The Ministry of Justice has published on the public consultation portal a draft Act for the Supplementation of the Non-Profit Legal Entities Act (“NPLEA”). The most essential aspect of the proposed legislation is the extension of the deadline for submitting applications for re-registration of non-profit legal entities (NPLEs) - until 31 December 2026.

It should be recalled that in 2016, a major reform of the NPLEA was adopted. A decision was made that non-profit legal entities should be transferred from the registers maintained by the district courts into a new special register, kept by the Registry Agency. The deadline for re-registration was initially set at four years - until 31st December 2020 - and was later extended to 31st December 2022, in order to provide more comfort for the obligated entities.

A serious omission in the current legislation, however, was the absence of explicit provisions regulating the consequences of missing this deadline - i.e., if the relevant entity failed to take active steps towards re-registration. Numerous questions were raised by business representatives about whether such passive behavior would lead to automatic deregistration of the relevant NPLE, as well as whether fines could be imposed.

Meanwhile, contradictory court practice emerged. Some courts refused to issue certificates of current status after the expiration of the original deadline for re-registration - i.e., if the respective NPLE had not been re-registered before 31st December 2022. In practice, this court practice blocked any possibility for subsequent, later re-registration, since the Registry Agency’s officials require (among other documents) a certificate of current status issued by the court.

Other courts, however, took the opposite view – that the deadline was instructive, and therefore continued to provide the above-mentioned service to associations and foundations seeking re-registration. In practice, this led to unequal treatment of entities and uncertainty in civil turnover.

There is no doubt that from a business perspective, the issues described above are significant - many NPLEs participate as shareholders or partners in commercial companies, directly implement projects under EU programs, or are beneficiaries under contracts with the state. The lack of re-registration in the current register maintained by the Registry Agency, combined with the fact that these NPLEs have not been wound up and continue to exist in the legal environment, puts the legitimacy of their actions at risk.

With the new provisions (§ 25a – 25h of the Transitional and Final Provisions of the NPLEA), the following is envisaged:

·         A new opportunity for NPLEs that are still registered with the district courts to be re-registered in the register maintained by the Registry Agency by 31st December 2026, without owing state fees;

·         If an NPLE does not complete re-registration by this date, its activity shall be deemed terminated as of 1st January 2027, and in the BULSTAT register the circumstance “inactive” will automatically be recorded;

·         From 1st January 2027, interested parties (a founder, a member of a non-re-registered NPLE, a member of its management body, and other similar parties) may request the initiation of liquidation proceedings, within a deadline of 31st January 2030;

·         After this date, all NPLEs that have not been re-registered and for which no liquidation proceedings have been opened will be deemed automatically deregistered.

Special attention is given to the protection of creditors - any person with pending judicial, arbitration, or enforcement proceedings against a non-re-registered NPLE will have the right to request the appointment of a liquidator. In this way, the interests of businesses and citizens will not be harmed by the formal termination of legal personality.

From the perspective of economic turnover, the proposed amendments aim to provide legal clarity regarding the consequences of delayed re-registration of NPLEs, while at the same time ensuring protection of the public interest and predictability for business and the non-governmental sector. This will increase legal certainty, facilitate financial institutions and counterparties, reduce administrative obstacles in financing and contracting, and lay the foundation for a unified, centralized, and transparent register of NPLEs in line with good European practices.