Opening insolvency proceedings | Lawyer Mihail Tomov | Varna

For insolvency proceedings to be opened against a trader, the conditions laid down in Articles 608, 625(1) and 631 of the Bulgarian Commerce Act, or Article 742 where applicable, must be met cumulatively. A person listed in Article 625 or, as applicable, Article 742(2) must file a written petition with the competent court. The debtor must be a trader within the meaning of Article 1. The debtor must owe a monetary obligation that has fallen due and arises from or relates to a commercial transaction, including its validity, performance, non-performance, termination, avoidance or rescission, or the consequences of its termination. Alternatively, the debt may be a public-law debt to the State or a municipality connected with the debtor’s business, a private-law claim of the State, or wages due under the conditions in Article 608(1), point 4. The debtor must be insolvent within the meaning of Article 608(1) or, in the case of a capital company, overindebted under Article 742(1). The debtor’s difficulties must not be temporary: insolvency must be an objective and lasting condition.

Under Article 625, the debtor, its liquidator where applicable, or a creditor under a commercial transaction may petition the court in writing. The National Revenue Agency may petition in respect of a public-law debt to the State or a municipality connected with the debtor’s business or a private-law claim of the State. The General Labour Inspectorate Executive Agency may petition if wages are due to at least one third of the trader’s workers and employees and have remained unpaid for more than two months.

Insolvency under Article 608(1) is an objective condition. It concerns the debtor’s inability to meet monetary obligations that have fallen due to specific categories of creditors. Their claims must arise from transactions connected with the debtor’s business, be public claims connected with that business or private-law claims of the State, or arise from the obligation to pay wages under the statutory conditions.

In insolvency proceedings, a court-appointed expert analyses the trader’s financial and economic position, including the company’s current, quick, immediate and absolute liquidity ratios.

This article is not a legal opinion or advice on a particular situation or person. The author makes no claim to cover corporate insolvency exhaustively. For legal assistance in a similar case, consult a lawyer practising commercial law, particularly insolvency law.

Lawyer Mihail Tomov | Varna