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Company Re-registration Deadline Granted One Year Extension

The Bulgarian Government has extended the deadline for companies in the country to re-register into the national registry.

This new move will allow companies who have still not re-registered into the commercial registry another full year to comply.This takes the new deadline to 31st December 2011.

PENDING ISSUES:

According to the Act on the Commercial Registry which is currently in force (as of 28.12.2010), if a company owner fails to re-register it, the Registry Agency will re-register it ex-officio, after which it will initiate a liquidation procedure at the expense of the company. In 2009 some rules on the procedure for assigning a liquidator were adopted in the Ordinance on the Keeping, Storage and Access to the Commercial Registry and yet it is still unclear even for the professionals, how this official liquidation will be conducted and mainly - how long and expensive it will be.
In addition to this at the end of this year it turned out that a very small number of companies have re-registered during the 3-year period and the Registry Agency may be facing the problem of dealing predominantly with official re-registrations and liquidations of the remaining 3 million companies which will have missed the term. These two main and closely related issues - the lousy activity of companies and the unclear and incomplete set of rules for the official liquidation have motivated the government to introduce a draft Act on the Amendment of the Act on the Commercial Registry.


 

 

THE NEW DRAFT ACT ON THE AMENDMENT OF THE ACT ON THE COMMERCIAL REGSITRY

The draft Act has already been approved on the first hearing in the Parliament in November 2010. Its second hearing and final adoption is expected any moment now.

Prolongation of the term for re-registration:
The most important change for the Quest readers that the draft Act provides is for the prolongation of the term for re-registration until 31st December 2011. The idea of this new deadline is to stimulate company owners to re-register their companies voluntarily and avoid the consequences of the amended liquidation procedure.

Liquidation procedure and new opportunities for creditors:

The second most important change relates to the status and future of the companies that fail to re-register until 31st December 2011. The newly proposed legal provisions are quite different and provide for many more options than the existing ones:
- On the first place after 31st December 2011 the commercial activity of the companies which have not re-registered, will be deemed officially terminated. The Registry Agency will not initiate a liquidation procedure right away, as it is provided in the current Act, but will announce on its web-page lists of all companies that have not re-registered and these companies will not be allowed to conduct commercial activity, initiate court proceedings, dispose of their assets or conclude any deals whatsoever. They can only pay salaries to their employees and public liabilities to the state authorities (two categories of creditors which usually benefit higher protection). Any other actions of these companies will be deemed null and void.
- As of the date of the announcement of the lists of creditors on the web-page of the Commercial Registry, all creditors, courts and authorities will be considered notified of this fact.
- A significant opportunity is provided to the creditors of such companies. They are entitled to demand the re-registration and liquidation of a company-debtor (it is necessary to mention that such opportunity is given to the owners or managers of the company as well, only they will not be allowed to keep the company, it has to be liquidated). The term for exercising of this right is 30 June 2014. The main purpose of this right is for the creditors to exhaust the possibilities for recovery of their takings against the respective company, by conducting a liquidation within which all assets of the company-debtor will be explored, gatherer, evaluated and distributed amongst creditors. This amendment releases the Registry Agency from this duty and transfers the active role and somewhat the responsibility, including financial to the creditors of the company. This is because the creditors who have requested for the liquidation, are even allowed to point out a liquidator or become liquidators of the company, in case there is no registered legal representative of the company in liquidation (Note: I see certain deficiency of the draft here, because there is always a registered representative of the company - the opposite is impossible, except in cases of decease. But the more frequent cases, which is not secured in the draft, will be those of unavailable legal representatives or legal representatives who are inappropriate to take the responsible position of a liquidator. This deficiency is compensated to some extend by the possibility for the creditor to demand replacement of a liquidator who does not fulfil his duties or threatens the rights of the creditors with his actions). It is important to point out that the creditor, initiating the liquidation procedure, will be financially liable for the costs of the liquidation procedure. And because the main purpose of this opportunity is to cover the creditor's takings against the company, it is advisable to make a preliminary investigation and initiate such procedure only if you are sure that the company has enough assets to justify the whole adventure and no less importantly - to cover the liquidation costs which will otherwise turn into another loss for you. I am paying more attention in this article to the opportunity of creditors to initiate a liquidation procedure against a non re-registered company, because in this financial crisis some of you may have to make use of it and should be therefore aware of it. Of course it is impossible to explain all other specifics of the procedure in details, so before deciding to exercise this right and during the procedure itself, you should obtain professional advice.


Another very important draft amendment regulates the cases of unaccomplished court proceedings against companies that fail to re-register by 31st December 2011. In these cases the relevant court on the pending case will stop the case and will advise the claimant to initiate the procedure under the preceding item, within a term, set by the court. Failure to do so will cost the case to the claimant, because the court case will be dismissed.

- Five years after the expiry of the term for re-registration, the Registry Agency shall ex-officio delete those companies that have not been re-registered and have not been liquidated by the set of rules of the Act. The draft Act remains silent on the question what will happen to the assets of such "deleted" companies.
Other important amendments;
A few other changes suggested in the draft Act, which deserve mentioning, are as follows:
- provisions for increased protection of personal data, where the personal data contained in the documents, enclosed to the company file, will be deleted, except for such personal details that are required by law being public;
- the Commercial Registry will continue to be public and free of charge. There was a rumour in the middle of 2010 that the access may become subject to a charge as a measure for stopping unregulated access to all sorts of details. It is obvious now that a more intelligent mechanism is possible. This mechanism is registered access to the full data base. This means that unlike now, where you can see all company documents by clicking on the relevant file in the web-page, with the new changes the basic details of the company - name, address, managing bodies, capital, subject of activity etc., will still be visible on the web-page, but you have to file an application to get access to the full folder in the offices of the Commercial Registry or to request for electronic access by means of electronic signature or electronic digital certificate, provided by the Agency.
- Joint-Stock Companies will only be able to make registrations and announcements in electronic way, which is a change in order to harmonise the national legal system with the EC Law.
- upon filing documents for registration of new circumstances or for announcement of certain instruments, if the applicant has forgotten to enclose a document or has made a mistake, he will be given the opportunity to correct the defects of the application following the guidance of the relevant official. This is a very welcome change, because noone was born equipped to fight Bulgarian bureaucracy and most of the enacted refusals for registration so far have been caused by minor formalities and the applicants were not given the opportunity to correct them.
- the above change entailed a change of the term for pronouncement of the officials on an application - from "immediately" it was changed to "in three days term". Not a big deal - in reality the officials delay registrations with many more than 3 days anyway.
Let us once again note that the above changes are still to be adopted and until they are published in the State Gazzette, the current, old terms and provisions shall apply. So if you have planned to meet the current term for re-registration, do so.
Despite its very unconvincing start, numerous subsequent problems, several necessary changes of its rules and principles of work and continuing delays, the new Commercial Registry is generally a more convenient structure, providing free, easy and immediate access to the details and status of companies to all interested parties. Hopefully in future more attention will be put into facilitating the procedures in terms of paperwork, yet increase the security means against unlawful or false registrations.
Article written by GPNG-lAW