In the end of September amendments to the Commercial Act (“CA”) were promulgated, which provide for a simplified and faster procedure for liquidation of commercial companies. The novelties comply with Bulgaria’s obligations under the transposition of Directive (EU) 2019/2121 amending Directive (EU) 2017/1132 on certain aspects of company law.

The changes are, first of all, aimed at addressing the serious problem of the length of liquidation proceedings, which until now had a minimum duration of 6 months (but realistically at least 8-10 months) even for companies with no real business activity and/or no creditors.

The “quick” liquidation procedure provided for in the new Article 274a of the CA is applied by a decision of the General Meeting in the case of limited liability companies, joint stock companies and companies with variable capital, when the undertaking:

1. Has not been active or has ceased to be active for more than 12 months;

2. It has not employed or has terminated the relationships with employees more than 12 months ago;

3. It is not registered under the VAT Act or has terminated its registration more than 12 months ago;

4. Has no outstanding debts to the state and municipalities;

5. There are no pending proceedings to establish tax liabilities and liabilities for compulsory social security contributions, to which the NRA is a party;

6. It is not a defendant in court proceedings, a debtor in enforcement or order proceedings, or has not been subject to enforcement proceedings under the Law on Special Pledges  or the Law on Contracts for Financial Securitization .

The liquidators are required to declare that each of the above conditions are met in respect of the company. The main advantage of the “fast track” liquidation procedure is that the liquidator can start distributing the assets within three months from the day on which the invitation to creditors is published in the Commercial Register. Accordingly, the proceedings can be concluded twice as quickly as the standard liquidation procedure. The other rules of the CA on liquidation proceedings apply subsidiarily to the new procedure.

Along with the “simplified” liquidation process, the amended Commercial  Act provides for new clearer rules for transformations of entities with a cross-border element, i.e. transformations where one of the companies has its registered office and registered address in Bulgaria and the other company has its registered office in another Member State. The changes are particularly important for all foreign investors intending to invest in Bulgaria, as they will have another option to spin off part of their foreign business/assets into a Bulgarian company (e.g. by merging or amalgamating with a Bulgarian company).