-
Following the major legislative developments that preceded and followed
shortly following Bulgaria’s accession to the EU on 1 January 2007, the
legislative activity throughout the period 2008/2009 was aimed at improving
the laws already adopted and further development of the regulatory framework
in light of the initial years of application.
-
New Civil Procedure Code
A new Civil Procedures Code entered into force in May 2008. Compared to the
old regime numerous changes have been made and new legal institutes were
introduced by reference to the UK and US systems of judicial procedure. Some
of the principal changes include:
·
The introduction of summary judgments in cases where the defendant has not
submitted a response to the statement of claim, respectively the claimant
has not submitted a counter-statement on the response of the defendant, and
has not appeared in the first hearing on the case, without submitting a
request the case to be heard in absentia. This should facilitate a
number of minor litigations, such as those for unpaid invoices, but in
certain cases can endanger the right of a party of defense, if for some
reason it has not become aware of the litigation in time;
·
The introduction of a US style Supreme Court jurisdiction, where the Supreme
Court of Cassation is free to decide whether to hear a case as a third
instance, based on its judgment whether the case is of significance to law
or jurisprudence or the case presents an illustration of divergent practice
of the courts;
·
The introduction of a new regime of class action suits, which aims to
facilitate collective litigations;
·
Introduction of new procedures and institutes with respect to obtaining an
order for compulsory execution without the necessity of a trial.
The general purpose of the new Code is to accelerate the procedures by way
of imposing strict rules to the litigants thus the time necessary to
conclude a case should be dramatically reduced.
Amendments to the Labour Code
In a bid to support parenthood the Labour Code and the Tax and Social
Security Code were amended so that the term of the paid maternity leave has
been increased from 9 to 12 months. Fathers have been given the right to: (i)
use paternity leave of 14 days as of the day of birth of the child and (ii)
use the maternity leave instead of the mother, subject to her consent.
-
Corporate Income Tax Act
Following amendments to the Corporate Income Tax Act as of January 1, 2009
dividends distributed to a legal entity that is a tax resident of a EU
Member State or an EEA Member State will not be taxed with withholding tax
in Bulgaria (this is not conditional on the entity holding a specific
percentage in the distributing company, or on a certain duration of holding
the equity interest). The general level of corporate income tax remains at
10% of profits.
As of January 1, 2009 and for a period of five years corporate income tax
over profits from activities in the field of agriculture, processing
industry, manufacturing industry, high technologies and infrastructure has
been released, subject to the requirements for de minimis aid or
regional aid, and provided that (among others):
·
the tax payer invests over BGN 10,000,000
per year; and
·
as
part of the investment new assets are acquired;
-
New Protection of Competition Act
At the end of 2008
a new Protection of Competition Act (“PCA” or “the Act”)
entered into force in Bulgaria. The new Act pars the level of the sanctions
with the levels under European law. Moreover, in
an unprecedented legislative move, the sanctions that can be applied to
infringements of Bulgarian and EU merger control and antitrust law, have
been extended to unfair competition infringements and infringements relating
to misleading and illegal comparative advertising. Major changes include:
·
Concentrations
o
New
Merger Control Threshold
Where the combined
aggregate Bulgarian turnover of the undertakings concerned exceeds BGN 25
million in the latest complete financial year, the proposed merger must be
notified to the Commission
for the Protection of Competition, provided it
answers at least one of the following two additional criteria, namely: (i)
the turnover of each of at least two of the undertakings concerned in the
territory of Bulgaria during the previous financial year to exceed BGN 3
million; or (ii) the turnover of the target company in the territory of
Bulgaria to exceed BGN 3 million.
o
Sanctions
The Commission may
impose a monetary sanction in the amount of up to 10 per cent of the total
turnover for
the preceding finance year, to an undertaking where:
§
A concentration is completed without a prior notification;
§
A concentration is completed under conditions and in a manner that differs
from the ones notified to the Commission and on the basis of which its
clearance decision was issued, including upon failure to honour commitments
and obligations imposed;
§
The concentration is completed in violation of an express prohibition of the
Commission;
§
The concentration is completed in violation of the general suspension
obligation, that applies prior to a clearance decision.
In addition,
the Commission is entitled to impose a sanction to the amount of up to one
per cent of the total turnover for the preceding financial year in cases of:
§
Failure to cooperate with the investigation;
§
Delay in the provision of information or the provision of incomplete,
incorrect, untrue or misleading information;
§
Failure to notify the Commission of the performance of its decision in the
term specified in it (if the decision provides for such an obligation).
The Commission may also impose periodic sanctions of 5 per cent of the
average daily total turnover for the preceding financial year for each day
of failure to comply with conditions and obligations attached to a
Commission’s decision, and up to 1 per cent of the average daily total
turnover for the preceding financial year for each day of failure to provide
complete, true and non-misleading information.
·
Anti-trust Provisions
o
Abolition of Individual Exemptions
In line with the anti-trust reform package introduced by Regulation (EC)
1/2003, the new PCA abolishes the possibility for individual exemption of
agreements which fall under the general anti-trust prohibition.
o
Change of De Minimis Thresholds
The new Act brought the Bulgarian de minimis thresholds in line with
the EU standard – from 5 to 10 per cent for horizontal agreements, decisions
and concerted practices and from 10 to 15 per cent for agreements, decisions
and concerted practices the parties to which are not competitors.
o
Provisions on Withdrawal of the Benefit of Block Exemptions
The new Act contains express provisions on withdrawal of the benefits of
both local and EU block exemptions in individual cases.
o
Interim Measures
In a major
development,
and
in contrast to the former Protection of Competition Act, the Commission has
been granted the right to impose interim measures in infringement
proceedings for anti-trust violations.
o
Sanctions
Where undertakings have entered
or engaged in prohibited agreements, decisions or concerted practices
(either under Bulgarian or under EU law) the Commission may impose a
sanction on the infringing undertaking amounting to up to 10 per cent of the
total turnover for the preceding financial year. A sanction in the same
amount can be imposed on an undertaking for failing to comply with a
decision of the Commission.
The Commission may also impose
periodic penalties in amount of up to 5 per cent of the average daily
turnover for the preceding financial year, calculated on a daily basis for
each day of non compliance with:
1. a
decision of the Commission ordering the termination of an infringement,
including by imposing the appropriate behavioural or structural remedies;
2. a
ruling of the Commission, imposing interim measures.
The Commission may impose a
sanction to the amount of up to one percent of the average daily turnover
for the preceding financial year for each day of:
1. failure
to comply with the obligation for assistance;
2. failure
to furnish complete, accurate, true and not misleading information;
3.
impeding an inspection of the Commission.
o
Leniency
Immunity from
sanctions is no longer automatic. In order to
obtain
immunity from sanctions, a company which participated
in a cartel must be the first one to inform the Commission of a secret
cartel by providing sufficient information to allow the Commission to launch
an inspection at the premises of the companies allegedly involved in the
cartel, or where the Commission is already in possession of enough
information to launch an inspection or has already undertaken one, the
company must provide evidence that enables the Commission to prove the
cartel infringement.
·
Dominance
o
Presumption of Dominance Abolished
Dominance will be assessed in respect of each undertaking by reference to a
variety of factors, including its market share, financial resources,
possibilities for access to the market, level of technology and economic
relations with other undertakings. The former threshold of 35 per cent
market share over which dominance was presumed, has been abolished.
o
Sanctions
The new sanction amounts discussed above apply also to abuse of dominance
infringements.
·
Unfair competition. Misleading and Comparative Advertising
o
Imitation by Use of a Domain Name or Web Design
The new PCA provides that the use of a domain name or web-site design
identical or similar to those of other persons in a manner that may mislead
and/or injure the interests of competitors shall be prohibited.
o
Misleading and Comparative Advertising
Provisions on misleading and comparative advertising, were introduced into
the unfair competition section of the PCA. The definitions follow those of
Directive 2006/114/EC concerning misleading and comparative advertising. The
burden of proof has expressly been placed upon the defendants to prove that
the advertising is not misleading, and where comparative advertising has
been used this has been done in line with the provisions of the Act.
·
Sanctions
The sanctions that apply to unfair competition and misleading or illegal
comparative advertising are the same as for antitrust infringements. They
can reach up to 10 per cent of turnover.
-
Investments
Foreign investments continue to be governed by the Promotion of Investments
Act (“the PIA”) and the implementing secondary legislation.
Specific measures were introduced to promote investments, ranging from
support with administrative formalities and shortened review periods, to
financing or building of infrastructure to the site etc. The range of
benefits available to an investor depend on the award of an investment Class
to the investment, whether it is “green field or “brown field”, the industry
in which the investment is made, the timeline to complete the investment
etc.
The minimum amounts necessary to be invested in order to obtain a Class A
Investor certificate or Class B Investor Certificate have been significantly
reduced. Depending on the exact activity carried out and the administrative
region where the investment is made the minimum amounts of investments
necessary to be made may vary from BGN 32,000,000 for Class A Investor
Certificate and BGN 16,000,000 for Class B Investor Certificate to BGN
11,000,000 for Class A Investor Certificate and BGN 5,500,000 for Class B
Investor Certificate.
-
New Energy Efficiency Act
In 2008 a new Energy Efficiency Act was introduced.
Important new energy efficiency measures, introduced by the Act, include:
·
A scheme of activities and measures for the increase of the energy
efficiency by the end-users of energy;
·
Measures to promote the development of the market of energy services and
increase of the energy efficiency by the energy traders;
The activities and measures include:
·
energy passporting;
·
examination and certification of buildings;
·
examination of industrial systems;
·
examination for energy efficiency of water caldrons and air-conditioning
installations;
·
energy efficiency management;
Promotion of Renewable Sources Electricity Production
Under the new Act the system of encouragement of generation of electricity
from renewable sources is based on feed-in tariffs. The system comprises the
following elements:
·
the owners of the national transmission grid and/or regional transmission
systems are obliged to connect renewable energy generation facilities with
priority subject to
relevant
technical requirements.
·
the national supplier (NEC) and the regional suppliers (end suppliers) are
obliged to purchase all
electricity
generated from renewable sources, which is certified with a generation
certificate (see below).
·
special
preferential
prices are set by the State Energy And Water Regulatory Commission (“SEWRC”)
and at which electricity from renewable sources is purchased (see below).
According to the Renewable Energy Act, the existing feed-in tariff system
and the compulsory buy–out of the electricity produced will be applicable
for new facilities for a period of 15 years
as of beginning of the production of electricity but only if the facility
enters into commercial operation not later than December 31, 2015. After the
expiry of the period for compulsory purchase, it is envisaged that another
market oriented system of encouragement of renewable energy will be put in
place (green certificates for instance). Under the Renewable Energy Act, the
government has until end of 2011 to decide on which encouragement system to
implement.
It should be mentioned that special prices apply only to energy for which a
special “certificate for origin” has been issued by the SEWRC pursuant to a
recently adopted Regulation (published in May 2008, in effect as of June 30,
2008). The Regulation establishes a procedure for certification of the
actual electricity generated from renewable sources and the maintaining by
the SEWRC of a public registry of the issued certificates giving detail
about the generating facility, the quantity of electricity concerned and the
period it has been generated. Certificates are issued for a period of 3
months (i.e. for the electricity generated by the applicant in the 3 months
preceding the application). The SEWRC may on a case by case basis prolong
this regulatory period up to one year. Until issuance of a certificate, the
generated electricity is purchased by the relevant buyer (the NEC or a
regional end supplier) in accordance with the data provided by the generator
under the terms and conditions agreed in the respective power purchase
agreement and final settlement is made upon issuance of the certificate if
there are differences between the quantities for which a certificate has
been issued by the SEWRC and the quantities already invoiced under the
agreement.
The last decision
of the regulatory SEWRC for determination of prices for electricity produced
from renewable sources was taken on March 31, 2008 and it set prices as
follows for some of the main RES projects:
|
TYPE OF PROJECT |
PRICE PER MWh (VAT exclusive) |
|
Wind parks with annual hours of operation of up to 2,250 h and
installed capacity of more than 800 kW |
BGN 189 per MWh |
|
Wind parks with annual hours of operation of more than 2,250 h and
installed capacity of more than 800 kW |
BGN 172 per MWh |
|
Wind parks with installed capacity of less than 800 kW |
BGN 145 per MWh |
|
Solar parks equipped with photovoltaic modules of up to 5 кWр |
BGN 823 per MWh |
|
Solar parks equipped with photovoltaic modules of more than to 5 кWр |
BGN 755 per MWh; |
|
Hydro power plants up to 10MW |
BGN 105 per MWh |
-
The new Payment Services and Payment Systems Act
On November 1, 2009
a new Payment Services and Payment Systems Act (“the PSPSA”) will
enter into force implementing the provisions of (i)
Directive 2007/64/EC of the European Parliament and of the Council of 13
November 2007 on Payment Services in the Internal Market amending Directives
97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC and repealing Directive
97/5/EC; (ii)
Directive 98/26/EC
of the European Parliament and of the Council
of 19 May 1998 on Settlement Finality in Payment and Securities Settlement
Systems and (iii)
Directive 2000/46/EC of the European Parliament and of the Council of 18
September 2000 on the Taking-up, Pursuit of and Prudential Supervision of
the Business of Electronic Money Institutions.
The PSPSA
regulates:
·
the requirements to the suppliers of payment services and the types of
payment services;
·
the terms and conditions for licensing of and provision of services by the
payment institutions;
·
the requirements and the procedures for licensing of the payment
institutions;
·
the rights and obligations of the parties when payment services are
provided;
·
the terms and conditions to the companies for electronic money when
exercising their activity;
·
the terms and conditions for licensing and carrying out of activities by the
payment systems.
The PSPSA explicitly defines and determines terms such as suppliers of
payment services, payment services, payment institution, electronic money,
etc. Taking into consideration the importance of the services to be
provided, the PSPSA provides for additional requirements to the payment
institutions with respect to their minimum starting capital which, depending
on the concrete services to be provided, may vary between BGN 40,000 and BGN
250,000.
Lower Deposited Capital Requirement for LLCs
At the end of 2008
with a change of the Bulgarian Commerce Act the amount of the capital
necessary to be paid-in upon incorporation of a limited liability company
was reduced. Prior to the amendments, the Commerce Act provided for at least
70 % of the registered capital to be effectively paid in (i.e. BGN 3,500 in
case the minimum amount of the capital provided by the law for setting up of
a limited liability company). At present at least 35% of the registered
capital has to be effectively paid in (i.e. BGN 1,750 (about EUR 900).
The Public Offering of Securities Act
The Public Offering
of Securities Act, was amended to provide even more stringent requirements
for the conduct of General Meetings of Shareholders in Bulgarian publicly
listed companies:
·
Additional Information to be included in the Invitation for a General
Meeting
o
the overall number of shares of the company and the voting rights in the
General Meeting as at the date of the resolution for convocation of a
General Meeting as well as the right of the shareholders to participate in
the General Meeting;
o
the right of the shareholders to include points in the Agenda of the General
Meeting and to propose resolutions on questions included in the Agenda as
well as the deadline for exercising of this right;
o
the right of the shareholders to pose questions during the General Meeting;
o
the rights for voting through a Proxy as well as the forms of the documents
to be used for voting through a Proxy and the means for electronic
notification of the company for authorizations made;
o
the terms and conditions for voting by way of correspondence or electronic
means (if applicable);
o
the internet page on which all the information necessary must be published;
·
Voting by electronic means
The
Statutes of the company may provide for the possibility the General Meeting
to be conducted by usage of electronic means under one or more of the
following options:
o
live transmission of the General Meeting;
o
two-way live messaging granting the shareholders the possibility to
participate in the discussions and the decision – making process of the
General Meeting;
o
mechanism for voting prior or during the General Meeting without the
necessity a Proxy to be authorized (through correspondence, post services,
e-mails, courier, etc.); in such case the vote shall be valid if received
not later than the day preceding the date of the General Meeting.
The
shareholders shall have the right to authorize any third party to
participate in the General Meeting on their behalf. Moreover, the
prohibition of the Commerce Act for the members of the Boards to be Proxies
of shareholders shall not apply in case the shareholder has explicitly
provided for the manner of voting under each of the points from the Agenda.
OASIS
