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Bulgarian Government begins systematic liquidation of property assets owned by abandoned companies. What can owners do?

Now three years after the twice extended deadline, thousands of Bulgarian companies remain in their original illegitimate format, the assets of which are now being ceased and liquidated by the state. If you own a property via a Bulgarian limited company and it currently remains in its original format, you must act to preserve your ownership before 31.1.2015 or risk losing the property entirely without appeal.

 

Do you own a Bulgarian property via a Bulgarian Limited company and didn’t get the company reregistered?

Compulsory reregistration of all Bulgarian companies was made law from 1.1.2008. If you own a company that was setup before this date, you have a legal obligation to reregister your company to comply with new laws. The state gave company owners 5 years to complete this up to 31.12.2011, but as a foreign owner you might not have been adequately informed by your managing agent or accountants. If you have completed the reregistration you have nothing to worry about, if you have not, please read on.

 

What is reregistration?

Bulgarian limited companies were originally registered locally in paper format with the local courts and authorities. Company details, documents and paperwork were retained locally as standard until 1.1.2008. It was a decentralised antiquated system, which desperately required updating and bringing online to enable quick, reliable access to company information to be in line with the rest of the EU. The process of reregistering companies took the local information and put it online in a central government registry, it enables rapid access to crucial information such as accounts, director’s details, company history etc, much like Companies House in the UK. If you are unsure if your company has been re-registered there is a simple check we can do for you online, please contact us to discuss.

 

So what is the current status of companies that have not been reregistered?

Right now companies that have failed to reregister are technically no longer companies, they are legal owning entities but they cannot trade, sell, acquire or submit accounts etc. If you own a company in this position it has already officially been ‘deregistered’ as of 1.1.2012. Sadly there is no way back into ‘good standing’ for these companies; there is no possible avenue for repair, no legal remedy or path of paperwork to reinstate the company. These companies are defunct and now must be officially closed, voluntarily by the owners or involuntarily by the state, either action is now inevitable.

How long do I have until my assets are gone?

At this time the deadline for voluntary liquidation of such companies is the 31.1.2015, however this could be extended by parliament. Pushy accountancy and consultancy companies seeking your business will tell your assets will be ceased imminently, others will more honestly say that its sheer bad luck if you are picked out in the next few years and the deadline is likely to be extended. However, the legal reality is that your situation can no longer change so acting definitively and ensuring any action against your best interests is avoided or paused is better done sooner rather than later.

The law is clear that these companies are no longer recognised and cannot trade, it is certain that they will eventually all be struck from the register. As such failing to act progressively will eventually result in your discovery of the liquidation of your property assets, although this could well be years away.

 

Can the government legally do this?

This is ultimate question for this topic and its most accurate answer will probably not be truly known until the European courts decide when the first cases appear before it some years from now. However, for the moment and as far as the current law states, yes it is legal. The more relevant point is one of logistics; we do not see how the Bulgarian state has the resources or the inclination to wade through thousands of abandoned companies and truly sell the assets of each. Few are likely to return the costs invested (which the electorate certainly won’t be in favour), many will cause endless and uncalled for legal cases against thousands of citizens with uncertain outcomes. For those directors living abroad the can of worms only gets bigger, whilst the European laws equally constrain and control each European citizen, thus technically enabling debt chasing across borders, the cost to implement this are vast and present a huge obstacle. Not so different to speeding fines accumulated in one country under one jurisdiction and attempted to be placed on the license of another; technically achievable, but easier said than done and ultimately easier for your lawyer to challenge the technicalities of if it happens against you. Overall, the fact is that these companies will all be struck off, however the way in which the state will process them and how long it will take is very much unclear and unknown.

 

How can I keep my property?

The good news is that there is still a way for you to retain ownership of your company’s assets, the bad news is that it is not particularly cheap. Essentially, a professional consultancy company, solicitor or accountant will need to be appointed, who will initiate and carry out to completion the process of ‘voluntary liquidation’. Your only involvement will be to sign documents in your home country, no visit to Bulgaria will be necessary.

The exact legal steps are numerous, suffice to say they and complicated and involve various government tax and revenue departments.  The legal minimum timeframe for liquidation is 6 months, any creditor owed funds by your company must have at least this long to view the public notice of your closure and act accordingly, as such you must expect the process to be ongoing for 7-8 months at the minimum. Any liquidation action must be completed within 12 months of its initiation or the process is terminated by default and the company remains defunct.

If you enter voluntary liquidation and do not owe any funds to creditors (other than perhaps minor charges or taxes to the state) then you as the sole director / shareholder you are entitled to initiate liquidation, thus you are entitled to appoint the liquidator and by doing so you remain in control of the direction of the property assets and where they end up. For example, you can simultaneously setup a new company and transfer the assets there, or if applicable you can own the asset personally (recent changes in land ownership laws now allow this for foreigners in some cases).

 

How much will it cost?

Every company is unique, each requires more or less hours subject to the location of its registration, the location of its assets, the amount of taxes or fines owed and if it has ever actively traded. Liquidation is a complicated process with many legal avenues, we offer a single service to overseas owners who count on us to best advise and guide them through the process; you deal with us only in clear and plain English, we deal with the accountants, lawyers, liquidators and the courts on your behalf.

Unfortunately without reviewing each case it is not possible to guide on the price, please contact us to discuss.

 

What is the best course of action?

If you find yourself in this position and are worried for the security of your property investment, please contact us to discuss your situation and your options. Without any charge we will review your case and your documents to confirm what can and cannot be done and for what price. Definitely the best route is to act, but it is up to you to risk when.  We have no upfront fees and are constantly process several cases of every type, as such whatever the situation we would have seen it before and can certainly help.

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