Legislative changes and challenges facing the business in Bulgaria

Popov, Arnaudov & Partners presented before Bulgarian media current legal topics facing the business sector at the end of the pandemic-ridden 2020.

Galin Popov, Senior Managing Partner and Emiliyan Arnaudov, Managing Partner of the Law Firm, presented some of the most pressing legislative topics concerning citizens and businesses in the country.

The beginning of the event revolved around the amendments to the Spatial Development Act, aiming to alleviate the administrative burden with the standardization of the administrative services and the creation of a unified spatial development register. The topic was discussed by Eleonora Sergieva, Head of Public Law and Projects Department. The National Assembly is expected to vote on second reading the proposals in the Act to Amend and Supplement the Spatial Development Act, which are aimed at reducing the administrative burden. The proposals include the introduction of an administrative services standard, which will lead to significant relief by unifying and providing over 12 000 services in municipalities and district administrations in the same way. The creation of a unified public spatial development register will, in turn, provide an opportunity for the centralization and unification of over 2300 registers, while the data in them will become electronically available.

Att. Sergieva also remarked on the declared unconstitutionality of texts from the Spatial Development Act, whether citizens and businesses will be able to appeal general development plans and how the terms for property expropriation for greenspaces are changing. In practice, this means that citizens and organizations will be able to challenge general development plans in court, in relation to plans that are still in the process of development and adoption. Citizens and organizations are also left with the opportunity to receive compensation for damages caused to them by the unconstitutional Act, as long as they are able to prove them.

Desislava Tsvetkova, Head of Debt Collection Department, discussed the submitted proposal for a ten-year statute of limitations, through amendments to the Obligations and Contracts Act (OCA) and its adoption by the Bulgarian Parliament. This legislative initiative was prompted by the aim to abolish the “eternal debtor” figure, with the absolute statute of limitations being set out in the the bill and introduced as an alternative to the other discussed option for dealing with the problem – the creation of a bankruptcy procedure for individuals or the so-called “consumer bankruptcy”. At the same time, at the end of last month, a Bill on the protection of individuals in the event of insolvency was submitted to the National Assembly in response to Bulgaria’s obligation to transpose the so-called Restructuring Directive. Tsvetkova concluded that there is no uniform concept for solving the ‘eternal debtor’ issue. She called on creating adequate rules for the protection of all conflicting interests, while also taking into account good European practices and the specifics of our society.

Tsvetelina Stoilova, Head of Corporate, Banking and Finance Practice, reviewed the amendments to the Energy Act, according to which, as of October 1st, 2020, all non-household electricity consumers whose facilities are connected at low voltage level have entered the free electricity market. Previously, the free electricity market was mandatory only for larger non-household consumers.

Within a 9-month grace period – until 30.06.2021, non-household consumers have the right to choose a new supplier by concluding a contract with an energy trader for electricity supply at freely negotiated prices. Consumers who do not choose another supplier by this date will be serviced by a supplier of last resort at higher prices. An expected advantage of the transition to a free market is the price reduction of electricity due to competition between traders, as well as the possibility for consumers to negotiate the terms of delivery with the respective trader.

The need for amendments to the Commerce Act in the context of the pandemic was also a topic covered by Att. Stoilova. Pandemic conditions, travel restrictions and the application of social distance measures raise questions regarding the normal functioning of companies and the possibility of holding remote meetings of Management Bodies. According to Tsvetelina Stoilova, the Commerce Act explicitly stipulates the possibility of adopting remote decisions by the General Meeting of Partners in OOD (Ltd.), if all partners have provided their consent for the decision in written form. The same is valid for the decisions of the Boards of ADs (Join-stock companies), if this possibility is stipulated in the Corporate Statute of the respective company. There is no explicit regulation regarding the adoption of absentee decisions by the General Meeting of Shareholders in an AD (Joint-stock company), which creates a level of uncertainty and a legislative settlement is highly recommended. According to Tsvetelina Stoilova, there should be no obstacles for the company’s Corporate Statute to stipulate the possibility of an absentee decision in case the interests of the company and all shareholders are protected – such a hypothesis would be the consent of all shareholders with the decision on the merits. An explicit regulation on the issue related to the possibility of holding General Meetings via electronic devices is provided for public companies, and this regulation can be used as a basis for future changes to the Commerce Act.

Att. Stoilova also discussed the the difficulties foreign investors may encounter when opening a bank account due to the application of anti-money laundering measures by the banks. The interpretation of the Anti-Money Laundering Measures Act, adopted in 2018, allows for a contradictory interpretation and leads to a significant reduction or suspension of the opening of new bank accounts by Bulgarian companies with non-EU individuals or legal entities as capital owners. In addition to the complicated procedure for opening a bank account, additional difficulties for the business are created by the unreasonably long preliminary research deadlines, as well as the high fees of certain banks.

For the final part, Hristo Koparanov, Head of Competition, Compliance and Regulations Practice, discussed the topic of the transposition of Directive 2019/1 in 2021 and whether the Commission on Protection of Competition will have the right to search the personal cars and homes of managers, as well as under which conditions. The Directive stipulates an obligation of Member States to ensure enhanced powers for the Competition Authorities by February 4th, 2021. The aim is to ensure their effectiveness in relation to classic Competition Law and not in performing side activities. In practice, this should lead to a concentration of the Commission on Protection of Competition’s efforts in several main areas – combating cartels and dominant position abusers, as well as in competition advocacy and control of concentrations of economic activity.

The most interesting change arises from the broader powers that will be acquired by the Commission. At the moment, it has the right, after court approval, to search without warning and seize documents, computers and correspondence of interest. The enterprises cannot refuse to cooperate with the Authority and the fines for obstructed inspections are high. After the change, the Commission’s employees will also be able to inspect the personal homes and cars of the companies’ management. Until now, these broad powers applied only to offices and premises used by companies, but not to personal ones. In practice, this means that in case of suspicion of a cartel, the employees will probably be able to enter the personal property of the manager of one of the affected companies, to search and seize documents and evidence. The exact regulation of these powers and how it will be ensured that the Commission on Protection of Competition will not abuse its rights remains to be seen.