Bankruptcy - Bulgaria

Updated 09/2011

Legal requirements

Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties – if they keep a close eye on the financial situation of their business.

Financial difficulties — Bulgaria

The Commercial Code (TZ) sets out what companies have to do under these circumstances. A business is deemed insolvent if it is late in paying its arrears, or if the owner of the business is only able to pay off part of the company's debts.

Bulgarian Commercial Code (TZ)

Insolvency procedures are set out in a separate act for banks and insurance companies:

The Bulgarian Bank Insolvency Act (ZBN)

There are special rules on insolvency for private supplementary pension insurance companies in Chapter 38 of the Social Security Code (KSO).

Social Security Code (KSO)
Tax and Social Security Procedure code (DOPK)

The Guaranteeing Payments to Employees during Employer Insolvency Act (ZGVRSNR) in Bulgaria sets out the options open to employees when this happens.

Guaranteeing Payments to Employees during Employer Insolvency Act (ZGVRSNR)

Insolvency procedures

When it institutes insolvency proceedings against a bank, the court:

declares the bank insolvent and sets the date of insolvency;
opens bank insolvency proceedings;
declares the bank insolvent and terminates its activity as an enterprise;
suspends the authority of the bodies of the bank;
issues a general foreclosure and distraint on the bank's assets;
strips the bank of its right to dispose of its assets in bankruptcy;
orders the commencement of proceedings to sell off the assets in bankruptcy to distribute the proceeds therefrom.

At the request of the administrator or the insolvency fund, the court may authorise legal measures to secure the existing assets of the bank.

The proceeds from the sale of any assets are distributed among the bank's creditors when there are sufficient cash assets in the assets in bankruptcy.

Competent authorities

Bankruptcy proceedings are instituted when the Bulgarian National Bank, as the central bank, has revoked the bank's operating licence. The court may only ask the Central Bank to institute insolvency proceedings against a bank.

When a copy of the decision to institute insolvency proceedings arrives, or on the following day at the latest, the Bank Deposit Guarantee Fund appoints an administrator for the bank.

Dealing with bankruptcy

The aim of insolvency proceedings against a bank is to ensure that account holders and other creditors of the bank are fairly satisfied within as short a time as possible.

In bank insolvency proceedings, there are no creditors' meetings and no recovery plans are proposed.

Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.

Business — Starting up

Administrative procedures

Insolvency procedure step-by-step guide

You must submit a bankruptcy application to the local court of the company's registered office. No upfront fee is payable; it is deducted from the insolvency notice which lists all your assets at the time they are distributed.

Bulgarian courts

Before declaring you bankrupt, the court may appoint an administrator. Administrators are selected from a list kept by the Ministry of Justice. When bankruptcy has been declared, your company will continue to operate, but new transactions may only be entered into with the administrator's permission.

List of administrators

Applications for a Tax and Social Security Procedure Code (DOPK) certificate must be submitted to the local tax office.

National Revenue Agency

You may offer to repay your creditors at any time after insolvency proceedings have been instituted. Every agreement becomes effective seven days after it has been entered in the Commercial Register.

Bulgarian Commercial Register
Commercial Register - electronic services -

If your company ceases trading, you need to inform the National Revenue Agency. There are no limits to the length of time required to wind up the company. If the company ceases to trade and has no legal successor, the pay documentation is handed in to the National Social Security Institute.

The court will end the bankrupcy proceedings when:

all debts have been paid off, or
the assets in bankruptcy have been used up.

Transformation

A bank may only be transformed with the written permission of the Bulgarian National Bank.

Enforced liquidation

If a bank's licence has been withdrawn by the Bulgarian National Bank for any of the reasons listed below, the Bank Deposit Guarantee Fund appoints a liquidator :

if the bank fails to start the operations permitted within 12 months of issue of the licence;
for any violations under Article 103( 1;
if the bank has presented false information on whose basis the licence was issued;
if the bank stops its activities for more than 6 months;
if the bank breaches the terms of its licence;
if the bank does not have sufficient capital, or it is believed that it will not be able to satisfy its creditors, including if the bank does not provide surety for the assets it holds.

Check also the legislation on this topic in:

Bankruptcy - Bulgaria