Under Article 607a of the Bulgarian Commerce Act, insolvency proceedings are opened against a trader who is unable to pay its debts. Overindebtedness is also a ground where the debtor is a limited liability company, a joint-stock company or a partnership limited by shares.<\/p>\n
Article 608(1) defines inability to pay. It covers a trader unable to meet a debt that has fallen due and arises from or relates to a commercial transaction, including its validity, performance, non-performance, termination, avoidance or rescission. The provision also covers a public-law debt owed to the State or a municipality in connection with the trader\u2019s business, or a debt arising from a private-law claim of the State.<\/p>\n
The inability to meet debts of the kind described must be objective, beyond the debtor\u2019s control and lasting. It is distinct from a debtor deliberately taking no action to pay a particular monetary debt to a creditor. Whether the trader is unable to pay is determined by examining its financial position as a whole, using measures of liquidity, collectability of receivables and financial independence. This includes assessing whether its current assets suffice to meet its short-term or current liabilities.<\/p>\n
Under Article 742(1) of the Commerce Act, a company is overindebted when its assets are insufficient to cover its monetary obligations.<\/p>\n
The two grounds are independent and may be pleaded together or in the alternative. Proceedings may be opened on both grounds if their onset dates coincide. Where overindebtedness arose before inability to pay, it matters whether the company is still overindebted when the court rules. If both grounds are established, the earlier date is taken into account provided the corresponding condition still exists at the date of the decision.<\/p>\n
This article is not a legal opinion or advice about a particular situation or person. For legal assistance in a similar case, consult a commercial lawyer specialising in corporate insolvency.<\/em>
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