Delchev & Partners

Changes to the Commercial Act

• Prohibition on transfers of enterprises and sales of shares in case of outstanding liabilities to employees

The changes aim to prevent companies with accumulated employment liabilities from transferring their enterprises or shares to other companies, thus stripping the debtors from any assets from which the employees’ claims can be satisfied during execution proceedings.

Pursuant to the amendments if there are any outstanding remunerations, compensations and social security payments in favour of employees, including those whose employment agreements have been terminated up to three years prior, then:

• the enterprise as a going concern can only be transferred after the transferor (or the buyer, if explicitly agreed) has paid any due amounts to the employees.
• a transfer of shares cannot be carried out.

It is still unclear how the above circumstances will be evidenced before the Commercial Register in the course of the transfer of enterprise or sale of shares registration proceedings.

• Non-payment of employment remunerations as grounds for initiating insolvency proceedings

As of 31.03.2018 the following important changes concerning the insolvency proceedings will enter into force:

• in case the employer fails to pay the employment remunerations to at least one third of the employees for more than two months, he shall be considered insolvent and insolvency proceedings can be initiated against him. A request for initiation of insolvency proceedings can be submitted by the GLI.
• Employees’ receivables under existing employment agreements or agreements terminated up to 6 months prior to the registration of the court resolution for initiating insolvency proceedings in the Commercial Register, are entered ex-officio by the insolvency administrator in the list of approved claims. Such employees also vote separately on the stabilization plan, if one is proposed.

Changes to the Public Procurement Act

The following new grounds for removal from participation in public procurement procedures have been introduced:

• lack of written employment agreement between a participant in the public procurement procedure and an employee of his;
• failure to submit a notification for a concluded employment agreement to the National Revenue Agency, or to present a copy of the notification to the employee, as well as  making the employee commence work before submitting the notification;
• failure to pay any due compensation in time.

The above circumstances can be evidenced by mandatory instructions of the GLI and the participant in the public procurement procedure can prove his reliability by paying all outstanding remunerations and compensations. The GLI verifies the grounds for removal of participants as well as their payment of outstanding remunerations.

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Delchev & Partners

This Legal Alert has been prepared by DELCHEV & PARTNERS for information purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Readers should not act upon this without seeking professional counsel.