August 2016 - In June 2016, Bulgaria’s parliament approved amendments to the Public Offering of Securities Act to further align national legislation with EU Directive 2013/50/EU, which sets harmonised standards for the disclosure of shareholdings in public companies. The main driver for these changes is to establish a legislative framework so that investors may become familiar with the shareholding structure of public companies they are planning to invest in an easy and transparent manner.

The main amendments that have been adopted into Bulgarian legislation include:

  • Scope of obligation – The disclosure obligation is no longer limited solely to the ownership of shares but also applies to a broader range of financial instruments. The amended law, however, does not contain an exhaustive list of the types of financial instruments that trigger the disclosure obligation. The definition includes all financial instruments with an economic effect that is equal to or similar to the holding of shares, including the entitlement to subscribe to shares in future. Financial instruments that meet the above criteria include options, futures, forwarding interest agreements, swaps, etc.
  • Applicable threshold – The new rules are triggered when the holding of shares and/or other financial instruments reaches, exceeds or falls below 5% (or any other multiple of 5%) of the votes in the public company’s general meeting.
  • Joint thresholds – When calculating the disclosure threshold for a shareholder (or holder of other financial instruments), the rights deriving from the direct or indirect holding of shares should be added to any and all rights deriving from the direct or indirect holding of financial instruments. The idea behind this broad concept is that the disclosure obligation applies to each person in a position to influence, now or in future, the operations of the public company. It is believed that this new approach will increase legal certainty and make the international investment environment more stable and secure.
  • New sanctions – The scope of liable persons now extends to members of managing or controlling bodies of companies and other unincorporated organisations (such as trusts) that fail to disclose their shareholding if they are obliged to do so. Such natural persons may be sanctioned irrespective of the sanction that may be imposed on the relevant company/organisation. The sanction for natural persons may be in the range of EUR 1,500 – EUR 15,000, or up to double the amount of realised profit or avoided loss, whichever is higher. Sanctions for public companies failing to meet the disclosure obligation are now significantly increased and may be: (i) in the range of EUR 2,500 – EUR 25,000, or up to 5% of annual turnover according to the latest annual financial statements; or (ii) up to  double the amount of realised profit or avoided loss, whichever is higher. In addition to monetary sanctions, the Financial Supervision Commission is entitled to announce publicly that the respective company has been sanctioned, unless this announcement poses an eminent threat to financial markets or could result in excessive damages to the affected parties.
  • Entry into force - The amendments entered into force at the beginning of June 2016, therefore, public companies are already obliged to comply with them.