The reform is aimed at improving the efficiency of these proceedings by introducing mechanisms to expedite them under clear criteria guaranteeing the rights of creditors and the debtor. Modernised rules have been adopted in debtor stabilisation procedures and the range of persons against whom such proceedings can be initiated has been extended.

The amendments are dictated by the need for the Bulgarian legislation to be harmonised with EU law in the field and are a prerequisite for Bulgaria’s accession to the Eurozone. The amendments to the Commercial law implement the requirements of Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132 (Directive on restructuring and insolvency) (OJ L 172 of 26 June 2019).

It is a novelty for the business that the explicitly listed in the law court acts of significant importance in the insolvency procedure (incl. The judgments on the opening of insolvency, the judgment on the declaration of insolvency and the termination of the debtor’s commercial activity, as well as the judgments on the rejection of the application for the opening of insolvency; the judgments on the approval of the restructuring plan, the judgments on the non-admission of the restructuring plan; the judicial acts on the closure of insolvency proceedings, etc.) will have to be published in the Commercial register instead of being personally served on the parties to the proceedings, and the time limits for their appeal will be shortened and will start to run from the day of their publication in the register. The aim is to link the time limits to the publication of the acts in the register in order to increase the speed of proceedings.

The acceleration of the proceedings is also at stake in the submission and acceptance of claims phase, including the requirement to approve templates for claims submission, lists of creditors, distribution accounts, monthly insolvency administrator’s reports and even the insolvency administrator’s log for each of his actions. At the same time, the reform also aims to reduce the costs of business insolvency cases by reducing the court fees provided for the practically important annulment claims under Articles 645, 646 and 647 of the Commercial Law. It is now clearly defined that the insolvency administrator may, with the permission of the court, realise certain assets of the debtor, the proceeds of which will cover the costs of initiating and conducting the proceedings. The introduction of an electronic public auction is also envisaged.

A new feature of stabilisation proceedings is their significant procedural and documentary simplification, which aims to allow more debtors to continue trading, minimising job losses and preserving the benefits of their activities for society and the economy.

The amendments to the law also provide for reduced majority requirements for individual classes of creditors by the approval of a stabilisation plan, and an appeal of a plan already approved by the court will not stop its implementation. The stabilisation plan will now be binding on the partners and shareholders, including the sole owner of the capital of the debtor, and acts and transactions carried out by them in breach of the approved plan will be null and void. Mechanisms are introduced to obtain financing from old or new creditors of the debtor to successfully implement the stabilisation plan.

The amendments to the law also provide for the first time the legal regulation of insolvency proceedings for natural persons who are entrepreneurs – all natural persons exercising a business activity, a trade or a liberal profession, where their enterprise by its subject and volume does not require the conduct of affairs in a commercial manner.

Since, with some exceptions, most of the pending insolvency  proceedings will be closed under the new regime, the adopted changes are expected to increase the efficiency, speed and procedural economy, and thus indirectly support the development of the overall economic climate in the country. Our team is carefully analysing the changes in the law considering the need to implement them in the most accessible way for our clients.