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 Amendment provides a new chapter, titled "Proceedings for the stabilization of merchants", which is similar to the bankruptcy reorganisation schemes in the UK and the US. The aim of the reorganisation procedure is to allow companies to avoid insolvency, especially in cases where there is a risk the company will be unable to repay its debts.
The Amendment exhaustively lists the scenarios when the reorganisation procedure is available and the types of entities that may make use of it. Of note, companies which have unreasonably provided shareholder loans will not have access to such reorganisation. Likewise, banks and insurance companies are also excluded, since there are special provisions for them in the recently adopted Recovery and Resolution of Credit Institutions and Investment Intermediaries Act and the new Insurance Code.
Further, the Amendment explains the proceedings involved in such reorganisation; identifies the competent courts that will oversee them; and details the rights and obligations of the interested parties. It also clearly states the steps for such reorganisation and the rules for preparing the company’s reorganisation plan.
The Amendment is expected to enter the Bulgarian Parliament for discussions by the end of April; we will keep you updated on any new developments.