Insolvency Lawyers in Bulgaria

The Insolvency Law in Bulgaria is part of the Commercial Act. This legal document includes the insolvency proceedings and compliance that is required from the debtor in this case. Companies in Bulgaria may become insolvent for a number of reasons, including economic and business sector crisis, poor management and/or inadequate control, poor investment decisions and even internal conflicts. 

Below, our insolvency lawyers in Bulgaria explain how these proceedings are completed and how we can assist in such matters.

Services provided by our insolvency lawyers in Bulgaria

Insolvency is a complex matter of law, which is why for companies in this difficult situation, our Bulgarian law firm has designed specific services. Among them, we mention the following:

• support in understanding the insolvency rules of the Bulgarian Commerce Act;
• drafting redundancy plans;
• assisting with the purchase and sale of the assets that can be capitalized;
• offering advice on business and shareholder protection in the event of bankruptcy;
• limiting the risks associated with management and supervisory board members’ liability;
• offering employment-related support in insolvency proceedings;
• providing guidance on tax-related restructuring options.

Just like in other cases, such as mergers and acquisitions, insolvency proceedings also require the attention of a team of Bulgarian insolvency lawyers. Among them, the expertise of tax and labor law specialists is critical.

Insolvency rules in Bulgaria

Insolvency in Bulgaria is included in the Commercial Act and the law in Bulgaria allows only for court-administered insolvency procedures. Insolvency may be initiated against a company that is insolvent or over-indebted.

The insolvency law provides the legal conditions and opportunities for the creditor to recover the debts, at the same time allowing the legal entity to continue its activity (in ideal cases). In practice, most insolvency cases in Bulgaria will end in the liquidation of the insolvent company. This means that all of the company’s assets will be used to pay the debts owed to the creditors.

A first step after the court in Bulgaria has declared that the company is insolvent is to order it to cease its activities. This court order prohibits the company from using any of its assets, as they will be used to satisfy the claim of the creditors. One of our insolvency attorneys in Bulgaria can give you more information about the steps you can take after the enforcement of the insolvency order.

When can a Bulgarian company file for insolvency?

Insolvency and over-indebtedness are the two conditions under the Bulgarian law that initiate the procedures. However, the two conditions do not have to be met together. The only requirement for a business to be forced into insolvency procedures or for its creditors to be able to enforce them is for it to be either insolvent or over-indebted. Our insolvency lawyers in Bulgaria can offer detailed information on each of the two statuses.

A Bulgarian business is declared insolvent if it can no longer commit to payments made to:

• a public obligation to the state and municipalities related to its commercial activity, such as paying its taxes;
• an obligation to its contractual agreements;
• an obligation to pay wages to at least 1/3^rd of its employees that has remained unpaid for more than 2 months.

Feel free to address our Bulgarian insolvency lawyers if you need assistance in assessing the state of your company.

The manner in which the assets of the company are distributed to the creditors is a process that is supervised by a court in Bulgaria. The insolvency administrator will handle this process and will start by creating an insolvency balance sheet, to determine the value of the company’s assets and how they are to be distributed. 

Cross-border insolvency cases are solved according to Regulation (EU) 2015/848 on insolvency proceedings: main proceedings are opened where the debtor's centre of main interests is, and secondary proceedings in Bulgaria only in those cases in which the debtor has an establishment on the territory of Bulgaria that is in his possession. 

Company owners in Bulgaria are advised to go through the insolvency process with assistance from a team of insolvency lawyers in Bulgaria.

Types of insolvency proceedings in Bulgaria

There are 3 types of insolvency procedures Bulgarian companies can use:

• rehabilitation;
• liquidation;
• stabilization.

The primary goal of rehabilitation procedures is to let the debtor continue operating their business while partially satisfying the demands of each and every creditor. The rehabilitation plan may be drafted by the insolvency administrator, the debtor, shareholders, creditors, and even by the employees.

In the case of liquidation, assets belonging to the insolvency estate are sold in order to satisfy the creditors’ claims. If a debtor is not yet bankrupt but faces an immediate threat of becoming so, stabilization is a possibility.

Amendments to the Insolvency Law in Bulgaria

In 2023, the insolvency rules of the Bulgarian Commerce Act were amended. A significant modification implies excessive debt as a basis for initiating insolvency procedures. The negative equity balance-sheet test was introduced. As such over-indebtedness now includes a company’s incapacity to satisfy all of its responsibilities in addition to its financial commitments.

Additionally, changes were made to the insolvency procedural rules. Specifically, if the debtor’s seat has not changed in the past 6 months, the court to hear the case will be chosen based on it.

Considering these changes, we strongly advise discussing them with our Bulgarian insolvency lawyers in order to make sure you comply with them.

Statistics related to registered and bankrupt companies in Bulgaria

According to news:

• in the 3^rd quarter of 2023, the number of new registered companies was 9,829, while 829 went bankrupt;
• in the 2^nd quarter, there were 11,025 new companies incorporated, and 984 bankrupt ones;
• the largest share of bankruptcies (77.1% of the total) was registered in the trade and car and motorcycle repair sector.

Our specialists are also at your service if you want to immigrate to Bulgaria. We can help you apply for residency followed by citizenship in Bulgaria.

You can contact our law firm in Bulgaria if you need more information about liquidation and insolvency.