Under Bulgarian law, persons who manage and represent companies and cooperatives (“Officers”) have a duty to file for bankruptcy 30 days from the cessation of payments if the entity they manage and represent becomes insolvent. Apart from the personal liability to creditors for late filing, the aforementioned Officers could be held criminally liable. During the last few years, the practice of the lower courts regarding this criminal liability was inconsistent. Generally there were two interpretations of the law:
- The first was that Officers should file for bankruptcy only after they have been expressly instructed to do so by the general meeting (or sole owner of the capital) of the legal entity. The rationale behind this is that only that governing body is competent to decide on closure of the company. However this interpretation has proved to be problematic. In practice Officers were often found innocent, because in most cases they have not been instructed to file for bankruptcy. This interpretation puts creditors of insolvent companies at high risk, because Officers were intentionally not filing for bankruptcy, knowing that they cannot be held criminally liable.
- The second was that Officers should always file for bankruptcy even without instructions from the general meeting (or sole owner of the capital) of the legal entity. This interpretation protects the interests of creditors of insolvent companies, as it forces Officers to be more cautious about the financial status of the entities they manage and represent, knowing that they cannot escape criminal liability by simply relying on the fact that they have not been instructed to file for bankruptcy.
A recent decision - Interpretative decision No. 5/2014 of the Criminal Division of the Supreme Court of Cassation, which is binding for the lower courts adopts the second opinion, that Officers must always file for bankruptcy upon the insolvency of an entity, even without authorisation from the general meeting (or sole owner of the capital) of the legal entity.