At the very beginning of the new year, substantial amendments to the Bulgarian Commerce Act (CA) entered into force. Part of these amendments concern the functioning of the most common legal form of business in Bulgaria – the limited liability companies – OOD, respectively EOOD.
With these changes, firstly, the form of certain corporate transactions, namely of transfer of shares in a limited liability company and transfer of a commercial enterprise, was aggravated. Up to now, these transactions have been performed by agreements, bearing notarised signatures of the parties thereto. The amendments provided for this to be done with notary certified signatures AND contents, carried out at the same time.
Next, the same aggravated form of simultaneous notary authentication of both signatures and content was introduced for the protocols, by which the General Meeting of shareholders, respectively – the Sole Owner, would adopt some company decisions.
The decisions that are now required to be taken in this more cumbersome form are:
- acceptance and exclusion of partners/shareholders, consent over transfer of a company share to a new partner;
- reduction and increase of capital;
- appointing of a manager;
- acquisition and disposal of real estate and property rights.
The amendments to the Commerce Act stipulate that the decisions of the General Meeting, respectively those of the Sole Owner of the Company, adopted in violation of the above rules, are void.
The mentioned modifications were launched as measures to combat company theft, but triggered a sharp negative reaction, especially on the part of the Bar, as early as the first reading of the bill in the summer.
Outside of the scope of the stated objective stands the legislative solution for aggravation of the form of the last type of protocols – the ones concerning disposal of immovable property, which are not subject of entry in the Commercial Register. This modification is also puzzling in the context of the Bulgaria’s Supreme Court of Cassation’s interpretative decision of several years ago, in which the Supreme Court ruled that the absence of a GM decision, sanctioning the transfer of immovable property, owned by the company, would not invalidate the transaction in question. That is, the form of this type of decision is aggravated, even though the manager of the company can validly dispose of the property of the company without it being available.
Furthermore, said amendments provide for a more cumbersome decision-making process, including:
- The new requirement for simultaneous certification of signatures and content means that all shareholders in a limited liability company, respectively, all parties to a transaction, should physically appear all together before the Notary Public. This represents derogation in practice of the legal possibility of absent decision-making and remote meetings.
- The requirement for the Commercial Registry officers to compulsorily check notary certifications in a unified national notarial registry creates uncertainty as to how company documents, notarised abroad, would be regarded by state authorities.
- Last but not least, a non-negligible obstacle to the normal functioning of companies is the considerable increase of the cost of the decision-making process and some transactions in view of the new notarial certifications required.
The entire article, containing detailed analysis of the amendments, their practical implications and consequences, as well as options of overcoming the more complicated procedure, can be found here (in Bulgarian language).
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