To standardize the legal regulation of insolvency proceedings across Member States, the EU adopted Directive (EU) 2026/799 on the harmonization of certain aspects of insolvency law (“the Directive”). It enters into force on April 21, 2026, and is yet to be transposed into Bulgarian law (the deadline for this is early 2029).

The rationale for adopting the new legal framework is the need to establish minimum requirements in key areas related to insolvency proceedings that have a significant impact on the efficiency and duration of such proceedings, particularly in cases of cross-border procedures. A review of the rules set forth in the Directive shows that some of them have already been incorporated into the Bulgarian Commercial Code in one way or another; accordingly, this circumstance should be taken into account during transposition.

In summary, the Directive provides for general rules regarding:

· cancellation statements of claim;

· the tracing of assets from the insolvency estate;

· pre-arranged sale proceedings;

· the directors’ obligation to file a petition for the opening of insolvency proceedings;

· the creditors’ committee;

· key information documents.

Special conditions are introduced for challenging legal acts of the debtor that are detrimental to creditors through cancellation statements of claim. Preferential payments or security interests may be declared void or invalid if made shortly before the commencement of insolvency proceedings, particularly where the debtor was insolvent and the creditor knew or is presumed to have known this. Also covered are gratuitous transactions or those involving a manifestly disproportionate consideration (up to 12 months prior), as well as intentional acts to harm creditors (up to 2 years prior). Exceptions are provided for certain transactions, such as those related to financial markets. The consequences of successful cancellation statements of claim are also regulated. Benefits received are returned to the insolvency estate, affected claims are not recognized, and other provisions apply. The rules described are conceptually consistent with the current provisions of the Bulgarian Commercial Code on this matter.

With regard to mechanisms for tracing assets from the insolvency estate through expanded access to information, Member States shall designate courts and administrative authorities with the power to access national and cross-border bank account registers directly and rapidly at the request of the insolvency practitioner, subject to strict conditions regarding data protection, oversight and traceability. Direct access by the insolvency administrator to beneficial ownership registers and national databases is also provided for, with the aim of identifying and recovering assets without notifying the persons concerned.

The Directive also establishes a pre-agreed sale procedure in the event of a risk of insolvency. It includes a preparatory phase involving an independent observer and the debtor retaining control, as well as a subsequent liquidation phase in which the court approves the sale based on the best offer. This ensures transparency, creditor protection and the ability to transfer the business quickly, typically free of old liabilities.

An obligation is introduced for directors, upon the occurrence of insolvency, to request the opening of insolvency proceedings within three months of becoming aware of it. Possible exceptions or waivers of this obligation are provided for in cases such as personal liability of directors and public disclosure of insolvency.

The functions and powers of the creditors’ committee as a representative and supervisory body in insolvency proceedings are regulated. It participates actively through the right to information, a hearing, and influence over key decisions, acting independently and in the interest of all creditors, subject to rules on operation, confidentiality, costs and liability.

The stated objective of the new legal framework is to promote the better functioning of the internal market and capital markets. The idea is to remove obstacles to the free movement of capital and the freedom of establishment that arise from differences between national insolvency regulations. In Bulgaria, the Directive must be transposed into domestic law through appropriate legislative changes.

This article has been prepared for and is part of the Legal Digest issued by Penkov, Markov & Partners. The publications therein do not constitute legal advice and are not binding. Penkov, Markov & Partners reserves all rights to this material, and any distribution thereof is subject to the prior written consent of the law firm.