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Re-registering your Bulgarian Company

We wrote for the first time about the new Commercial Registry - the new administration belonging to the present Registration Agency (literally translated from Bulgarian language as “Agency of the Entries”, which was responsible for the BULSTAT registration and the recording of the real estate transactions) in 2006, when a new piece of legislation was enacted to create the new body replacing the district courts in respect of the companies’ registrations. In addition, an obligatory process of re-registration of existing companies was introduced. Our article was based purely on the provisions of the newly adopted Commercial Registry Act (the “Act”) and being fully aware of the fact that theory often tends to differ substantially from reality in Bulgaria, we submitted that only after the Act came into force, would we be able to find out how it would be applied, and whether new practice and additional internal rules would be introduced.

The Act was originally meant to enter into force in October 2006, but was subsequently delayed twice – first in January, 2007 and then again in July 2007. The Prime Minister sent an ultimatum to the Ministry of Justice and the Registration Agency to put the Commercial Registry into operation on 1 January 2008 at the latest, yet even this generous deadline was nearly missed by the Registration Agency. The impression of all professionals is that the Commercial Registry is still not ready to meet all of the requirements and the purpose of the new legislation. This administration soon became synonymous to “chaos, inefficiency and incompetence”.

Step by Step Guide

Let us, however, reiterate all of the steps detailed by the practice of the Commercial Registry, of the obligatory “re-registration” process that each existing company must undergo.

1. A standard application form should be filled-in and submitted to the Commercial Registry. In addition to this application, another application for an announcement of the current Articles Of Association, respectively By-Laws or Act of Incorporation of the company (Application for Announcement of Acts) should be submitted to the Commercial Registry as a separate document. This makes a total of 12 pages excluding the attachments (1. 2)

2. A special Certificate of Good Standing issued by the respective court of the initial registration and containing the BULSTAT number of the company has to be attached to the application for re-registration of the company. Commercial companies must also enclose their current Articles of Association, respectively By-Laws or Act of Incorporation that are in force, certified with the company seal and the signatures of their managing bodies.

3. Together with the additional Application for Announcement of Acts, all active commercial companies are also obliged to submit to the Registry their Annual Financial Reports, for the period 2004 up to the year preceding the year of the re-registration, in observance of the term under the Accountancy Act, which is …. 30 June 2008!

Note: This new requirement caused the reasonable concerns that in fact actively operating companies will not be able to make use of the three year period for obligatory registration and would only have six months, sometimes even less, for the reasons stated below to re-register.

4. Because the new Commercial Registry is being kept as integrated registry for the entire territory of the country, all company names must become unique for the whole territory of Bulgaria. Under the old legislation the names of the companies were unique only for the region of the court of registration. To address this situation, the legislation provides the following procedure for such cases:

a) The official is re-registering the company with the name under which the company or the branch was entered into the respective court of initial registration and in compliance with the Application and the Certificate of Good Standing.

b) The Registry Agency is sending to any other reregistered companies with the same name a notification for the coincidence, and gives them a two month period, as of the date of receipt of the notification, to apply for a change of name. If within the term the company does not apply for the change, the official, acting of its own motion, adds to the name of the re-registered company the name of the city of the respective court of registration.

c) The Registry Agency should send to all companies the names of which are found to be identical with the name of the company, which had applied for re-registration a notification for the coincidence, and should indicate that they need to apply for changing of their names together with filing their application for re-registration. If they do not apply to change their name, these companies shall be re-registered in the Commercial Registry with the name under which they were entered into the respective court registry, and in compliance with their applications and Certificates of Good Standing, but the official shall add to their names the name of the city of the respective court of registration acting of its own motion.

d) If the names of two or more companies registered within the area of one and the same registration court appear to be identical, except the name of the city of the respective registering court the official shall ex officio add to their names a digit in accordance with the order of entry of their Applications for re-registration.

Note: the rumours that the company, which files its application for re-registration first amongst all companies with the same name, shall be able to reserve its original name, so far have proved to be wrong, the law itself justifiably does not provide such a “privilege,” which would serve as a good pre-condition for abuse.

5. When re-registered, the companies or branches of foreign companies are to be erased from the BULSTAT Registry and their BULSTAT registration code becomes their Unified Identification Code.

6. Companies are to be represented before the Agency with a notary certified Power of Attorney. In case of representation with a Power of Attorney, all applications that are being submitted are to be signed by the representative of the respective company and his or her signature is to be notary certified, as well.

7. If a company does not re-register within the three-year term, the Agency will initiate a liquidation procedure at the expense of the company.

Here are the main advantages and disadvantages of the new Commercial Registry:

The Advantages of Re-registration

1. Re-registrations and any further changes can now be filed in any Commercial Registry without consideration to the main seat of the company. Only the initially necessary Certificate of Good Standing is to be obtained by the respective district court. The companies based in Sofia used this opportunity to avoid the huge queues in front of the Registration Agency in Sofia and many people used the nearby cities of Pernik and Kyustendil.

2. Once your company is re-registered, you can obtain a Certificate for good legal standing immediately without having to wait for 3-5 days or pay 10 times the state charge to get it immediately from a helpful official.

So much for advantages!

The Disadvantages

1. The masses of paperwork that are necessary to be diligently filled in and submitted for just one registration can make every ecologically engaged citizen cry with pain.

2. In large cities huge queues and a whole day of waiting in line deter people from filing out their applications and this is not nearly the end of it. Only a couple of weeks thereafter you will get your reference number. Then a re-registration may take about two to two and a half months! The highly promoted electronic filing actually only saves you two weeks of waiting for a reference number.

3. The new system provides 23 different application forms; each one of which from two to eight pages for the different types of registrations! If you do not have practical experience or even worse – if you are not proficient in the Bulgarian language, you simply cannot complete the re-registration of your company on your own!

4. Some of these 23 applications cannot be submitted simultaneously! If you want to re-register your company and change its address for example, that is O.K. – file your three application forms and wait. But if you want to change your address and register a special pledge for example – you have to do it one after another and wait. And make your lender wait for his collateral. Senseless complications like this one have a disastrous impact on business at the moment.

5. If your company is an active one and not just registered to acquire real estate, on many occasions you will be required to re-register your company before being able to take certain actions, which practically makes the three year period, provided by the Act, unusable.

6. The new officials on whom re-registrations and other registrations of changes and other circumstances depend, do not take into consideration the recent court practice and you may end up with refusal (subject to appeal before the court), based on grounds, which you come across for the very first time!

7. The new state fees are significantly higher!

8. If a proxy is supposed to physically perform the registration, most of the documents have to be notarised, which additionally increases the costs. At least now the Act has been amended to allow lawyers to file applications without notarising them.

Roumen V. Petrov
Asya Mandjukova
GPNG Law Firm