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Varadinov & Co.
Legal Bulletin

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SG 42/3.06.2016 г.
Enhanced control over the issuers in order to decrease the risk for investors is provided with the amendments in the Law on Public Offering of Securities. The concept for a state that exercises supervisory and regulatory functions during a public admission to trade on a regulated market is updated – from a “sending state” it becomes “the member state of origin”. A legal definition is given to the new term as leading signs are the seat of the issuer and the location where the securities are allowed or are expected to be allowed for trade on a regulated market or where they are publically offered at the choice of the issuer, the offeror or person that requests their admittance for trade on a regulated market.
For an issuer, registered in a third country, the choice is valid for the member-state, chosen by him between the members-states in which his securities are allowed for trade on a regulated market. In order to benefit from this choice, the issuer must, however, have revealed it publically. If the issuer doesn’t do so in three months from the date on which the securities had been allowed for the first time for a trade on a regulated market, a member state of origin is the one in which the securities are allowed for a trade on a regulated market. And if they are allowed for trade on regulated markets, located on the territory of or executing activity in more than one member-state, these members states are member states of origin of the issuer until he doesn’t choose only one member-state of origin.
The requirements are increased for the content of the information which the issuers provides to the financial regulator in the notifications, declarations for corporate management, annual financial reports, interim and annual reports for the activity as well as for the disclosure of information for payments to the executive bodies in Bulgaria, to a national, regional or local body of a member-state or a third country and to the supervised by them persons. More severe administrative-punitive penalties are provided for inexecution of these obligations from the issuers – natural persons, members of a management or supervisory body of an issuer – juridical person or the person with management power in an issuer – unincorporated company.
SG 43/07.06.2016
Recovery measures, regarding the heavily indebted municipalities and institutions, are provided in the amendments in the Law on Public Finance. The Minister of Finance will determine the order, manner and terms for provision of the information on the condition and movement of the debt of the municipalities, the social funds and other entities that fall within sector “Government management”. Data will be required for the possessed by them assets in the form of debt instruments, including for the intentions of the local authorities to undertake a debt and for issuance of guarantees. The Ministry of Finance will publish monthly official information about the debt and guarantees while annually, no later than the 31st of October, the Council of Ministers, by a proposal from the Minister of Finance, will approve the strategy for management of the government debt under the Law on the Government Debt for the period of the specific medium-term budget forecast. The mayors of municipalities will send the project for budget for consultation from the Minister of Finance in the process if financial recovery. The project will be presented for public discussion from the local municipality in order, determined by the municipal council. For the filed proposals a protocol will be drawn up which is submitted in the municipal council along with the final draft of the project.
With the Law on the State Budget it will be possible to set limits on the expenses for personnel on budgets for the first-level budget users with budget from the state budget as well as to authorize the Council of Ministers with the decree for the execution of the state budget to set limits for expenses for personnel on budgets for the specific budget users with the exception of the budgets of the National Assembly and the judicial system. The Council of Ministers will be able to undertake a national debt for refinancing of the current debt only to the size of the yearly acquittals on the national debt, undertaken no later than the beginning of the specific budget year. During the consideration, from the municipal council, of the budget of a municipality, in the procedure for financial recovery, the opinion of the Minister of Finance on the project for a municipal budget will also be discussed.
The procedure for recovery of municipalities with financial difficulties is being regulated. It will be initiated from the Minister of Finance in the presence of certain indicators for a period of one to three years. He will issue methodical guidelines and instructions which will be published on the internet page of the Ministry of Finance along with the information from the accounting data of the municipalities for their financial condition. With the opening of the recovery procedure the Minister of Finance will assign the mayors the preparation of a recovery plan within one month and to carry out a public discussion of the plan with the local community. In cases when the municipality has overdue obligations the plan must contain a program for their payment with a specific schedule, measures for optimization and for increasing the revenue collection. For implementation of the recovery plans, the Minister of Finance may grant the municipalities, on the expense of the central budget, temporary interest-free loans whose return deadline cannot be longer than the term of the recovery procedure.
If there is a trend for inexecution of the set tasks, the municipal council can make a decision for an interest-free loan only after a preliminary approval of the Minister of Finance. And with a steady trend for improving the financial condition of the municipality, on the minister’s proposal, the Council of Ministers may grant the municipality an addition subsidy, from the central budget, for acquittal of the loan. The decision for termination of the procedure for financial recovery is made by the municipal council after a proposal by the mayor but upon the presence of a recovery plan which provides interest-free loan the termination must be preliminary discussed with the Minister of Finance. For inexecution of the obligations under the recovery procedure administrative-punitive liability is provided by the local authorities.
SG 48/24.06.2016
A significant ease in the restrictions on the offshore companies is being provided by the amendments in the Law on Economic and Financial Relations with Companies, registered in jurisdictions with preferential tax regimen, the connected with them persons and their actual owners. On one side, the scope of its application is being narrowed in respect to the persons – the restrictions will now apply not for all connected to such companies persons but only for the controlled by them. Most of the prohibitions for participation in different activities are being liberalized.
Participation in the procedure for obtaining a license for a credit institution or participation in such institution is forbidden only if the percentage of participation represents qualifying share participation within the meaning of the Credit Institutions Act. The participation in the procedure for obtaining a license for execution of insurance or reinsurance activity or for participation in a company, that conducts such activity, is forbidden only if the participation percentage represents qualifying participation within the meaning of the Credit Institutions Act. Participation in a procedure for obtaining a license for execution of an activity as a company for additional social insurance under the Social Security Code or participation in such company is allowed only if the participation rate is less than 10 percent of the company’s capital. Offshore companies will also be able to participate in a procedure for obtaining a license for execution of services and activities under the Law on Markets for Financial Instruments as well as to participate in companies with such license if the participation rate or number of shares that they want to acquire does not represent a qualifying participation within the meaning of the same law.
Similar are the reliefs of the prohibition for participation in the procedure for obtaining a license, permit or in the procedure for registration under the Law on the Activity of Collective Investment Schemes and other companies for collective investment as well as under the Law on Payment Services and Payment Systems. Upon participation less than 10 percent of the voting right at the General Meeting of the juridical person it will now be possible to participate in procedures under the Law on Concessions, the Public Procurement Act, the Law on Investment Promotion, the Law on Electronic Messages, the Law on Radio and Television, for public-private partnership, issuing of periodic publications, participation in a professional sports club, sociologic agency and trading company with more than 33 percent national or municipal participation.
A rule is created in order to combat abuses, according to which in cases of participation in the abovementioned procedure of two or more companies, registered in jurisdictions with preferential tax regime and/or of controlled by them persons, the thresholds for participation are applied commonly and cannot be exceeded. The thresholds are defined and applied when two or more companies, registered in jurisdictions with preferential tax regime, are under common control or one of them controls the other. Expanded are, however, the exceptions from the implemented with the law prohibitions – for example if the company’s shares, in which directly of indirectly an offshore company participates in, are traded on a regulated market or on a multilateral system for trade in a country – member of the EU or in another country – party to the Agreement for European Economic Area or on a equivalent regulated market, defined with an ordinance of the Commission for Financial Supervision; or if the company has a status of local person for tax purposes in the offshore country or jurisdiction.
Pointed are the subject of entry in the Commercial Register circumstances and data for these companies as well as the authorities of the Minister of Finance along with the Minister of Economy and Minister of Justice to issue instructions, regarding the application of the law. For violations of the obligations and prohibitions administrative-punitive sanctions in the form of fines are provided in the amount of 10 000 to 50 000 leva for first offence and upon repetition the maximum is raised to 1 000 000 leva.