“It’s never boring in Bulgaria – we always have some hot topics to handle,” says Stefana Tsekova, Partner at Schoenherr Bulgaria, who reports that on August 10 the country’s trade registry collapsed and remained unavailable for 18 days, causing a “total nightmare for the business sector.”
The crash involved the online registry of all Bulgarian – and Bulgarian branches of foreign – companies, and all non-profit legal entities acting in the country. “This site is basically the single source that provides reliable information on companies’ current status, whether they are active, in liquidation, or in insolvency,” Tsekova says. “This platform also tells us the legal representation of a company and provides information on the representative powers.” Tsekova explains that any change that happens within a company must be immediately uploaded on the registry. “If you change the ownership structure, the management, or if there are any changes in companies' articles of associations, everything must be there.”
Because of its vital role in day-to-day business activities, Tsekova says that the crash “created kind of a mass panic in the business and legal sectors” with representatives of both unable to use it for basic research, nor use it to register new information or deals. “If someone wants to sign a deal, usually you check who the representative of the counter-party is, and you do that in the online trade register, in order to know if they actually have the power to buy or sign. During the outage, this was also impossible,” she explains.
“It was so severe that the Bulgarian Minister of Justice, the Bulgarian National Security Agency, and the prosecutor’s office had to launch an emergency action-plan in order to recover the data from the registry,” Tsekova says. “It truly was a nightmare, especially because in the first days of the collapse, the reasons were unknown to the government as well. Later on, they officially stated that the reason was the burnout of some system discs, but some of the specialists still suspect that it might have been a cyber-attack and there might be some data leakages.” Either way, she reports, the crash has raised a lot of questions about the reliability of the system, and whether all the data was properly recovered.
The system was finally reinstalled on Monday, August 27. Still, even now not all functions are back, and Tsekova reports that users are continuing to have problems filing online applications. “Also, while before applications required just three days to be registered, now everything is delayed, and applications are being registered only after one month.”
“So what all companies and our clients are doing now, with our help, is checking if the recovered data matches the actual data which we initially submitted in the system,” Tsekova says. “You can imagine that some data in the register is historical, and it is almost impossible to track and check the entire history. It will require huge resources to go over it.”
Besides checking and confirming the data of the newly reinstalled registry, Bulgarian law firms are also busy with new regulations coming for the energy sector, she says. “The government just adopted a new law regulating oil-related economical activities in Bulgaria. It was promulgated at the end of July, 2018, and it will become effective as of January 28, 2019.” She explains that the previous regulatory regime for oil-related activities was repealed in Bulgaria almost 30 years ago, with the fall of Communism, and is now being reintroduced to deal with the so-called “grey sector.”
“All oil and oil product companies which are involved in wholesale, retail, storage, transportation, bottling, and distribution-related businesses must be entered into a special publicly-accessible registry maintained by the Ministry of Economy,” she says. “There are smaller companies – shelf companies – that are making some transactions and then liquidating the companies, sometimes avoiding tax and the obligation of the compulsory stock maintenance,” says the Schoenherr Partner, who adds that in Bulgaria all oil companies have to maintain a certain level of compulsory stock in case of a crisis.
“Generally, I think it is a positive initiative," Tsekova says. "The only negative impact could be on small enterprises; the new obligations and restrictions will affect them mostly, as among the requirements is that a minimum threshold of registered capital must be maintained and they must also provide certain guaranties for their businesses to cover taxes and other duties.” She adds that because of these regulations, there were some arguments against the adoption of the law. “Anyway, the law is adopted,” she says, “and it also provides for some serious sanctions. If you do not register, fines could reach up to 125,000 euros, and for repeated violations, the fines will double.”