Мinority Shareholder Rights in Unlisted Companies in Bulgaria


Minority shareholders in unlisted companies in Bulgaria (i.e., those holding shares making up less than half of the registered share capital of a Bulgarian OOD or AD company) enjoy certain legal rights protecting their position in the ventures in which they are invested.

Focusing in this note on the two most common corporate forms in Bulgaria: (1) the private limited company (abbreviated in Bulgarian as OOD) and (2) the public liability company (AD), we review certain major risks facing shareholders who alone or in combination with others hold less than the majority of shares in these companies, and summarise the main protections of minority shareholder rights that they may have access to.

This note may be of special interest to shareholders in the minority including those planning their future investment (e.g. in the context of an unequal joint venture; a private equity or venture investment); financiers considering extending credit secured by minority shareholdings and  their advisors. This document is an overview and is not intended to provide in-depth information but rather to catalogue the issues.

It is recognised that minority shareholders may be further protected legally among others by contractual arrangements into which they have expressly entered with other shareholders or the company, including shareholders’ agreements (and including ones not governed by Bulgarian law). These have their own challenges of enforceability, and otherwise.

New Balkans Law Office regularly advises on the cross-over between foreign-law governed legal agreements (traditionally governed by English law), and the local legal system.

Lastly, this note should be read as being for information purposes only and not used in lieu of advice, which should be obtained as needed.


In an OOD, minority shareholders are entitled to the following, among others:-

(1) Distributions

Shareholders are entitled to distributions of dividends and/or liquidation shares (as appropriate), pro rata to their holdings at the relevant times.

(2) Share transfers to existing shareholders

Shareholders can transfer their shares to another existing shareholder of the OOD or to a third party, subject to the statutory limitations described below. The limitations are of a mandatory nature and cannot be overridden by a shareholder agreement or the Articles of Association. Conversely, if the shareholders in an OOD wish to transfer their shares to someone who is external to the company, they would need to comply with the statutory requirements for accepting a new shareholder, including the assent of other shareholders to the joining shareholder and such shareholder’s acceptance of the Articles of Association as they stand at the time of admission.

(3) Participation in the affairs of the company

Shareholders may:

  1. Participate in general meetings of the company (GMs) and vote in them;
  2. Request the directors to convene a GM;
  3. While voting in GMs, veto resolutions for increases and/or decreases in the capital or to subdivide the OOD’s shares;
  4. “Participate in the management” of the company, which has a broad meaning and serves as a catch-all phrase to ensure fair participation at all times.

(4) Information and control rights

As part of this category of rights, minority shareholders may:-

  1. Apply to court to set aside a resolution of the GM, where there are grounds to believe that such a resolution is in breach of mandatory legal provisions or of the Articles of Association of the company.
  2. Apply to court for the protection of their rights as a shareholder, in other cases which do not concern breaches contained in shareholder resolutions.
  3. Be informed of the company’s affairs, i.e. each shareholder has the right to be given on request and in a timely manner any information pertinent to the company’s affairs; such request to be made to any other shareholder and/or the company’s employees.
  4. Obtain access (personally or through a proxy) to examine the company’s entire universe of documents and books (the practical limit here perhaps being the ability to prove that a certain document exists).
  5. Petition for the company’s winding-up for “important reasons” (this is a concept different from the “just and equitable” ground familiar in the context of English companies), subject to limitations set out below.


The exercise of the rights set out in the section above is however limited. For two of the groups of rights we set out above, the following limitations apply:-

(1) Limits on participation in the corporate affairs

With respect to participation rights, the following minimum amounts of share holding are required for the respective right to be exercisable:-

  1. 50% of the registered capital is required to pass a GM resolution;
  2. 10% of the registered capital are needed to convene a GM (however, any holding is enough to add an item to the meeting’s agenda, once the meeting has been convened);
  3. In the context of a liquidation of an OOD, whether voluntary or compulsory, at least 10% of the registered capital is required to propose liquidators to be approved by the court;
  4. 25% plus one vote of the registered capital is required to veto an OODs voluntary winding-up;
  5. 20% of the registered capital are required to petition for the company’s winding-up;
  6. Minority shareholders cannot initiate court proceedings against the directors of the company for losses caused to the company by one or more of the directors. The right to initiate such proceedings is reserved for the company as such, acting through the directors, who in turn exercise their power as directed by the Articles. Unlike in common law jurisdictions, there is no doctrine of “unfair prejudice” and accordingly, the appointment of directors as a remedy for a wronged minority shareholder in cases of “unfair prejudice” is not possible under Bulgarian law.

(2) Limitations on rights to distributions

  1. Transferring shares to an outsider requires prior approval by more than a 75% majority of the registered capital in GM;
  2. Consequently, a 25% or more of the registered capital can veto such a resolution.


The rights of a shareholder in an AD, subject to the limitations described below, are similar to those which shareholders in an OOD and are as further described below. However, a general difference is that unlike in an OOD, AD resolutions are adopted by a majority of votes by shares voting (whether attending in person or by proxy) and not out of the total potential number of votes (“represented capital”), unless specified otherwise below.

The rights of minorities in the AD include:-

(1) Rights to distributions

  1. As in an OOD, the shareholders of an AD are entitled to dividends (whenever these are declared) and to a liquidation share, pro rata to the nominal value of the shares they hold.
  2. In distinction to the OOD, an AD shareholder may freely transfer its shares to anyone (existing shareholder or not) – unless this is prohibited by the Articles of Association.

(2) To participate in the affairs of the company

Minority AD shareholders may:-

  1. Participate in GMs of the AD; be given advance notice of the agenda; request GMs to be convened and vote in them.
  2. Depending on the level of attendance at the GM, to affect the outcome of resolutions.
  3. Shareholders with more than a third of the represented capital can veto GM resolutions amending the company's Articles, increasing and/or decreasing its capital and resolving on its winding-up.

(3)  Information and control rights

Minority shareholders may:-

  1. Petition the court to set aside resolutions of the GM where the resolution may be in breach of mandatory legal provisions or of the Articles.
  2. Apply to court to protect their rights as shareholders generally.
  3. Commence legal proceedings on behalf of the company against members of the board of directors and/or of the supervisory board, provided they hold at least 10% of the registered capital (and not of the represented capital). Just as in the OOD, the minority may not appoint directors in “unfair prejudice”.
  4. Require from the GM the appointment of a “controller” to examine the financial statements of the company (shareholders with shares of at least 10% of the registered capital are needed here).
  5. On liquidation, shareholders with shares of at least 5% of the registered capital may require from the court to appoint and/or release liquidators if there is good cause.


The exercise of these rights in ADs is, similarly to OODs, limited, especially as regards participation in the management of the company. E.g. shareholders with shares less than 5% of the registered capital or who have held their shares for less than 3 months:-

  1. Are not entitled to add items to the agenda GM;
  2. Require a GM to be convened.


For minority shareholders in both private limited companies (OOD) and public liability companies (AD) two commonly perceived risks are:-

  1. Expulsion from membership of the company;
  2. Dilution of shareholding.


Private limited companies (OODs)

One common scenario for the risk of expulsion may arise on non-payment of capital calls otherwise due. Even where a single share is held, a minority shareholder may veto an increase of the nominal value of shares and/or of the number of issued shares.

However, where the company approves a so-called additional contribution to capital (a form of capital contribution similar to share premium), shareholders holding at least 25% plus one vote of the registered capital are needed to veto this.

Where a resolution for an increase of capital or the payment of an additional contribution to capital is passed rather than vetoed, all shareholders become liable to contribute and may be expelled if they fail to do so.

Secondly, an OOD shareholder may be expelled if it “does not assist the company” to conduct its business. This duty in general requires acting in good faith with respect to promoting the company’s interests, including potentially as to tasks which the OOD’s director(s) may allocate to shareholders. A further element of this duty of assistance is a duty of loyalty, requiring not contravening validly adopted resolutions of the company in general meeting. This makes the OOD a much more “personal” type of company and this may be unexpected for many modern shareholders and would generally require careful further analysis and advice.

Public liability companies (ADs)

A shareholder in an AD may not be expelled on the grounds on which a shareholder in an OOD may, as set out above. The risk for minority shareholders of potential expulsion from a public liability company still arises however, e.g. on non-payment of due contributions to capital for shares subscribed by them. Such an omission is surprisingly common and it may be advisable to confirm e.g., whether a transferor of the shares which are being acquired has fully paid up their required contribution to the full value of the share.

Minority shareholders may also be expelled if the company in GM resolves to increase the nominal value of shares of the class held by the minority or the number of issued shares and the minority holders do not top up their contribution (or participate in what is effectively a rights issue) to close the gap. However, a shareholder with shares of more than one-third of the represented capital may veto such a resolution.

The law on tender offers and mandatory share purchases (squeeze-outs) in listed companies is inapplicable to companies which are not currently listed.

Any purchase of the minority’s stake in those cases is therefore purely a matter of contractual agreement between each shareholder and a potential buyer.

What is the risk of dilution in a private company?

Private limited companies (OOD)

Risks connected to mergers and divisions

Minority shareholders may be diluted on a merger or a demerger.

Risks connected to capital increases

Potentially, a dilution may also occur by an increase of the registered capital through the issuance of new shares, where it is envisaged in the Articles that the increase will not be proportionate to their existing shareholdings. Minority shareholders may however veto such increases of capital.

The risk for minority shareholders in public liability companies (AD)

Risks connected to mergers and divisions

As with OODs, minority shareholders may be diluted on a merger or a demerger.

Risks connected to capital increases or decreases

Potentially a dilution of the share of minority shareholders may also occur by an increase of the registered capital of the company through the issuance of new shares, where: (i) the minority shareholders do not exercise their statutory preemption right to acquire new shares in the rights issue; or (ii) the preemptive acquisition right is derogated from by way of a resolution of the GM.

Similarly, a dilution may be achieved by an increase of the registered capital of the company through the conversion of corporate debt securities (bonds, notes and others) into shares (whether newly-issued or existing), where: (i) the minority shareholders do not exercise their preemption right to acquire; or (ii) the preemption right is derogated from by the GM, or (iii) the increase is through conversion of ordinary bonds into convertible bonds and the minority shareholders have not subscribed to such ordinary bonds upon their issuance.

It should be mentioned that diluting minority shareholders’ interest by way of a decrease of the registered share capital of the company is also theoretically possible.
However, a shareholder holding more than one-third of the represented capital may veto a resolution for the increase and/or decrease of capital.



We set out below in tabular form the rights which come with each level of shareholding in companies. The table covers both ADs and OODs.

Table 1


Shareholding Description Reference
1/3 In an AD, a resolution for repurchase of own shares can be passed (unless a different mechanism for repurchase is not expressly provided for in the Articles of Association), by a majority of two-thirds of the represented shares.
This means that a 1/3 shareholding in an AD has always veto powers provided that the repurchase is not expressly provided for in the Articles of Association. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 187b(1),(2) of the Commerce Act
In an AD, the shareholders’ preemption rights may be restricted or set aside only by a resolution of the GM, passed with a majority of two-thirds of the votes of the represented shares.
This means that a 1/3 shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 194(1),(4) of the Commerce Act
In an AD, the GM’s resolution to increase the capital shall be passed with a majority of two-thirds of the votes of the shares represented. The Articles of Association may provide for a larger majority, as well as for additional conditions.
This means that a 1/3 shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 192(2) of the Commerce Act
In an AD, resolutions for amendment and supplement of the Articles of Association, to increase or decrease the registered capital, or to wind up the company shall require a majority of two-thirds of the votes of the shares represented. The Articles of Association may provide for a larger majority in these cases.

This means that a 1/3 shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 230(2) of the Commerce Act
25% plus one vote If an AD is wound up upon expiration of its term or with a resolution of the competent company bodies, the latter may resolve by a majority of three-quarters of the capital to continue its business, unless the distribution of its assets has started.

This means that a 25% plus one vote shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 274(1),(2) of the Commerce Act
In an AD, in order to pass any resolutions restricting the preferences of the non-voting preference shares, it shall be necessary to obtain the consent of the preference shareholders, which shall convene at a separate meeting. The resolution shall be passed with a majority of at least 3/4 of the shares represented.

This means that a 25% plus one vote shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 182(5) of the Commerce Act
An OOD may be wound up with a resolution of the GM passed with a majority of three-quarters of the capital, unless the Articles of Association provide for a greater majority.

This means that a 25% plus one vote shareholding in an OOD has veto powers.
S. 154(1) of the Commerce Act
The resolution for transformation of a company shall be passed by the GM with a majority of 3/4 of the capital.

This means that a 25% plus one vote shareholding in an OOD or AD has always veto powers. In an AD, where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 262o(2),(3) of the Commerce Act
In an AD, the GM may resolve to increase the capital by partial capitalisation of the profit with a majority of 3/4 of the votes of the shares represented.

This means that a 25% plus one vote shareholding in an AD has always veto powers. Where the turnout at a GM is lower, even less than that could suffice since it is the shares actually represented at the GM that are counted rather than all shares in the company.
S. 197(1) of the Commerce Act
25% In an OOD, resolutions on the amendment and supplement of the Articles of Association, admission and expulsion of shareholders, giving consent for the transfer of a company share to a new member, and on additional monetary contributions shall be passed by a majority of more than three-quarters of the capital, whereas greater majority may be provided for in the Articles of Association.

This means that a 25% shareholding in an OOD has veto powers.
S. 137(3) of the Commerce Act
20% In an OOD, 20% of the shareholders may petition the court to wind up the company for important reasons. S. 155(1) of the Commerce Act
10% In an AD, shareholders holding at least 10% of the company’s capital, may file a claim with the court against the company’s directors for damages caused to the company. S. 240a of the Commerce Act
In an AD, shareholders holding at least 10% of the company’s capital may table to the GM a resolution to appoint an auditor to audit the company’s annual financial statement. S. 251a(1) of the Commerce Act
In an OOD, shareholders holding at least 10% of the company’s capital may request from the director to convene the GM. S. 138(2) of the Commerce Act
Upon petition by the controller or by the shareholders holding at least 10% of the company’s capital, the court may appoint new liquidators. S. 156(3) of the Commerce Act
5% In an AD, a GM may be convened upon request of the shareholders who have held shares representing at least 5% of the company’s capital for more than three months. S. 223(1) of the Commerce Act
In an AD, shareholders who have held shares representing at least 5% of the company’s capital for more than three months may add additional items on the GM’s agenda. S. 223a(1) of the Commerce Act
In an AD, the court may, when important reasons exist, appoint or discharge liquidators upon petition by the shareholders holding at least 5% of the company’s capital. S. 266(4) of the Commerce Act
One share A shareholder may apply to the court to protect their shareholder right and individual rights as a shareholder, when these have been infringed upon by company’s bodies. S. 71 of the Commerce Act
A shareholder may petition the court to set aside a resolution of the GM, if it is in breach of mandatory provisions of the law or the statutes of the company. The petition shall be filed against the company. S. 74(1) of the Commerce Act
In an OOD, a shareholder may participate in the affairs of the company, be informed on the course of the company’s business, inspect the company’s documents, and be entitled to dividends and a liquidation share. S. 123 of the Commerce Act
In an OOD, resolutions on the increase or decrease of subscribed capital shall be adopted unanimously by all shareholders.

This means that a single shareholder in an OOD has veto powers.
S. 137(3) of the Commerce Act
If an OOD is wound up upon expiration of the term or with a resolution of the competent company bodies, the latter may resolve unanimously to continue its business, unless the distribution of property has started.

This means that a single shareholder in an OOD has veto powers.
S. 274(1),(2) of the Commerce Act

Authors: Kamen Shoylev and Yavor Markov

Directors’ Liabilities in Private Limited and Public Liability Companies

Directors in private limited companies (abbreviated in Bulgarian as ‘OOD’) and public liability companies (abbreviated in Bulgarian as ‘AD’) have a gamut of responsibilities and attendant liabilities. We review below three kinds of liability in Bulgarian law: civil liability; administrative liability and criminal liability.

Disciplinary liability – a creation of labour law – is left aside for the purposes of this note. Conceivably, a director may be liable as an employee of a company, but this does not arise from his director’s service agreement, but requires the director to be performing an additional role at the company, for which he or she may then be disciplinarily liable.

Civil liability

Liability to the company

At a general level, civil liability in Bulgarian law is based on the duty to repair loss caused to another where the loss arises through fault (including negligence), including non-compliance with statutory duties. Therefore the directors of both OODs and ADs are liable for such losses as they unlawfully cause to the company of which they are officers. Such liability requires negligence or fault, whether through action or omission.

In companies with multiple directors, each director is jointly and severally liable for loss. However, each director may seek to individually avoid his or her liability on the basis of lack of fault, among other things. Thus, for example, directors are not liable for decisions taken by their predecessors.

For a company to bring a claim against a director, its members must resolve in general meeting in favour of a claim. The director may be liable (subject to a court order):

(i) to compensate the losses;
(ii) pay interest and
(iii) in certain cases to pay additional penal damages which may follow from the director’s service agreement.

Conversely, the company may resolve in general meeting to waive any liability of the director and such a resolution, once validly passed, is irrevocably binding on the company.

Liability to shareholders and to third parties

The director may also be liable to the shareholders and to third parties (e.g. to the company’s creditors for false formal statements made upon a capital reduction).

Unlike an OOD, the directors in an AD are legally required to provide the company with a guarantee in an amount not less than the equivalent of a quarter of their annual remuneration. This guarantee may be provided in various ways, including by depositing cash directly with the AD or in its bank account; issuing a bank guarantee in favour of the AD; or by conditionally pledging securities in favour of the company, etc. The guarantee is released on termination of the director’s appointment.

Example breaches of statutory duty

Below are examples of statutory duties giving rise to civil liability to creditors or third parties. These are non-exhaustive, and in any event are additional to the more general class of duties which directors owe not to harm the company or certain third parties, described above.

In the Commerce Act 1991:

  • Where a going concern is being acquired by a company, the acquirer's directors are liable to the target’s creditors to ensure that the newly-acquired assets are managed separately from those of the acquirer for 6 months from acquisition;
  • The director of an OOD, unlike the director of an AD, is liable to ensure the due and proper book keeping of the OOD;
  • On incorporation, the directors of an AD must certify before the AD’s bankers that the AD has applied to register with the Company Registry. Failure to certify allows subscribers of shares to claim their capital back (including from the directors personally);
  • Directors are liable to the AD for transactions in breach of the company’s articles of association;
  • The directors of an AD are also liable when contracting with a connected person without prior board consent;
  • Directors are liable to the shareholders for the losses resulting from failure to perform statutory duties during the preparation and execution of a corporate reorganisation (such as merger, demerger, etc.);
  • A director who fails to apply to court to open insolvency proceedings within 30 days of the company’s insolvency, is liable to the company’s creditors.

In the Tax and Social Security Procedure Code 2005:

  • Where a director withholds information which he or she is obligated to disclose to the tax authority or to a bailiff and as a result, corporate tax liabilities fail to be collected, the director is liable up to the amount of unpaid tax.

The withholding could conceivably take place occasion when:

the director declares (personally or, arguably, through an agent such as the company’s accountants) information to the tax authorities, for example in a tax return or a payroll return;

during a tax audit;

when the director withholds information from a bailiff in the course of enforcement proceedings, e.g. by failing to declare assets of the company.

  • A director may be liable for corporate tax liabilities when he or she, in bad faith, performs one of the following, as a result of which the assets of the company decrease and as a result of such decrease the corresponding payments for taxes and mandatory social insurance contributions fail to be collected:

acts which constitute hidden distributions of profits or dividends or transfers of assets or of the going concern, either for no value at all or for a value which is materially lower than the market price of the assets; or
causes an encumbrance to be created over the company’s assets, etc. as a security for another person’s debt, and the encumbered assets are subsequently disposed.

In such cases, the director is liable up to the value of assets disposed of.

The range of possible situations of bad faith appears wide. For instance, where:

the relevant act of bad faith is performed within one year of the tax obligation arising or being declared (whichever is later); and
when the relevant act is performed in the period from the commencement of a tax audit pursuant to the Code and up to 6 months from its end or, in the case of a tax inspection, within 6 months of the formal initiation of the inspection.

The liability of the director in both situations above is subsidiary to that of the company: he or she would be required to pay the tax due insofar as it cannot be collected from the company.

In the Credit Institutions Act 2006:

  • a bank director (banks are always ADs) who extends a loan without the necessary board resolution is liable jointly with the borrower for the loan amount sum.

In the Public Offering of Securities Act 1999:

  • a director is liable for the provision of false information in the company’s financial statements and other documents destined for publication.

Administrative liability

The administrative liability of directors arises under administrative law, i.e. law providing a public body with powers in certain area of public life. Such breaches typically result in fines and sometimes in other consequences.

Some examples are:

In the Protection of Competition Act 2008:

  • breaches of the Act by a director, such as failure to notify the Commission for Protection of Competition of a relevant merger, can result in fines of up to BGN 50,000 (EUR ~25,500);

In the Public Offering of Securities Act 1999:

  • breaches of the Act by a director, such as failure to notify the Financial Supervision Commission of changes in the company’s articles of association can result in fines of up to BGN 100,000 (EUR ~51,000);

In the Corporate Income Tax Act 2006:

  • a director who fails to file a tax return on behalf of the company can be fined up to BGN 1,000 (EUR ~510).

Criminal liability

Criminal liability arises when an individual commits a crime with the requisite state of mind. This liability is always personal and is typically triggered by intentional action or inaction, but sometimes, when expressly provided by the Criminal Code 1968, also by negligent action or inaction. All criminal offences and their respective punishments are exhaustively laid down in the Criminal Code 1968. The act complained of must be criminalised at the material time.

A director may commit a crime in the context of carrying out his or her duties in a range of cases.

For example:

  • Tax evasion of amounts over BGN 3,000 (EUR ~1,530) is punishable by imprisonment of 1 to 6 years and a BGN 2,000 (EUR ~1,000) fine;
  • Tax evasion of amounts over BGN 12,000 (EUR ~6,100) is punishable by imprisonment of 3 to 8 years and confiscation of part or the whole of the director’s property;
  • Failure to apply for insolvency within 30 days of cessation of debt repayments by a company is punishable by imprisonment of up to 3 years or a fine of BGN 5,000 (EUR ~2,550).

Please contact us for more information.

Authors: Yavor Markov and Kamen Shoylev

Proposed changes to Bulgarian citizenship by investment


On 20.03.2020, the Bulgarian Government published a draft Bill with proposed changes relating to the citizenship by investment programme.

Amendments to the programme had been previously proposed in March 2019 but were never adopted and the Bill did not reach an advanced reading in the Bulgarian Parliament.

The recent proposals alter the first stage of the process, permanent residence.

It is not yet clear if this latest proposal will be adopted as it is and whether yet further changes will be proposed.

We describe below the proposed changes as they are proposed.

New Permanent Residence Options

The current option to invest in Bulgarian government bonds will no longer be viable. Instead, the following substitutes are introduced:

(A) Acquisition of shares in a Bulgarian collective investment scheme (CIS) with a market value of no less than € 513,000 provided that:

  • the CIS’ assets are no less than ~ € 2.5 m ;
  • the CIS is approved or licensed by the Bulgarian Financial Supervision Commission (FSC);
  • the CIS shares are admitted to trading on the Bulgarian Stock Exchange or a Multitrading Facility (MTF) in Bulgaria;
  • the investment strategy of the CIS is focused on investment in shares and corporate bonds of companies, admitted to trading on the Bulgarian Stock Exchange.

(B) Acquisition of shares with a value of at least € 513,000 in Alternative Investment Funds (AIF), provided that:

  • the assets of AIF have a value of at least ~ € 1.5 m;
  • the AIF and the AIF Manager (AIFM) are approved, registered or licensed by the FSC;
  • the shares are admitted to trading on the Bulgarian Stock Exchange or multilateral trading facility (MTF) in Bulgaria;
  • The AIF’s investment strategy is focused on investment in shares and corporate bonds of companies admitted to trading on the Bulgarian Stock exchange.

(C) Investment in the capital of a Bulgarian company for an ongoing or completed priority investment project (PIP), certified in accordance with the terms and procedure of the Bulgarian Investment Promotion Act. The required amount in this case is no less than BGN 2 mln (~€1.025 mln)

More information on PIPs, you may find on our previous article.

Grandfathered Options

(D) Investing in the shares of a Bulgarian company traded on the Bulgarian Stock Exchange has been preserved, however the amount is now proposed to rise to 2 million leva (~€1.025 mln).

(E) Lastly, investors will still have the option to contribute to the capital of a Bulgarian private company (€3 mln).

Proposed timeframe

All investments should be maintained for a period of 5 years from the time of its making. Monitoring of the investment is yet to be further implemented by way of changes to the respective secondary legislation.

Current universe of CIS, AIF and AIFM

To date Bulgaria has two multilateral trading facilities, namely BSE International and MTF Sofia. There are over 130 CISs available for investors to choose from. There are currently also 11 AIFMs.

Citizenship Options

Standard Track

As before investors under the standard track will be able to apply for citizenship five years after becoming permanent residents.

Fast Track

A Fast Track option will still be available.

People who have obtained permanent residence on the basis of investing in a CIS, AIF/AIFM, a Bulgarian listed-company or in a PIP will have two options to speed up the process of naturalisation:

  • Doubling their initial investment under the same conditions of the law; or
  • Investing a further BGN 1 mln (~€513k) in the capital of a company that has carried out or is carrying out a PIP.

An interesting option is available to those who choose to invest in a PIP at the first stage when applying for permanent residence and have invested at least BGN 2 mln (~€1.024 mln). They will not be required to invest additionally to qualify for naturalisation under the Fast Track option.

These proposed changes would give investors a lot of flexibility to suit their investment styles. If approved as they are, the majority of the fast track routes will be similar to US EB-5 programme, which is very popular amongst investors.

People who have contributed 1 million euro to the capital of a company who has carried out or is carrying out a priority investment project will not be required to make further investments - they will be eligible to apply for citizenship after 1 year of becoming permanent residents.


Family members of the investor will continue to benefit from the programme. Spouses of applicants under the Fast Track will now be eligible to apply for citizenship after only 3 years of holding permanent residence as opposed to the 5-year period which now applies.

Options for Residents who have invested Bulgarian government bonds?

The most important question for existing investors is what happens if they have already started the process. How will any changes in the programme affect their applications?

As is widely known, the Bulgarian R/CBI programme is a 2-step process. The first step being applying for and obtaining permanent residence and the second – applying for and obtaining Bulgarian citizenship.

Our view is that permanent residents should still be eligible to apply for citizenship under the Standard Track even if changes to the residence options occur.

Those who wish to opt for the Fast Track will need to make the second tranche of the investment in the form of a contribution to the capital of a company, which is carrying out or has carried out a PIP.

We will continue to monitor the progress of the proposed changes. Should you have any questions, please do not hesitate to contact us via cbi@newbalkanslawoffice.com or on +359 2 950 6239

Authors: Nevena Bekyarova and Ivan Petrov

How to protect your family and wealth in the face of the Covid-19 pandemic?

In an unsettling time as this, it is of paramount significance to secure a safe and financially stable environment for you and your family.

We illustrate below (relatively to Bulgaria - where your assets or affairs may fully or partially be) some of the best practices to consider when preparing for a global pandemic that may disrupt your normal pace of life for weeks or even months. Flexibility and anticipation are crucial when making any arrangements.

  1. Arrange for a delegate in emergencies

    The situation may drastically change and it is crucial that you are able to hand over your personal affairs, whether medical, legal or financial, to a trusted family member or advisor or to an appropriately governed structure. In Bulgaria, you could delegate powers by way of executing a power of attorney.
  2. Wealth and corporate restructuring

    Identify a safe place where you can store your ownership documents, financial records and other valuables and make sure to create a way for your trusted family members or advisors to find them in case of an emergency.

    Restructure your corporate affairs so that you can make decisions remotely.

    Ensure  if possible that you have a locally compatible digital signature to optimise the level of security. While in principle all EU issued signatures ought to work, in practice we find that Bulgarian government agencies, notaries and banks tend to accept locally issued signatures from several suppliers.
  3. Draft a will

    Without a will, the Bulgarian position is to reserve shares of your assets for your spouse and children. This type of ‘reserved share’ inheritance law applies elsewhere (e.g., in France, Germany, Spain and Russia). The exact distribution may vary from country to country and it is crucial to have a contingency plan. The applicable succession law would depend on factors such as the place of last habitual residence of the deceased, country of nationality, country, in which your real estate is located.
  4. Create an Emergency Fund

    Open a bank account or create a fund which allows for your loved ones to have quick access to funds and be financially secure. This should help facilitate them including e.g. by funding their costs of stepping into ownership of your assets as heirs as needed.
  5. Check you existing structures

    If your structures were created some time ago, please check if they are still legally sound and continue to serve your purposes fully.
  6. Get Appropriate Insurance Coverage

    Review your assets and structures and make sure to consider the risks and potential damages that your business may be facing. It may be wise or necessary to have additional insurance in place.
  7. Obtain a second passport

    Being a global citizen is more important than ever. Different countries provide for different healthcare systems and opportunity to travel freely. Having the option to move quickly and to a developed country may at times be the best solution and a potential lifelong insurance for times of crisis.

We have vast experience with assistsing Private Clients and HNWIs. Should you have any questions, please do not hesitate to contact us at  sofia@newbalkanslawoffice.com.

Author: Nevena Bekyarova

Covid-19 in Bulgaria: Standstill of Creditor Remedies


  • The Bulgarian Parliament has enacted an amended Actions and Measures under the State of Emergency Act 2020 (State of Emergency Act or “Act”). This includes provision for the standstill of the availability of remedies for non-payment, which are normally available to creditors against debtors in default
  • The Act is part of the governmental response in Bulgaria to the Covid-19 epidemic 
  • Between 13 March and 9 April 2020 a slightly wider scope of obligations were placed in standstill
  • The now standstilled creditor remedies include accrual of interest and penalties; acceleration; discharge of contract for default; and seizure of assets
  • The standstill is only available in specific contracts with banks or financial institutions
  • Debts owed to other types of creditors remain fully enforceable
  • Interest for the period to the affected creditors will be forgone for the period of the standstill
  • Debtors who are planning on availing themselves of the optionality under the Act ought to plan for the fact that obligations will become due immediately after the expiry of the state of emergency and may then lead to acceleration provisions applying immediately. This may be mitigated by negotiated solutions with lenders. There is also some discussion about the possibility of further legislation to deal with this cliff edge
  • The standstill provisions described here operate alongside the normally applicable doctrines of force majeure and frustration in Bulgarian law, which we cover in a separate note.


In response to the Covid-19 pandemic, the Bulgarian government declared a state of emergency on 13 March 2020. Due to last until 13 May 2020, the emergency state may be extended. Retroactively applicable from 13 March 2020 is a statute, the State of Emergency Act. This will apply for the duration of the state of emergency.

The State of Emergency Act was supplemented and amended on 9 April 2020.

In this note, we address one aspect of the State of Emergency Act: the standstill of a range of private law remedies for the duration of the state of emergency, set out in s 6 thereof.

Section 6’s wording

Following amendment, as of 9 April 2020 s 6 now reads as follows:

“Until the repeal of the state of emergency, in case of delay in payment of obligations of private persons, debtors under loan contracts and other forms of financing (factoring, forfeiting and others) provided by banks and financial institutions under s 3 of the Credit Institutions Act, including when the receivables are acquired by other banks, financial institutions or third parties, and under leasing contracts, no interests and penalties shall accrue, the obligation shall not be accelerated and the contract shall not be discharged due to default, and no property shall be seized.” (NBLO’s translation)

Who does s 6 apply to?

The addressees of the provision are all “private persons”, i.e. individuals and legal entities, such as companies, which are non-public, which are debtors under certain contracts covered by s 6 of the Act. Public entities such as government bodies and municipalities are not within the scope. They remain fully liable.

How long for?

The standstill in s 6 of the State of Emergency Act is temporary, lasting for the duration of the emergency. This means that certain usually available remedies were suspended on 13 March 2020 and will continue in suspension until the end of the state of emergency - currently, 13 May 2020.

As above, certain other normally available creditor remedies were initially included in the statutory wording and were thus unavailable to creditors between 13 March 2020 and 9 April 2020. They are now once again available.

Once the state of emergency is lifted, the standstilled remedies will automatically come back to life.

As a result, debtors who have suspended payments taking refuge in the standstill will find themselves owing several instalments simultaneously and creditors will be able to both charge prospective interest, penalties, terminate the contract for breach or accelerate repayment of the contractual sum, and this may apply on the very first day after the state of emergency is lifted (depending on the contractual interpretation). One caveat is however that this has been identified and publicly debated, and may motivate further amendments to the Act.


As a result of the Act, remedies relating to payments under the following types of contract are brought to a standstill:

  • Loans or other forms of financing (factoring, forfeiting and others) provided by banks or financial institutions; and
  • Operating and financial lease agreements.

Typically, both of these types of contracts would involve periodic payments.

Section 6 does go somewhat further. It extends also to assigned receivables (e.g., to other banks or third parties like collection agencies) - but not where the obligation was due initially to a non-banking party that falls outside of the special definition.

Section 6 does not apply to non-financial obligations under otherwise financial agreements, for example, taking due care of a motor vehicle which is the subject of a lease. Default on non-financial obligations may still see creditors avail themselves of the remedies otherwise brought to a standstill by s 6 of the State of Emergency Act.

Nor does section 6 of the State of Emergency Act apply to remedies for obligations stemming from, in particular:

  • loans not given by banks or financials, e.g. private loans between individuals, between companies or between companies and individuals;
  • other types of contracts, e.g. rentals and sales;
  • public payments, such as taxes and fines.


Financial remedies

Very much as with force majeure, which we cover here, debtors can now provisionally lawfully suspend payments to the specified creditors, provisionally without default and without accrual of interests and/or penalties. It appears that the interest for the period of the standstill is forgone permanently: it cannot be charged subsequently.

Careful planning is called for as payments would be due all at once immediately after the last date of the state of emergency. The remedies would then (having been only suspended previously), immediately apply again. A debtor may therefore wish to negotiate with their creditor a mutually acceptable compromise.

Non-financial remedies

Default on payment during the state of emergency will not be a ground for discharge of the contract by a dissatisfied creditor and they will not be able to accelerate their clients’ debts and start enforcement proceedings against them, among other things - for the duration of the state of emergency at least.

Parties still free to perform voluntarily?

The law only brings to a standstill the remedies for non-performance. Voluntary performance certainly remains possible during the state of emergency. If a payment is made, and was otherwise due, it would appear to be irreversible.

Further questions

NBLO regularly advises clients on issues arising from contractual relations. If you have any further questions relating to the standstill of contracts in the context of Covid-19, please do not hesitate to contact us.

Authors: Yavor Markov and Kamen Shoylev

During and after COVID-19: Force Majeure and frustration as defences against contractual liability


  • The Covid-19 pandemic has prompted swift and all-encompassing governmental measures, gumming up domestic and cross-border commerce and making many transactions impossible
  • This is a cause for contractual default by businesses
  • Along with newly-introduced special legislation, the force majeure and frustration defences are devices Bulgarian law devices that will be used by businesses defending contractual claims and seeking to adjust their economic losses
  • Force majeure is based on a party's inability to perform under a contract. It allows for the suspension of performance (and may allow for complete discharge of contract).
  • Force majeure is however inapplicable to purely financial impossibility.
  • Frustration allows a party to request contractual adjustment: termination or amendment, where it does not wish to perform and unforeseeable economic reasons make the bargain grossly unfair and contrary to commercial good faith.


The ongoing Covid-19 pandemic and government actions intended to dampen it strain the performance of contracts sometimes to breaking point. Аmong others, the proximate causes of impossibility to perform include staff absences, newly-imposed workplace health and safety requirements and liquidity crises.

In the general case, where a breach of a contractual obligation would occur as a result of Covid-19 or of epidemic control, what can a contractual party do to defend itself against or mitigate claims for breach of contract? On the other hand, what arguments may be soundly made in favour of performance regardless? We refer to each party prevented from performing as Affected Party (all parties may be Affected Parties: identically or in different ways).

Below we review two relevant concepts of Bulgarian law: force majeure and frustration in turn. In addition to these concepts, which apply non-specifically to the pandemic, s 6 of the recent Bulgarian Actions and Measures under the State of Emergency Act 2020 (AMSEA) may also be relevant. This newly-passed legislation suspends a range of private law obligations and remedies for the duration of a state of emergency (at the date of writing, this state will continue to 13 May 2020). We cover the implications of s 6 in a separate note [link].


What is force majeure?

Overwhelming force (below we use the commercially common French variant ‘force majeure’) is an extraordinary event that cannot be foreseen or avoided, which arises after the parties contract. The force in issue may be in the form of a natural disaster (e.g. the Covid-19 pandemic itself) or may be man-made including of a governmental, administrative or legal nature (e.g. the government measures taken in response to the Covid-19 pandemic). The force majeure can apply to all types of contract governed by Bulgarian law.

Is a force majeure clause needed?

Force majeure principles apply by default of law: a force majeure clause does not need to be included by the parties in their contract – though it may be. Spelling out what counts as force majeure between the parties may: (i) help the parties be better aware of it in their dealings; (ii) be useful if the contract is to be enforced by a foreign tribunal or court; and (iii) allow for a more extensive definition than the statutory description of force majeure, applicable specifically between the parties. Parties may not subtract from the statutory scope of force majeure - if an event meets the statutory criteria, it will be considered as force majeure regardless of the parties’ definition.

The flip side of this may be that with a cross-border contract (even one that is intended to be performed in Bulgaria), the parties cannot assume that force majeure would automatically apply - but they can assume so if the contract is governed by Bulgarian law.


The force majeure event must make at least one contractual party unable to perform its contractual obligations. The causal relationship may be direct (i.e., the overwhelming force is the immediate cause of the impossibility to perform (e.g., in a contract of carriage by air, the impossibility of a flight due to a government ban on flights)) or indirect (e.g. in a manufacturing contract, the inability to import an input material necessary for the product to be produced under the contract due to a flight ban) and as above may be a purely legal cause: e.g., legislation prohibiting the export of certain goods. Where there are arguably more causes of one and the same inability to perform, a more careful analysis of the situation will be needed.

Notice requirement

Further, force majeure must be invoked by the Affected Party. I.e., the Affected Party must notify the party to which they owe performance as soon as practicable. We would recommend that notice be given in writing and following any pre-existing contractual requirements as to how notice should be given that apply between the parties (e.g., as to the address or method of service of notice).


An important exception from the list of the kind of events that can count as force majeure is lack of money itself, even if it is sudden, unforeseeable and catastrophic.  Therefore, if e.g., the force majeure involves a loss of goods which were to be sold under one contract, which in turn results in a lack of funds that is relevant to the performance of another contract, force majeure as a defence of a claim under the second contract is of doubtful use.

The dominant judicial view in Bulgaria however is that a technical inability to pay may be force majeure. E.g., where banks in the country of the payee have closed for business because of Covid-19 (Bulgarian banks continue in business at the time of writing).

Importantly, to make use of force majeure, the Affected Party must not already be in breach (e.g. late with a payment) by the time of occurrence of the supervening event.

Effect of force majeure

While the force majeure continues, performance of the contractual obligations of the Affected Party and the related obligations of other contract parties are suspended by operation of law.  Both the Affected Party and its counterparties with their corresponding obligations are free of liability for breach for as long as the overwhelming force continues.

Moreover, if the suspension lasts so long that there is a ‘loss of interest’ in the performance of the obligation affected by force majeure, e.g. if a party needs a delivery on a certain date and not a day later, it may discharge the contract all performance that is due after the date of notice. Parties can stipulate in their contract the duration of the force majeure before the contract to be discharged - automatically or with the discretion of the parties.

The obligations accrued before the force majeure event remain legally binding on the Affected Party.

Force majeure is typically invoked out-of-court first, though it may need to be litigated on in the competent forum.

How does this apply to your situation during the pandemic?

  1. The Covid-19 pandemic is likely such an extraordinary supervening event that it will be recognised as a force majeure in a very wide range of situations. Recognition is not an absolute certainty, but is likely for the majority of courts.
  2. Whether a certain inability to perform is caused by the epidemic (or by a mixture of reasons, or not at all by the epidemic) would be a matter of fact and will need to be analysed carefully. The less direct the causation, the more side-causes, the less straightforward the argument.
  3. Unfortunately, even where the pandemic is shown to be the cause of an impossibility in performing where the result is an inability to pay (that is not technical in nature), this cannot be pleaded as force majeure.
  4. Some defaults may be force majeure, but still not be helpful if you do not wish your counterparty to be able to potentially walk away from the contract.
  5. With force majeure, there is no automatic mechanism for price adjustment.

Practical steps

You may wish to:

  1. Include a contractual clause that defines what the parties will consider force majeure, define what the fundamental contractual obligations are, and define periods beyond which the contract may be discharged - but they may not in advance exclude the application of force majeure - this is mainly relevant for the future.
  2. Consider whether your contract’s difficulties are caused by the pandemic or the response to it and whether you wish to rely on force majeure if it means the contract may be ended. Seek legal advice.
  3. Obtain a force majeure certificate issued by the Bulgarian Chamber of Commerce and Industry, where at all possible: this will be useful evidence.


Frustration once again involves events and circumstances relevant to contract performance which were not foreseeable at the time of contracting. (“Foreseeable” to the average business man or woman, who is credited with knowledge of their area of business but not much else). The unforeseeable events make performing the contractual obligations unfair and contrary to “good faith”.

Frustration automatically applies to all types of Bulgarian law governed contracts, just as force majeure does.

Historically, frustration has coincided with economic depression and the dislocation resulting from war or dramatic upheavals like the fall of communism in Eastern Europe and the initial transition to a market economy (e.g., the accompanying high inflation, currency devaluation, etc.). Frustrating events may be also more isolated events, such as an exorbitant spike in the price of a relevant raw material.

Changes in the exchange rate of the contract’s currency are not a ground for pleading frustration in themselves. However, they may constitute a basis together with other causes.

As with force majeure, the party relying on frustration must not be in breach prior to pleading the defence.

Also, similarly to force majeure, parties are free to stipulate in their contract how frustration will apply between them but arguably are not free to exclude its application altogether.

The distinction between force majeure and frustration is that for parties pleading frustration it remains possible to perform, but for economic reasons performance is arguably unfair and contrary to good faith. The bargain they had struck is no longer a bargain of equals and just. Whether this is so, is assessed on a case-by-case basis by the competent forum (court or arbitral tribunal), asked on the matter.

Need for recourse to courts or arbitral tribunals

The party relying on the Bulgarian doctrine of frustration may apply to court to terminate or amend the contract as a whole or in part to correct the gross unfairness, in such a way as requested by the parties. The court cannot alter the parties’ obligations before the date of decision i.e. retroactively. These remain legally binding in full.

As we have written, Bulgarian courts are suspended until 13 April 2020 and this is expected to be extended to 13 May 2020 and at least some of the domestic arbitral centres are not issuing new arbitration proceedings. Some courts now accept claims and open cases during the state of emergency and schedule hearings for after its lifting.

Frustrated contracts will likely have long-term effects, and at least certain effects would apply after the courts reopen for business. They will therefore be capable of re-arrangement by a court or arbitral tribunal at that time. In our view, courts can, and those that open cases during the state of emergency will, backdate the remedy they decide on to the date of the application, making applying as soon as the economic unfairness arises quite prudent.


While the outcome of the contract adjustment process (applicable in frustration) may generally be less certain than the effect of a finding of overwhelming force, it may be the only attractive remedy where the impossibility one would otherwise plead is purely financial.


NBLO regularly advises clients on issues arising from contracts. If you have any further questions relating to force majeure or frustration specific to the context of Covid-19 or more generally, please do not hesitate to contact us.

Authors: Svetoslav Ivanov, Yavor Markov and Kamen Shoylev

COVID-19: M&A Opportunties in Bulgaria

As the COVID-19 pandemic grows the economic impact is difficult to predict. Countries around the world are taking unprecedented measures to protect SMEs and the markets.

The European Central Bank announced a €750 bln Pandemic Emergency Programme, The UK Chancellor of the Exchequer introduced an initial guarantee of GBP 330 billion to support the economy. Similar packages have been introduced by governments small and big.

The Government of Bulgaria is also implementing measures to limit the economic downturn. The Government has allowed for BGN 500 mln to be distributed as low-interest loans to businesses via the Bulgarian Development Bank. The Bulgarian National Bank is introducing BGN 9.4 bln worth of measures to support the liquidity of the banking sector.

Even though those are significant steps taken to protect the economy, it would be impossible to predict what Bulgaria’s economy would look like after the crisis is over. It is true that the current model of the economy is not diversified enough to protect it against a shock like this.

By the second half of the year a number of Bulgarian companies will be looking for inward investments to bring in more cash to continue operating. This might present lucrative opportunities for third-country investment. As East Asian economies are likely to have readjusted to the slump earlier and be in an expansionary mood, many investments may come from that part of the world.

Bulgaria has a highly-skilled technically-competent workforce. This is an inheritance from its Soviet-style educational system with a strong tradition in teaching mathematics and other STEM subjects. Bulgaria’s technology companies can be an attractive addition for business that would wish to further expand their presence in Europe.

Authors: Ivan Petrov and Kamen Shoylev

Covid-19 Lockdown in Bulgaria: Arbitration as a Substitute for Courts

Bulgaria declared a public health emergency on 13 March 2020. The Covid-19 emergency has affected multiple government services in Bulgaria, including courts. With certain exceptions, these have shut from 15 March 2020 to 13 May 2020.

The court closure may well be extended and when service is resumed, a backlog is likely.

Arbitration as a solution

How can you resolve a dispute in the meantime?

If a dispute is urgent and a party needs a binding decision on it, the only viable solution is arbitration in Bulgaria or abroad. The arbitration may not necessarily complete by the time courts resume business, but it may give preliminary results (including an award), and is almost certainly going to complete its course sooner than state courts, even if they reopen in April 2020.

Arbitration options: Bulgaria and internationally

Of the two leading institutional arbitrations in Bulgaria - the Arbitration Court at the Bulgarian Chamber of Commerce and Industry (BCCI) and the Arbitration Court at the Bulgarian Industrial Association (BIA), BCCI has stopped initiating new proceedings and suspended open court hearings until 13 May 2020 (the current end date for the state of emergency), but as of 23 March 2020, BIA has not.

Meanwhile, by virtue of s 3(1) of the Measures and Actions during the State of Emergency Act ('State of Emergency Act'), in force since 13 March 2020, the running of time in arbitration proceedings in Bulgaria is suspended. This means for example that a new arbitration proceeding may be opened, but any time limits thereunder, such as for reply which the opposing party would be entitled to, are suspended until the end of the state of emergency, when they would resume to run.

In this sense, a party which begins arbitration proceedings during the state of emergency would have a certain time advantage compared to state courts (insofar that even filing a claim with a state court is impossible in practice), but not the one that the party would otherwise expect.

Even if all domestic Bulgarian institutional arbitration courts paused, there are the options of institutional arbitrations seated in other jurisdictions (e.g. LCIA in London or ICC in Paris – both of which have confirmed that they continue to accept new requests for arbitration and do so electronically). It is also possible to start an ad hoc arbitration (on the difference between institutional and ad hoc arbitration, see below).

The limitations under s 3 of the State of Emergency Act do not pertain to arbitrations outside of Bulgaria, nor have at least France or the United Kingdom applied similar rules to their arbitrations. The parties could resolve their dispute without having to wait for the state of emergency’s end.

To what extent the rules for an ad hoc arbitration with a seat in Bulgaria may dispense with time limits at least in the initial phase (and therefore sidestep the effect of s 3(1) of the State of Emergency Act)) remains unclear.

The determinations of disputes issued by arbitral tribunals are applied in Bulgaria broadly identically to judicial determinations of disputes. Domestic and international arbitration tribunals are also treated equally, provided certain conditions are met by the tribunal, including that its seat is in a New York Convention country (all European states and a total of 161 countries globally are).

The arbitration clause

Even without a pre-existing arbitration clause, arbitration can be agreed on after the dispute arises. With their arbitration agreement after-the-fact of dispute, the parties can also agree on the arbitrator(s), rules, seat, language, and much more.

Are all disputes arbitrable?

All disputes which are capable of monetary valuation, excluding those regarding ownership or possession of real estate, financial consequences of divorce, employment or consumer contracts, are arbitrable. Arbitrations can be seated abroad, even if the parties’ business dealings touch predominantly Bulgaria or a third country, but from Bulgarian law’s perspective at least one of the parties needs to have a connection to an international element (e.g. to have its effective management abroad).

Why arbitrate?

Except that it may currently be the only option to bindingly solve on-going disputes, arbitration also has advantages to traditional court proceedings, such as:

  • Speed: arbitration is a single-stage proceeding, the award is final and the dispute can be resolved faster;
  • Flexibility: parties can tailor the arbitration to meet the specific requirements of the dispute;
  • Confidentiality: the proceedings and award are confidential by design;
  • Control: the parties can agree on arbitrator(s) they believe is/are neutral;
  • Internationally enforceable award: typically, an arbitration’s decision can be enforced in almost all jurisdictions in the world a lot more easily;
  • Cost: arbitration may be cheaper than prolonged court proceedings;
  • Certainty: arbitration does not exist in a vacuum. Parties may seek assistance from state courts if they feel their legal rights and/or interests have been infringed.

Institutional vs ad hoc arbitration

Usually arbitrations are institutional, i.e. they are part of continually existing institutions, akin to regular state courts.

However, even if the institutional arbitrations suspend for the duration of the Covid-19 pandemic, or in any other case, parties can still elect an ad hoc arbitration. This is an arbitration specifically set up by the parties for their concrete dispute.

It does not matter if the award is issued by an institutional or an ad hoc arbitration: it is just as enforceable and legally binding.

A disadvantage of ad hoc arbitration may be that parties cannot automatically rely on pre-provided rules of arbitration and on the institutional support of the Secretariat or other institutional body supporting the tribunal, but they may incorporate these rules to their specific proceedings adjusting them as necessary. The parties will need to find a method of appointing arbitrators acceptable to them.

Further questions

NBLO regularly advises and represents parties to arbitrations and is involved in the enforcement of arbitral awards. If you have any further questions relating to arbitration and dispute resolution in the context of Covid-19, please do not hesitate to contact us.

Authors: Yavor Markov & Kamen Shoylev

(1) E.g., the London Court of International Arbitration (www.lcia.org).

(2) International Court of Arbitration to the International Chamber of Commerce (https://iccwbo.org/media-wall/news-speeches/covid-19-urgent-communication-to-drs-users-arbitrators-and-other-neutrals/).

(3) The vast majority of the world’s economies are signatories to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which makes this possible.

How are administrative services delivered in Bulgaria during the Coronavirus outbreak?

Bulgaria declared a state of emergency on Friday 13th March, giving the government extraordinary powers. Approved in a parliamentary vote, the month-long measure (effective until 13 April 2020) should allow the Bulgarian Government to dedicate more resources to fighting the pandemic in Bulgaria.

How are Government services delivered during this time?

The public administration remains open for business.

Government agencies, ministries and other government bodies are currently in the process of restructuring their workflows to minimise the health risk to all officials and the public.

Most bodies are proactive in finding solutions to minimise personal interaction while continuing operations.

The Covid-19 pandemic has presented itself as an opportunity to push eGovernment forward.

One good example is the Bulgarian Investment Agency which is actively promoting a little-known eDelivery service that would allow for the submission of online applications. This platform is part of the Bulgarian Government's commitment to offering online services.

Individuals who are citizens or residents can register on the eDelivery platform. What they would need is either:

  • A certified digital signature issued by а licensed local provider such as InfoNotary, B-Trust or Eurotrust; or
  • A special PIN issued by the National Social Security Institute.

A certified digital signature can be obtained at most licensed Bulgarian banks as those have special agreements with the service providers to act as a point of sale. Bank branches remain open for business at present.

The PIN is issued free of charge by the National Social Security Institute if you are registered with them and requires one to simply submit an application and they are given on the spot. This PIN also allows you to access the NSSI online platform and make certain enquiries and submission of documents.

The eDelivery platform allows you to directly communicate with authorities as if you are talking to them in person. Currently there are 1188 different local and state bodies registered on the platform.

All communication is encrypted and there are a number of advantages of using the platform. It allows for the authentication of the time of sending/receipt of documents and messages by the sender/recipient. This proof can be used in a court of law as evidence and the platform guarantees the authenticity of the documents exchanged.

The platform can be used by companies and other legal entities as well following a registration process and approval by the administrators. As of March 2020 there are 194 companies (both limited liability companies and joint stock companies) registered in the system.


Authors: Ivan petrov and Kamen Shoylev

The Coronavirus Outbreak: Employment Issues

The 2019-2020 pandemic of novel coronavirus disease (Covid-19) caused by the SARS-CoV-2 virus is a material risk to human health - directly to vulnerable groups and indirectly, via the overwhelming effects it risks having on healthcare systems. The epidemic and the necessary responses to it are also a material risk to the economy and to livelihoods and businesses.

Employers are encouraged to participate in public health measures to limit the spread of the disease as part of a multi-pronged response.

In Bulgaria, this is further situated in the context of a national emergency which was declared on March 13, 2020.

What is mandated by government authorities or is prudent is evolving and you should seek specific advice. Below are a list of issues specific to employment and our initial comments on these which we felt may be helpful information (but not advice). We have already begun advising clients on the consequences of Covid-19 and are well-equipped to do so – please email us on covid19@newbalkanslawoffice.com if you require further assistance.

Purely legal issues will also mix in with questions of reputation and corporate social responsibility (CSR) which may modify your approach. In addition, input from your usual Health & Safety at Work consultant will be highly relevant and we are well-used to advising alongside such consultants on the legal aspects.

Infection and risk

(1) Are employees obliged to disclose themselves as potentially higher infection risks?
(2) Can it be employer policy to demand disclosure from employees?
(3) What obligations of confidentiality and data protection in respect of infection-related information do employers have?

NBLO’s view:

In our view, there is no right for employers to force the disclosure of such information from employees, unless the employer’s formal policies include the requirement for disclosure and such policy is incorporated in the relevant employment contract. In our view, such policy would not be generally inconsistent with the data protection principles. The information obtained in this way must be used only for the purpose of protecting the health and well-being of employees and customers and kept confidential. The employer however may be obligated to notify public health officials the (suspected) infection and this would not be an actionable breach of confidence.

Infection-related duties to employees, customers and the public

(4) If an employer suspects or knows of specific employee(s) being infected, how does this affect its duty to customers?
(5) What is a sufficient mitigation of risk to customers or employees in an epidemic?
(6) Are employers obliged to notify employee infections to the public health authorities?

NBLO's view: employers have a general duty to provide a safe and healthy place and system of work and a context-dependent duty to customers. This duty is only more prominent and higher in the context of the epidemic and the public health measures in Bulgaria.

The application of this duty will be context-dependent in the Covid-19 situation and of the business. E.g., offices would need to be cleaned more or in a different way; personal protective equipment and personal hygiene materials may need to be provided.

These risks will be well-advised to be dealt with on advice from specialist health and safety at work consultants. At a minimum, the public health authorities’ updated guidance should be followed. In some cases this would be straightforward, but in other circumstances - impossible in practical terms. In other cases, there may be an uncertainty. For example, recent Covid-19 guidance requires that a place of work (e.g. an office) must be aerated (проветряване). It may be this requirement will on its face be met by a windowless HVAC system.

Working from home

(7) Can employees demand to be absent from work if they believe this is beneficial for their health?
(8) Can employers force employees to work from home/away from the office?
(9) Can employees refuse to attend to specific customers, participate in meetings or work in groups or in open plan offices or working environments which might be considered risky?

NBLO's view: it currently may be and will shortly certainly be a statutory obligation obligatory under draft legislation for an employer to provide home working arrangements, where this is reasonably possible. Where not possible or too costly, the duty is unlikely to apply.

Employees and employers may not generally discriminate against customers on the basis of their protected characteristics and disability (caused by illness) may be one such. However, this is counterbalanced by the employees’ right to a safe place of work. A reasonable refusal by an employee will be difficult to fault legally.

Laying off of active work / forced unpaid leave

(10) Can employers suspend employees or send them on unpaid leave?

NBLO's view: in addition to any specific provisions that there may be in employment contracts, the Labour Code does not contain a statutory provision allowing employers to send employees on unpaid leave or lay them off temporarily without consent. However, if the period of forced inactivity at work continues for more than 15 days, on top of any additional contractual rights, employers can give employees’ a month’s notice and terminate their employment agreements.

Sick pay

(11) What are the sick pay obligations of employer

NBLO's view: where the employee has obtained evidence of his or her illness (a sick note), sick pay is standard: the employee is entitled to sick pay for the period of sick leave, subject to limits, and this is funded by a mixture of an employer’s direct contribution and social security funding.

(12) Are employers obligated to pay sick pay to employees who are quarantined but not documented as “ill”?

NBLO's view: quarantined employees (where the quarantine is imposed by the public health authorities) is paid for throughout its duration. Payment is by the employer for the first 3 days and is then taken over by the National Social Security Institute (s 40(5) of the Social Security Code).

Directors’ duties to employees

(13) What are the personal duties of directors and other senior employees for the health and well-being of their staff? Are directors exposed to liability?

NBLO's view: Directors, senior managers and senior or specifically nominated employees may owe duties to and within their companies for the health and safety of staff and/or customers. This is a liability primarily owed to the company itself and employees would generally be unable to directly claim against directors, etc.

However, directors, senior managers or perhaps senior employees with delegated responsibilities they may be joined into any claims against the company as third parties and may ultimately bear liability insofar as it can be established that they personally breached duties they had undertaken in relation to the health-related damage. Such claims would generally be difficult to establish (primarily due to difficulties with establishing causation) but ought to be carefully considered on their facts.

Employee external and internal disclosure and PR

(14) If employees are worried, are they free to communicate to the media about their concerns?
(15) If communicating with the media, what rules must employees follow?
(16) Are employees protected from retaliation if they ‘whistle blow’?

NBLO's view: as a matter of their duty of loyalty to the employer, employees are generally obligated to preserve the confidences of their employers and the reputation of their employer. In addition, employees must comply with any policy relating to media relations and others, which may be adopted and incorporated in the employment contract. There is no express ‘whistle blower’ protection for employees at this point in time, however.

Termination of employment contracts

(17) In the event of a prolonged period of inactivity or for business continuity purposes, may an employer terminate employment contracts or terminate new hires?
(18) Postponement of commencement of new contracts

NBLO's view: In addition to other grounds which may exist under the contract of employment, an employer may terminate employment by a month’s notice following a 15-day period of enforced inactivity for the employee.

This is an area of a high propensity to generate litigation and it is especially important to seek legal advice when planning to terminate one or more of the workforce to avoid undue negative publicity and otherwise undue compensation payments and expenses.

For more information, please contact us at covid19@newbalkanslawoffice.com

Recent work:

Enterprise building leasing for Heitman fund

NBLO advised the investment fund Heitman European Property III on the leasing to various blue chip clients of its Enterprise building which consists of 5,200 m2 of GLA of Class A office space. NBLO went on to provide ongoing legal services to the Fund concerning these leases.

© New Balkans Law Office 2020