Bulgaria

Bulgarian law provides for a single, unified corporate insolvency procedure, which is deemed a foreclosure procedure of “universal” nature. One of its main purposes is to provide an opportunity for recovery of a debtor’s entity and continuation of its activity. In most cases, however, the procedure results in liquidation of the insolvent or over-indebted company. Insolvency is regulated as a court-administered procedure, which could be initiated for a company which is either: insolvent; or over-indebted (balance-sheet insolvency). The over-indebtedness trigger applies only in the cases of a limited liability company, a joint-stock company or a partnership limited by shares. As the two tests are given alternatively, usually creditors base their petitions on both. The petition for opening insolvency proceedings could be filed not only by the debtor but also by: any creditor under a commercial transaction; the National Revenues Agency (only on the grounds of overdue public and private liabilities to the state); or the Executive Agency, “General Labour Inspectorate”. Within the course of insolvency proceedings, the debtor may reach a compromise and avoid being declared bankrupt — by rehabilitation plan or by an agreement for settlement of the payment of the monetary liabilities — please refer to Question 2, below.

Bulgarian law also provides for stabilisation proceedings, which is a court-administered pre‑insolvency restructuring applicable only in cases where the trader is solvent, but there is an imminent threat that it will become insolvent (i.e. the debtor is in “financial distress”). Please refer to Question 3, below.

Firstly, a debtor not yet insolvent but in imminent threat of insolvency (i.e. in “financial distress”) may launch stabilisation proceedings. The very purpose of the latter is to achieve restructuring and, where possible, partially discharge debts and prevent insolvency. It is a court-administered procedure party to which are all creditors, including those to which the trader has given security on debts to third parties.

Upon opening of the stabilisation proceedings, forcible execution proceedings against the trader and any proceedings under the Registered Pledges Act are suspended. If the proposed stabilisation plan is not approved by the court within four months, the suspension is lifted and the execution proceedings are resumed. The court may also allow termination of contracts where the trader is a party, as far as the contract has not been fulfilled at the time of termination and its future fulfilment will render difficult the implementation of the reorganisation plan and the termination will not cause losses to the other party greater than the normal ones in similar cases.

Secondly, within the course of insolvency proceedings, the debtor may reach a compromise and avoid being declared bankrupt.

For example, by the adoption of a rehabilitation plan that may provide for a deferment or rescheduling of payments, a release from liability in full or in part, a reorganisation of the enterprise, or the undertaking of other acts or transactions. A plan may be proposed by any of the following:

debtor;
trustee;
creditors holding at least one-third of the secured claims or at least one-third of the unsecured claims;
partners, respectively the stockholders, holding at least one-third of the capital of the debtor company;
unlimited partner; and
20 percent of the total number of the debtor’s employees.

More than one plan may be proposed. The plan shall be affirmed by the court to the extent it covers the legislative requirements and the court closes the insolvency proceedings.

Another option is an agreement for settlement of the payment of the monetary liabilities, concluded between the debtor and all creditors at any stage of the insolvency proceedings. Provided the agreement complies with the requirements of the law, the court shall close the insolvency proceedings with a decision on the condition that there are no actions brought for establishing non-existence of an accepted claim. If the debtor does not perform their duties under the agreement, the creditors whose claims amount to at least 15% of the aggregate amount of the claims may request resumption of the insolvency proceedings without proving new illiquidity, respectively over-indebtedness. Recovery proceedings shall not be carried out during the resumed insolvency proceedings.

Bulgarian law provides for stabilisation proceedings introduced in 2017 and subsequently amended to align with EU Directive 2019/1023 on preventive restructuring frameworks. The procedure aims to prevent insolvency by allowing a debtor facing an imminent threat of insolvency to basically restructure its debts through a court-confirmed plan while remaining in control of its business operations. It applies to debtors that have not suspended payments but may become unable to pay their debts or over-indebted.

3.1 What are the conditions to entry?

The debtor shall be solvent, but under an imminent threat of becoming insolvent (i.e. the debtor is in “financial distress”). An “imminent threat” means that the trader, taking into account the maturity of its debts for the next six months as from the date of the application for opening stabilisation proceedings, will not be able to repay due payments or is likely to stop payments. There is an exhaustive list when stabilisation is not permitted, including, inter alia:

where the trader has failed to submit its annual financial reports to the Commercial Register for the three years prior to the application for stabilisation;
where the stabilisation procedure has been opened for the same trader within the three years prior to the application;
if an application for opening insolvency proceedings has already been filed against the same trader; and
when over one-fifth of existing debts are to related parties or persons who have acquired receivables from parties related to the trader. Stabilisation is also not applicable to public undertakings holding a state monopoly or those established under a special law.

Only the incumbent trader has the right to request the opening of stabilisation proceedings, by filing a written application with the district court at its seat, entered no later than six months before submitting the application. The applicant must specify, inter alia, the type, amount and maturity of all its debts, together with detailed information on any existing security and enforcement measures, to provide data about all its assets and details of any judicial, arbitration or foreclosure proceedings opened against it, including any action for out-of-court settlement with creditors. The key feature of the application is the detailed reorganisation (stabilisation) plan, containing deadlines, conditions and means of repayment of debts, as well as the figured level of satisfaction of creditors and the securities offered to them.

3.2 Can creditor claims be compromised “within a class”?

Creditor claims may be compromised “within a class” in the sense that creditors vote on the proposed plan in classes as follows:

creditors with secured claims and creditors with lien;
creditors with claims arising from employment relations or terminated employment relations occurred before the date of the ruling for the opening of stabilisation proceedings;
creditors with public law debts incurred up to the date of the ruling for the opening of stabilisation proceedings;
creditors with unsecured claims; and
any creditors related to the debtor, regardless of classes mentioned before but with the exception of the creditors under item 2).

The plan shall be adopted by each class with a majority of more than half of the claims in the class, where, for the plan of this class to be adopted, it is required that a minimum of three-quarters of the creditors in the class need to have voted. Creditors under item 5) shall not participate in the vote on the adoption of the stabilisation plan.

3.3 Is there a “cross class cramdown”?

Yes, cross-class cramdown is possible under Bulgarian legislation following the 2023 amendments to the Bulgarian Commercial Act implementing EU Directive 2019/1023. The mechanism allows Bulgarian courts to approve restructuring plans even when not all classes of creditors have voted in favour, provided certain safeguards are met. If the stabilisation plan is not adopted with the majority required for each class of creditors, the court may still approve it at the debtor’s proposal or with his consent, given that:

certain legislatively prescribed numbers within the creditor classes are present;
classes of voting creditors not in agreement with the plan are affected at least as favourably as any other class of the same rank, and more favourably than any lower class; and
no class of creditors receives more than is due on its claim.

However, given the relatively recent implementation, practitioners should carefully review the specific provisions of the Bulgarian Commercial Act and any developing case law when structuring a restructuring that may require cross-class cramdown.

3.4 Can shareholder claims be compromised?

There are no specific provisions for the compromise of shareholder equity interests in the same manner that creditor claims are compromised. Notwithstanding, the approved-by-the-court stabilisation plan shall be binding on shareholders, partners, and the sole owner of the trader’s capital. Any acts and transactions carried out by them in violation of the approved plan shall be invalid. In addition, the debtor is obligated to immediately carry out the structural changes provided for in the plan.

3.5 Can secured creditors’ claims be compromised? Are deficiency claims treated differently?

Secured creditors and creditors with a right of retention form a separate class for voting purposes. The general rule is that the plan shall treat all creditors from the same class equally and provide them with the same level of satisfaction. However, the plan may provide for different treatment of creditors within a class where justified, provided that certain legislative conditions are met. Deficiency claims (i.e. the unsecured portion of a secured creditor’s claim where the value of the collateral is insufficient to cover the full debt) would typically be treated as unsecured claims.

3.6 Can creditors propose competing plans?

Within stabilisation/rescue proceedings, only the debtor may propose a plan. Creditors may make observations on the proposed plan and suggest amendments subsequently. However, creditors cannot submit competing plans. On the contrary, in insolvency proceedings, a rehabilitation/rescue plan may be proposed by various parties (including, among others, the creditors holding at least one-third of secured claims and creditors holding at least one-third of unsecured claims) which means that creditors may propose competing plans.

3.7 What level of court or other third-party supervision is there of the process(es)?

Under Bulgarian law both pre-insolvency stabilisation proceedings and insolvency are entirely court-administered procedures, where the court has a leading role and, inter alia:

decides whether to open the proceedings;
may appoint a trusted person in the case of stabilisation and a trustee in the case of insolvency;
may appoint a verifier;
may impose interim measures;
approves the final list of creditors and a rescue plan;
conducts the court hearing for discussion of the plan;
approves or refuses to approve the adopted plan; and
may close the proceedings under certain circumstances.

In insolvency proceedings already in progress, another key figure, alongside the insolvency court, is the trustee. Once a company is put into insolvency proceedings, its business and operations are administered by an insolvency trustee, subject to the approval of certain actions by the insolvency court. The first (temporary) insolvency trustee is appointed by the court and serves until the creditors of the insolvency estate appoint a permanent trustee. The general authority of the trustee is to:

represent the company;
supervise its activities;
prepare a list of eligible creditors of the insolvency estate and their eligible claims;
undertake the measures provided for by the law for recovery and preservation of the insolvency estate, including by collecting the assets and accounts receivable of the company and filing claims for setting certain transactions aside if any; and
prepare a rescue plan.

Moreover, the insolvency court could deprive the incumbent management from its powers and grant all management authority to the trustee.

Bulgarian law provides for clawback claims to challenge transactions that harm the interests of creditors in insolvency and the insolvency estate. These claims allow the insolvency estate to recover assets or value that were improperly transferred during the suspicious period between the actual occurrence of insolvency and the date of filing the petition for commencement of insolvency proceedings without consideration or in exchange for insufficient or non-market consideration. These claims shall be brought before the insolvency court and the final decision takes effect on the debtor and all creditors.

4.1 What is the applicable law that provides for clawback and/or antecedent transaction claims?

The applicable law governing clawback and antecedent transaction claims is the Bulgarian Commercial Act, specifically Articles 645–649. In addition, Article 135 of the Bulgarian Obligations and Contracts Act provides for a general Actio Pauliana (fraudulent transfer) remedy. These provisions set out the conditions under which transactions entered by the debtor at certain points prior to the insolvency may be declared void or voidable vis-a-vis the creditors of the insolvency.

4.2 What are the relevant “look back” periods for claims?

The look back periods may vary depending on the type of transaction. For example, when carried out by the debtor after the initiation of the insolvency proceedings and prior to submission of the petition for opening insolvency proceedings, the periods are as follows:

performance of a monetary obligation prior to its maturity, if made within a one-year period;
creation of a mortgage or a pledge to secure receivables from the debtor, which were unsecured prior to that within one-year period; and
performance of a due monetary obligation of the debtor if made within a six-month period.

The look back period is typically extended where the creditor knew or was in a position to know the circumstances giving rise to a reasonable assumption of insolvency or over-indebtedness.

4.3 Who can pursue the claims?

It is the insolvency trustee who is entitled to pursue the claims and, if they fail to do so, any insolvency creditor may bring the claim to court within two years following the institution of the proceedings. Where the claim is brought by a creditor: the court shall constitute the trustee as a joint applicant ex officio; and another creditor is not entitled to bring the same claim; however, the latter may intervene as a joint applicant not later than the first hearing of the case.

4.4 What remedies are available and how do they operate in practice?

The remedies available for successful clawback claims include:

declaration that the transaction is void or voidable as against the creditors of the insolvency;
return of assets transferred to the insolvency estate;
payment of compensation equal to the value of the transferred assets if the assets cannot be returned in kind; and
restoration of the position of the insolvency estate as if the transaction had not occurred.

In practice, the insolvency trustee initiates court proceedings to challenge the transaction, and upon a successful claim, the counterparty is ordered to return the assets or their value to the insolvency estate for distribution to creditors.

4.5 What defences are available?

Defences available against clawback claims may include, inter alia, objections that:

the transaction was in the ordinary course of the debtor’s business and was performed in accordance with the terms agreed between the parties, simultaneously with the provision of equivalent goods or services in favour of the debtor or within 30 days after the due date of the monetary obligation, or after the payment was made the creditor actually provided equivalent goods or services to the debtor;
the disputed rights were acquired by bona fide third parties for consideration before the registration of the claim; and
the counterparty acted in good faith and did not know and could not have known of the debtor’s insolvency or over-indebtedness — which will, however, only change the look back period. Bad faith shall be assumed until proven otherwise, if the third party is a person, related to the debtor or to the person with whom the debtor has contracted.

4.6 Is there a general right of action in respect of transactions defrauding creditors or Actio Pauliana claims?

Bulgarian law provides for a general Actio Pauliana claim under Article 135 of the Obligations and Contracts Act which allows creditors to challenge transactions made by the debtor that damage their interests, regardless of whether insolvency proceedings have been opened. It exists in parallel to claims under Article 646, paragraph 2 and Article 647 of the Commercial Act, where specific grounds are set out to challenge transactions as invalid against the creditors of the insolvency estate — these explicitly include, for example, gratuitous transactions, transactions at undervalue, and payments of undue debts.

The main difference between the general Actio Pauliana claim and the insolvency one is that, within the insolvency proceedings, the presumption that the creditor knew or was in a position to know the circumstances giving rise to a reasonable assumption of insolvency or over-indebtedness applies to any persons related to the debtor. In addition, for most of the hypothesis of the Actio Pauliana claim under Article 646, paragraph 2 and Article 647 of the Commercial Act it is not needed for the claimant to prove damage to the creditors.

4.7 Who can pursue the claims?

Similarly to the other clawback and antecedent transaction claims in the insolvency proceedings, the Actio Pauliana claims under Article 135 of the Obligations and Contracts Act can be pursued only by the insolvency trustee. If the trustee fails to act, any insolvency creditor may bring the claim to court, and the court shall constitute the trustee as a joint applicant ex officio.

4.8 What remedies are available and how do they operate in practice?

Similarly to the other clawback and antecedent transaction claims in the insolvency proceedings, the remedies available for successful clawback Actio Pauliana claims under Article 135 of the Obligations and Contracts Act include:

declaration that the transaction is void or voidable vis-a-vis the creditors of the insolvency;
return of assets transferred to the insolvency estate;
payment of compensation equal to the value of the transferred assets if the assets cannot be returned in kind; and
restoration of the position of the insolvency estate as if the transaction had not occurred.

4.9 What defences are available?

Defences available against clawback Actio Pauliana claims under Article 135 of the Obligations and Contracts Act may include, inter alia, that:

the transaction was in the ordinary course of the debtor’s business;
the disputed rights were acquired by bona fide third parties for consideration before the registration of the claim;
the counterparty acted in good faith and did not know and could not have known of the debtor’s insolvency or over-indebtedness; and
the creditor’s claim is not prejudiced by the transaction.

Bulgarian law imposes certain duties and liabilities on directors and managers of companies, particularly in the context of insolvency and restructuring. They are required to act with the care of a prudent merchant, prioritise the company’s interests and avoid conflicts of interest. When insolvency becomes imminent, they have specific obligations to take preventative steps, filing for insolvency within prescribed timeframes, and protecting the interests of creditors. Breach of these duties may give rise to personal liability to the directors and managers and even criminal liability.

5.1 What are the duties of directors and managers?

Directors and managers shall carry on the company’s business, or allow it to be carried on, exercising the degree of skill and care that would be expected of a good businessperson to perform their duties. Where there is imminent danger of insolvency, directors and managers have a duty to take all necessary actions to avoid insolvency and over-indebtedness of the trader, as well as to not endanger the viability of the company intentionally or through gross negligence, while considering the interests of creditors, shareholders, and employees.

5.2 What claims can be bought against directors and managers arising from breaches of those duties?

Directors and managers may be held civilly and/or criminally liable. Potential resignation or release of management from their positions does not in itself result in these types of liability, but it does not release them from such liability either, if the grounds for it occurred while they were in office.

Directors and managers may be held civilly liable: if third parties (e.g. creditors of the insolvent debtor) suffered damages from failing to file for the opening of insolvency proceedings within the statutory 30-day time limit, where the prerequisites for this were present, the respective creditor may file a civil claim for the damages suffered against the person who was obliged to file the petition for opening.

Directors and managers may face criminal liability if the company is insolvent, and the management failed to file for insolvency within the 30-day period from the moment the company became insolvent. In addition, persons who manage and represent a company may also be criminally liable for “negligent bankruptcy”, if the company went into insolvency and the creditors suffered losses because of certain actions or omissions on part of the company’s management, such as, for instance, execution of speculative or risky transactions outside the scope of the company’s ordinary course of business. Finally, persons who manage and represent a company in financial difficulties may also face criminal liability for a “wilful bankruptcy” if, after commencement of insolvency proceedings, they take or permit certain actions — including the disposal of assets or securities for no consideration or below market value, or the waiver of obligations owed to the company — which results in material damage to the company.

5.3 Who can pursue the claims?

In the case of a civil damage claim, it is the creditor of the insolvent debtor that is entitled to pursue the claim. The burden of proof for the elements of the civil liability lies with the claimant. In the case of criminal liability, it is the Prosecutor’s Office that can initiate the investigation proceedings, either ex officio or upon a signal from a third party that is not necessarily concerned in a direct manner. The burden of proof for the elements of the criminal liability lies with the Prosecutor’s Office.

5.4 Do directors have, at any time, a strict obligation to file for insolvency and, if so, when does that arise?

In the case of insolvency or over-indebtedness, a debtor shall file a petition for the commencement of bankruptcy proceedings within 30 days. The petition shall be filed by the debtor, the debtor’s heir, a management body or a representative, such as a liquidator of a company or an unlimited partner. In the case of a procurator, they are obliged to inform the merchant for the illiquidity in writing within seven days.

There is no coherent court practice as to when exactly management body’s obligation is triggered. According to one view, the 30-day period shall start on the date the management body has acknowledged the existence of over-indebtedness and/or insolvency. Another possible approach is the date on which the management body was able to establish the insolvency had it acted with due care. Failure to file for insolvency within 30 days from the moment the company has become insolvent or over-indebted shall invoke the joint liability of the debtor’s management body for damages incurred by the creditors due to the delay (a special type of tort liability). This liability does not extend to the members of the management body of the parent company and/or the shareholders.

5.5 Can directors and managers be found liable for the increase in sums owed to creditors after a company becomes insolvent?

Bulgarian law provides that where there is imminent threat of insolvency, directors and managers must not endanger the viability of the enterprise intentionally or through gross negligence, which could give rise to liability for increased debts resulting from such conduct. In addition, in the case of non-compliance with the obligation to file for insolvency on time, the persons obligated to file (including management bodies and representatives) are jointly and severally liable to creditors for damages caused by the delay. This effectively covers the increase in debts and deterioration of the company’s position that occurs between the time insolvency arose and the eventual filing.

5.6 In what other circumstances can directors and managers be found liable directly to creditors of the company?

Bulgarian legislation provides that directors and managers may also generally be found liable to creditors where creditors suffer damages that mean that they cannot satisfy their claims against the debtor company as a result of the directors and managers: having acted intentionally in transactions subsequently declared ineffective against creditors; providing false information on the company in the Commercial Register; or performing tortious conduct or fraud.

Bulgarian law provides the insolvency trustee with broad powers to obtain information about the debtor’s property and affairs. These powers are essential for the proper administration of the insolvency estate, identification of assets, verification of creditor claims, and investigation of potential avoidance actions. The framework is set out in the Commercial Act and is supplemented by procedural rules and the cooperation duties imposed on state authorities.

6.1 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

The insolvency trustee can obtain any information in respect of a debtor’s enterprise, affairs, properties and documents, that is, all books and records of the debtor, including, inter alia, accounting records and financial data, information on assets and liabilities, business documents, operational information, creditor information, transaction histories, and public registers’ data. Creditors, being private third parties, may rely only on publicly available information, which in Bulgaria constitutes only information regarding real estate and related transactions. Under no circumstances may private entities, including creditors, have access to banking information, accounts, or transactions.

6.2 How is that information obtained in practice?

The insolvency trustee obtains the information through:

taking control of the debtor’s premises and documentation, including accounting books;
requiring information from the debtor’s management body that is obliged to cooperate; and
requiring information from any state authorities and any other organisations that are obliged to assist.

The insolvency trustee must provide monthly reports to the court and the creditors’ committee.

6.3 Can the court assist in obtaining that information and how does that work in practice?

The insolvency court has supervisory powers and may:

issue orders requiring the debtor or third parties to provide specific information;
impose interim measures to preserve the debtor’s property;
order examinations of the debtor or other persons; and
request assistance from other courts or authorities.

As all state authorities and organisations are legally obliged to aid the insolvency trustee, the court may enforce this obligation. Additionally, the court may impose fines on the insolvency trustee for failure to properly perform duties, which serves as an incentive for thorough information gathering and reporting.

Bulgaria has adopted provisions for recognition and assistance of foreign insolvency proceedings and office holders. While it is a member of the EU and Regulation (EU) 2015/848 applies directly, the Bulgarian Commercial Act also contains its own provisions for cooperation in cross-border insolvency matters. Bulgarian courts may recognise foreign insolvency proceedings and foreign office holders may request assistance through appropriate legal channels.

7.1 Is the UNCITRAL Model Law on Cross Border Insolvency adopted?

Bulgaria has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. However, Bulgaria applies Regulation (EU) 2015/848, which provides for automatic recognition of insolvency proceedings opened in other EU Member States and cooperation between courts and insolvency trustees within the EU. This does not apply for non-EU jurisdictions.

7.2 Is it possible to recognise office holders from other jurisdictions?

For EU Member States, recognition is automatic under the rules of Regulation (EU) 2015/848. Thus, insolvency proceedings opened in another EU Member State based on the debtor’s centre of main interests (COMI) are recognised in Bulgaria without any special procedure, and the powers of the foreign insolvency office holder are determined by the law of the Member State where proceedings were opened.

With regard to non-EU jurisdictions, pursuant to the applicable Bulgarian legislation, a foreign court decision declaring insolvency may be recognised in Bulgaria based on reciprocity, that is, if the respective state where the decision has been rendered also recognises Bulgarian court decisions declaring insolvency. Another condition for recognition is that the decision has been rendered by an authority of the state where the debtor’s registered office is located.

7.3 What is the process and what are the conditions for recognition?

There is no formal recognition process where EU Member States are concerned. The foreign insolvency office holder must be able to prove their appointment but may exercise powers in Bulgaria without needing a Bulgarian court order, subject to the law of the state where proceedings were opened and certain protections under the Regulation.

The recognition of a foreign court decision rendered by a non-EU court declaring insolvency shall take place under the common conditions and principles for recognition and enforcement of foreign court judgments, provided for by the Bulgarian Code of International Private Law, namely:

the foreign court or authority had jurisdiction according to the provisions of Bulgarian law;
the defendant was served with a copy of the statement of action, the parties were duly summoned, and the fundamental principles of Bulgarian law related to the defence of said parties have not been prejudiced;
no effective judgment has been given by a Bulgarian court based on the same facts, involving the same cause of action and between the same parties;
no proceedings based on the same facts, involving the same cause of action and between the same parties, are brought before a Bulgarian court earlier than a case instituted before the foreign court where the recognition is sought and the enforcement is applied for or where a judgment has been rendered; and
the recognition or enforcement is not contrary to Bulgarian public order and policy. The latter covers all mandatory rules, created by the state unilaterally to protect the fundamental values of Bulgarian society and from which the parties have no freedom to derogate.

In the proceedings for recognition the national court shall under no circumstances examine the merits of the dispute decided by the foreign court. The debtor may raise the defence of extinguishment of the obligation on the basis of circumstances that occurred after the foreign judgment took effect. The debtor may not raise such defence after the decision for recognition has entered into force.

In addition, upon a request by the debtor, by the trustee in bankruptcy appointed by the foreign court or by a creditor, Bulgarian court may initiate supplementary bankruptcy proceedings for a person declared insolvent by a foreign court, if the debtor owns property within the territory of the Republic of Bulgaria. The decision for opening supplementary proceedings shall have effect only with vis-а-vis the debtor’s property within the territory of the Republic of Bulgaria and mainly aims at its realisation.

As a general effect, any avoidance claim filed by the trustee in bankruptcy either under the primary or supplementary insolvency proceedings, shall be considered filed for both proceedings.

7.4 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

A foreign office holder recognised in Bulgaria may obtain information about the debtor’s property and affairs through similar means to those of a domestic insolvency trustee. Under Regulation (EU) 2015/848, the foreign insolvency practitioner has the right to request information necessary for the administration of the proceedings. This includes:

access to public registers including the commercial register, land register, and other property registers;
cooperation from Bulgarian authorities and courts;
information from banks and financial institutions regarding the debtor’s accounts (subject to applicable procedures); and
cooperation from any secondary proceedings opened in Bulgaria.

A trustee in bankruptcy appointed by virtue of a non-EU foreign court decision has the powers conferred by the state, where the insolvency proceedings are initiated, if these powers are not contradictory to the rules of public order in the Republic of Bulgaria.

7.5 What steps can a foreign office holder take to recover assets belonging to the debtor?

A foreign office holder may take the following steps to recover assets belonging to the debtor in Bulgaria:

exercise powers granted by the law of the state where proceedings were opened, which are recognised in Bulgaria under Regulation (EU) 2015/848;
request assistance from Bulgarian courts;
bring proceedings in Bulgarian courts to recover assets;
request enforcement of orders from the foreign proceedings; and
cooperate with any secondary proceedings opened in Bulgaria.

If secondary proceedings are opened in Bulgaria, the foreign main insolvency practitioner must cooperate with the local trustee to coordinate recovery efforts.

7.6 Is a foreign office holder able to bring clawback claims or fraudulent transaction claims?

The ability of a foreign office holder to bring clawback claims or fraudulent transaction claims in Bulgaria depends on the applicable law and the nature of the proceedings. Under Regulation (EU) 2015/848, avoidance actions are generally governed by the law of the state where proceedings were opened (lex concursus). However, Article 16 of the Regulation provides protection where the transaction is governed by the law of another Member State and that law does not allow the transaction to be challenged. In practice, a foreign office holder seeking to challenge a transaction involving Bulgarian assets may need to:

apply the avoidance rules of the law of the state where proceedings were opened;
consider whether Bulgarian law (as the law governing the act) provides a defence; or
in some cases, bring claims directly under Bulgarian law if secondary proceedings are opened in Bulgaria.

8.1 Can a foreign office holder take appointments?

Foreign office holders cannot take appointments as trustees in Bulgarian insolvency proceedings. Only persons who are included in the official list of trustees maintained by the Ministry of Justice can do so.

8.2 What are the conditions for becoming an office holder?

To become an insolvency trustee, a person needs to meet the following conditions:

be included in the official list of the insolvency trustees maintained by the Ministry of Justice;
meet educational and professional qualification requirements established by the law, including, inter alia, having successfully passed a tailored qualification exam;
have no impediments such as certain legislatively specified criminal convictions or disciplinary sanctions that would disqualify him/her;
not be subject to any conflicts of interest with the debtor, creditors, or other parties; and
provide written consent with a notarised signature to the appointment.

A trustee shall make an obligatory annual payment for professional qualification as well as to maintain professional indemnity insurance.

Upon appointment, the trustee must provide a written declaration with a notarised signature regarding compliance with statutory conditions and absence of impediments. Should any change in these circumstances occur, the trustee must immediately notify the insolvency court in writing.

8.3 What are the main rules of professional conduct?

The insolvency trustee shall exercise his powers with the care of a prudent merchant, in compliance with the rules of the Code of Ethics for receivers and trustees approved by the Minister of Justice after consultation with the organisations of the receivers and trustees. The trustee may not allow themselves to be placed under personal, financial or any other form of dependence. The trustee may also not entrust their rights to another person, except with the explicit permission by the court.

The trustee shall keep a special book in electronic form, in which they record all actions taken by them in relation to the management and disposal of items and rights of the debtor’s property or of the insolvency estate. When the functions of the trustee are carried out by two or more persons, the disagreements between them and the taken decisions shall be entered into the book. The form and rules for keeping the book shall be regulated by an ordinance issued by the Minister of Justice. The trustee submits the book within the timeframes and under the conditions explicitly regulated by law.

The insolvency trustee may not enter into agreements on behalf of the debtor either with themselves or with a person related to them. The insolvency trustee may not acquire in any way, directly or through another person, any object or right from the insolvency estate. This restriction shall apply also to the spouse and certain relatives of the insolvency trustee. The trustee shall also not make available to the public any information, data or facts, learned while exercising their powers.