Insolvency proceedings in Bulgaria
In Bulgaria, insolvency proceedings are strictly limited to commercial entities or traders, thereby excluding personal insolvency.
The Bulgarian Commercial Act necessitates that the insolvency or excessive indebtedness of the debtor, typically a capital company such as a limited liability company, joint-stock company, or partnership limited by shares, must be confirmed.
Insolvency under Article 608 of the Commercial Act is defined as a trader’s inability to meet their financial obligations arising from commercial transactions, public duties to the state and municipalities related to their commercial activity, or private state obligations.
This insolvency is presumed if the debtor has suspended payments or selectively paid some creditors over others.
For capital companies, excessive indebtedness is identified when the company’s assets are inadequate to cover all its financial obligations, per Article 742 (1) of the Commercial Act.
The initiation of insolvency proceedings can be driven by two primary objectives: business reconstruction to continue the company or debt satisfaction followed by company liquidation.
The application for insolvency can be filed by the debtor themselves, a representative, their heirs, the liquidator, any creditor of sale transactions, a member of the managing body of the capital company, or the registry agency.
The district court where the insolvency debtor is located, according to Article 613 of the Commercial Act, handles the decision on the opening of insolvency proceedings.
The court can validate the insolvency or excessive indebtedness, determine the occurrence’s timing, and open the insolvency proceedings.
If the conditions are not met, the court may dismiss the application for insolvency proceedings in Bulgaria.
Upon the court’s decision, the insolvency administrator is appointed, protective measures to safeguard the assets are enacted, and the dates for the creditors’ meeting are set.
The court order impacts all parties involved. For the debtor, it essentially causes legal incapacitation, allowing them to act only in agreement with the insolvency administrator. For the creditors, it halts all ongoing court and enforcement proceedings.
Garnishees are required to meet their obligations to the insolvency administrator