On 24 March 2015, the Bulgarian parliament promulgated an emergency insolvency law that makes almost all of the major effects of insolvency proceedings applicable to Corporate Commercial Bank, even as the court proceedings on the application for commencement of insolvency against the bank continue. In accordance with the new law, on 25 March 2015 the court appointed temporary insolvency administrators to that bank vested with broad powers to recover assets of the bank.

The Bulgarian Corporate Commercial Bank ("CCB")’s insolvency has resulted in a variety of changes to the Bulgarian banking legislation. Lifting of bank secrecy in cases of bank insolvency is the newest addition to the pile of governmental attempts at accountability and transparency stemming from the CCB affair.  

Recently, the Bulgarian Ministry of Justice introduced a draft amendment to the Commerce Act (the "Amendment"). Amongst other proposed changes, the Amendment introduces a procedure for the reorganisation of companies, prior to their entering into an insolvency procedure.

The 2014 collapse of the Corporate Commercial Bank (ranked 4th in the country) raised doubts  about  the  accuracy  of  the  overall  liquidity  ratio  (34.80%)  and  asset  value (approx. EUR 44.07 billion) of  the  banking  sector  in  Bulgaria,  not  least  because  assets had been evaluated according to  the  internal  rules  of  the  respective  credit  institutions.

Proposed amendments to the Recovery and Restructuring of Credit Institutions and Investment Intermediaries Act, effective as of 14 August 2015 (“Recovery and Restructurings Act”) provide that stress tests should be carried out for insurers and reinsurers. If approved by the Parliament, the changes will necessitate the organising and performing of stress tests for insurers and reinsurers within a tight timeframe, by the end of 2016.

We saw important amendments to the Bulgarian Commerce Act (the “Act”) come to life at the very end of 2016, most notably regarding:

Notary certifications – currently in effect

Fraudulent debtors are trying to use a disputable interpretation of Article 37, para 4 of the Special Pledges Act on the outcome of enforcement over a special pledge against the rights of secured mortgage creditors.

The Bulgarian legislator is notorious for leaving gaps in enacted legislation. Often such legal gaps combined with inexperience, or even worse – corruption of judges, lead to questionable judgments being handed down. Several of these judgments have put mortgage creditors at risk of losing their collateral in the past year.

Rebeka Kleytman was a co-author of this article. 

Almost two decades after being adopted following the model of the World Bank and UNCITRAL for non-possessory registered pledges, the Special Pledges Act (the "Act") was substantially amended at the end of 2016. Most of the amendments take immediate effect while those concerning the digitalization of the Central Register of Special Pledges (the "Register") will come into force on 1 September 2018.

Overcollateralization

On 2 January 2017, amendments to the Bulgarian Commerce Act (the "Act") entered into force in Bulgaria. Amongst the aims of the Act is to prevent falsification of documents by introducing new formal requirements for certain agreements and shareholders' resolutions.

STRICTER FORMAL REQUIREMENTS FOR AGREEMENTS

A proposal to alter the guaranteed recovery of payments due to employees and workers when their employer becomes insolvent has been filed with Parliament.

The Labour and Social Policy Commission’s proposal aims to increase the protection for some employees and make it easier for them to recover any pay they are owed.

At present, the guarantee extends to all current and former employees and workers (whose contract was terminated during the last 3 months prior to insolvency), but is limited to 3 months’ earnings in the 6 months prior to insolvency.