Insolvency Law at Bulgaria
Insolvency law in Bulgaria is primarily governed by the Bulgarian Commerce Act, specifically Part IV, which deals with insolvency (несъстоятелност). The framework outlines procedures for handling cases where a trader (typically a legal entity or individual merchant) is unable to meet their financial obligations.
Key Aspects of Bulgarian Insolvency Law:
1. Definition of Insolvency
A debtor is considered insolvent if:
They are unable to pay a due and undisputed monetary obligation under a commercial transaction, or
They have ceased payments in general.
Over-indebtedness (where liabilities exceed assets) is also a ground for initiating insolvency for companies.
2. Who Can File for Insolvency?
The debtor (mandatory duty to file within 30 days of becoming insolvent),
Creditors,
The National Revenue Agency (in tax-related cases),
The public prosecutor (in cases of public interest).
3. Court Proceedings
Insolvency proceedings are initiated in a district court where the debtor is registered.
The court appoints a temporary trustee, evaluates the claims, and may issue preservation measures.
If insolvency is confirmed, the court declares the debtor insolvent and appoints a permanent trustee.
4. Effects of Declaration
The debtor’s right to manage and dispose of assets is transferred to the trustee.
Contracts may be terminated or renegotiated.
Creditors’ claims are verified and ranked.
5. Restructuring (Recovery) Plan
A recovery plan can be proposed by the debtor, trustee, creditors, or shareholders.
If approved by creditors and the court, it can restructure debt, continue operations, and avoid liquidation.
6. Liquidation
If no recovery is viable, the court initiates liquidation.
The debtor’s assets are sold and distributed among creditors according to priority.
7. Priority of Claims
Secured creditors,
Employment-related claims,
Public debts (e.g., taxes),
Unsecured creditors,
Subordinated claims.
8. Closure
The process ends with the distribution of assets and deletion of the company from the commercial register.
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