Category: Bulgaria

DGKV has advised Internet Corporated Networks on the sale of its hosting and domain business to Superhosting.bg. The Vladimirov Kiskinov law office reportedly advised the buyer. 

Financial details of the transaction were not disclosed. 

Superhosting.bg is a part of the Team.Blue Group, which offers hosting, domain, and data storage, among other digital services. The group, based in Ghent, Belgium, employs over 1,500 people and provides services to more than two million customers. 

DGKV’s team included partner Georgi Tzvetkov and Senior Associate Ivan Punev.

On March 24, 2021, CEE Legal Matters reported that Djingov, Gouginski, Kyutchukov & Velichkov had advised the founders of tech start-up MYX AD on EUR 350,000 invested into the company by a group led by New Vision 3 Fund KD. CEE In-House Matters spoke with Yordan Zarev, Partner at New Vision 3 Fund, to learn more about the matter.

CEEIHM: To start, please tell us a bit about the NV3 fund.

Yordan: This is our third generation fund, a EUR 25 million vehicle, investing in early-stage companies in fintech, AI, big data, cybersecurity, blockchain, digital identity, and urban mobility, among others. The fund invests tickets between EUR 100,000 and EUR 1 million in Bulgaria-based start-ups.

CEEIHM: You represented the lead investor in the EUR 350,000 investment round into the tech start-up MYX. What made the target particularly attractive to you?

Yordan: Currently there are over 65 million kilometers of roads, over 1.3 million kilometers of railroads, 4 million cell towers, and over 19 million square kilometers of protected land, with new infrastructures such as power lines, pipelines, bridges, and tunnels being built every day to accommodate the growing need for people to travel and connect with our increasingly global world. Companies need to take care of these assets regardless of the sheer complexity and size of the task; a step change is needed in how they maintain big and complex networks of assets.

MYX has a solution – digital twins of the world in one’s pocket. Incredibly accurate digital representations of the real world available on the smartphone to help make the best business decisions on the fly, and from any location. Empowered by MYX’s proprietary AI algorithms using Big Data, companies will be able to gain new insight into their own assets and get the big picture while not missing out on any of the important details.

CEEIHM: What are your plans for the start-up, now that the investment round is concluded?

Yordan: MYX will continue its cutting-edge product development and focus on market expansion in Bulgaria and beyond.

CEEIHM: How does this target align with the fund’s overall medium and long-term strategy?

Yordan: We aim to invest in a portfolio of companies that complement each other and could easily create significant synergy by working together. MYX is such a company and their team seems to be quite eager to conquer this nascent market and become a global player. If all goes according to plan, MYX will position itself among the leading solution providers in this vast sector, thus offering a substantial return to our investors within the next 5 to 7 years.

CEEIHM: DGKV started off as the counsel for the founders and, post-commercial agreement, undertook the representation of all parties. What was it about the firm’s work leading up to this point that made you turn to them?

Yordan: DGKV is a highly experienced player in VC deals. They devised an innovative investment instrument that will solve tons of red tape and other problems we have previously experienced when offering convertible instruments to investee companies. They have been hands-on and highly professional, from A to Z, and we plan to work with them going forward.

Originally reported by CEE In-House Matters.

While the Bulgarian political landscape is not exactly what Peterka Partners Partner Plamen Peev would describe as stable, there seems to be notable movement in terms of legislative updates as well as reasons for cautious optimism related to the Bulgarian economy.

“In terms of the political situation, things are not too stable in Bulgaria,” Peev begins. “The political landscape is dominated by two major events – the upcoming parliamentary elections and US sanctions.”  

Bulgarian parliamentary elections, scheduled for July 11, are extraordinary since the regular April 4 parliamentary elections failed to produce a government.”The parliament dissolved after a month or so – it was a rather unprecedented event,” Peev says. 

And the sanctions imposed by the United States, under the Magnitsky Act, only add to the flame. “The sanctions were imposed on several Bulgarian officials and 64 entities owned or controlled by two of the sanctioned individuals, on account of severe corruption,” Peev explains. “It’s quite a massive intervention that was hardly expected by most political players in Bulgaria, let alone society as a whole.” While Peev thinks that this might have negative short-term blowback in terms of investments, he also feels that this might lead to corruption being deterred more easily in the long run. 

As for the legislative updates, Peev mentions several of note: “A new law on industrial parks/zones has passed aiming at a much clearer legal framework on this topic. Some additional requirements were instituted when it comes to the sale of goods to consumers and the legal treatment of digital content and services. Amendments to the rules on work and residence permits for foreigners have passed as well.” He also says that the procedures related to work and residence of foreigners have long been a sore topic for the Bulgarian IT sector, seeing as how “IT companies have long been asking for a more adequate legal framework that would allow for more non-EU talents to enter the market, thus ensuring its growth.”

Finally, Peev says that there is room for moderate optimism as to how things are developing in terms of the Bulgarian economy, overall. “Despite the political context described, I’m happy that investors are still considering Bulgaria for their projects. We are currently in touch with businesses planning setting up local subsidiaries in various sectors, such as e-mobility, logistics, consumer goods, industrial repairs,” he says. “If you look at the numbers, the Bulgarian economy overall hasn’t been devastated by the crisis and current predictions are being revised to include a more optimistic outlook!,” Peev concludes.

CMS Sofia has successfully represented Philicon-97 in a dispute against the Ministry of Finance of the Republic of Bulgaria involving the country’s feed-in tariff.

According to CMS, in a ruling in June 2021, “Bulgaria’s Supreme Court of Cassation supported Philicon-97 AD’s claim for compensation for the 20 % reduction in the feed-in tariff that was enacted by the Bulgarian legislature in 2013 and then repealed by the Bulgarian Constitutional Court in 2014.” The firm added that this second success – following CMS’s win on behalf of Bezmer Energy (reported by CEE Legal Matters on January 7, 2021) – is “streamlining the case-law of the Supreme Court of Cassation in relation to all other pending cases related to the feed-in tariff cuts in Bulgaria.”

CMS’s team was led by Sofia Managing Partner Kostadin Sirleshtov and Partner Assen Georgiev and included Associate Yana Antonova and Trainee Teodora Peycheva.

Boyanov & Co has advised EnerSys Holdings S.a.r.l. on the sale of its Bulgarian subsidiary EnerSys AD, to Recocycling EOOD. Solo practitioner Kiro Kirov advised the buyer.

EnerSys Holdings S.a.r.l. is itself a subsidiary of EnerSys, a global operator in stored energy solutions.

Boyanov & Co’s team was led by Partner Nikolay Zisov and included Junior Associate Deyvid Iliev.

Boyanov & Co has advised Mondelez International on Bulgarian law aspects of its approximately-USD 2 billion acquisition of Greek snacking company Chipita S.A. from the Olayan Group, Spyros Theodoropoulos, and several unidentified individuals.

According to Boyanov & Co, “MDLZ, selling snack food and beverage products, plans to fund the deal with existing cash and new debt issuance. Chipita produces and markets savory and sweet snacks. The company’s portfolio of croissant and baked snack brands includes 7Days, Chipicao, and Fineti. It generated revenues of approximately USD 580 million in 2020.”

Boyanov & Co’s team included Partner Yordan Naydenov and Senior Associates Mihail Vishanin and Violeta Kirova.

Boyanov & Co could not provide more information on the deal.

The global pandemic has impacted all markets, with subsequent ramifications for M&A. Investors are now seeking greater protection against general lock-downs and supply-chain disruptions, while governments aim to protect critical supplies and services by imposing new regulations on foreign investment in crucial or strategic industries. 

If you are considering investment opportunities in Bulgaria, take a look at this overview to get insight into the regulations on foreign investment in strategic industries.

​The following overview is an extract from the Foreign Direct Investment in Central Europe publication, which gives insight into the regulations on foreign investment in strategic industries in the region.

Have FDI screening rules been implemented (or will they be implemented) in the country?

Bulgaria has not yet implemented FDI screening rules and mechanisms in accordance with Regulation 2019/452 (the “Regulation”). There are currently no indications of such rules and mechanisms being discussed in Parliament.

Although, there is no general restriction, screening or limit of foreign investments in Bulgaria, there are certain industry-specific restrictions adopted by various laws. The Act for Economic and Financial Relations with Companies Registered in Jurisdictions with Preferential Tax Regime, their Related Parties and Beneficial Owners introduced in 2014, prohibits companies, domiciled in offshore jurisdictions and companies

under their control, from engaging in certain economic activities, including banking and insurance activities, public procurement procedures, privatization transactions, acquisition of municipal property, gambling licenses, radio and television operators, auditors, etc. The law however provides for various exceptions. Under the Gambling Act, foreign investors (i.e. non-EEA nationals and legal entities) are also subject to more stringent requirements regarding investments in the gambling industry, where, to be eligible to invest in a local entity, holding a gambling license, a foreign investor is required to have invested at least EUR 10M in other activities in Bulgaria and created 500 jobs or to organize gambling games in a casino located in a hotel of four or more stars owned directly or indirectly by the investor. Pursuant to the Bulgarian Agricultural Land Ownership and Use Act, foreign investors (i.e. non-EEA nationals and legal entities) are generally barred from the acquisition of agricultural land on the territory of the country, unless this is allowed pursuant to an international treaty to which Bulgaria is a party. Companies with direct or indirect shareholding by offshore companies are also prohibited from acquiring agricultural land.

The general support, informational, administrative support, certification and collection of statistical data of the foreign investments in Bulgaria    is carried out by the Foreign Investments Agency, which is tasked with preparing an annual report on foreign investments in the country. Foreign investments are further monitored by the Bulgarian National Bank (BNB), which is tasked with keeping statistical information on loans between local and foreign entities. In this regard, locally domiciled legal entities are obligated to report to the BNB any received financing, exceeding the amount of BGN 50,000 (approx. EUR 25,000) within 15 days of its receipt. BNB is also entitled to request from any local and foreign person information relevant to the balance of payments and the international investment position of the country.

The Bulgarian merger control requirements apply to foreign and domestic mergers. The decision making body with respect to approvals or blocking of notifiable concentrations is the Commission for Protection of Competition. Additional regulatory clearance may be necessary in the regulated sectors such as banking, financial services and insurance and energy, among others.

Definition of FDI

Due to the lack of legislative measures on the implementation of FDI screening rules in accordance with Regulation, Bulgaria currently does not have a legal definition of FDI.

Definition of foreign investor

Similarly to the definition of FDI, the Bulgarian legislator has not yet established a legal definition of a foreign investor for the purposes of the FDI screening rules in accordance with Regulation.

Do the following scenarios trigger the screening? 

1. Acquisition of 10% or more of voting rights in the company: N.A

2. Establishment of a new branch: N.A

3. The production of new products: N.A

4. Establishment of a new company in which foreign investor will have more than 10% voting rights: N.A

5. The transfer of use or operational rights in infrastructure or assets that are indispensable for the operation of strategic companies: N.A

6. Other screening triggers: N.A

By Reneta Petkova, Partner, Deloitte Legal

Short overview of the importance of the applicable legislation and the need of adequate business reaction in the EU

Enough time has passed since the application of the General Data Protection Regulation (GDPR) and the EU Network and Information Security Directive (NIS) and there are still many companies that do not understand the difference between personal data protection and information security, do not see the point in achieving good level of legal compliance as they rely on technical security only or believe that cybersecurity has nothing to do with law.

Especially after the issues of remote working that the pandemic has brought to light, it is no longer serious to believe that technical and organizational measures, certain certification or the use of a wide range of DLP tools can circumvent the need to enforce the rules governing the protection of sensitive information and / or personal data. In addition, it is extremely irresponsible to consider that observing the applicable legal rules means simply the filling in of several blank documents to prove compliance. Employees are rarely educated and trained to respond to data breach or incident and so the existence of written model rules and policies renders it completely meaningless.

Cyber law covers aspects of personal data protection, intellectual property, freedom of movement and trade and much more. It builds on individual expert laws and regulations, including the GDPR. Through NIS and the accumulated practice of the regulators of the individual Member States, the individual companies are guided on how to ensure security in the digital circulation of software, online communication and e-commerce. Cyber law also provides legal recognition of electronic documents. Or, to put it simply, this is the legal infrastructure for dealing with cybercrime and abuse of information.

The right of protection of information consists of rules that dictate how the Internet and software products are used. The importance of cyber law can be explained with the following material parameters:

1. Defines the actions and reactions in cyberspace and when performing online transactions;
2. Teaches people (employees) how to avoid security breaches;
3. Enables companies to organize their activities in such a way that the threats of security breaches are much smaller and the reaction of employees along the chain – faster and adequate;
4. Defines the functions of the regulatory bodies and the sanctions that may be imposed.

In order to achieve a good level of information protection, it is necessary for companies to make internal or external due diligence of their structures and to establish the most convenient framework in which to organize the flow of information in a secure environment. It is particularly important to know that the GDPR, the guidelines of the European Data Protection Board (EDPB) and the European Union Agency for Cybersecurity (ENISA) as well as all applicable national laws should be considered as a whole and at once. Compliance should go hand in hand with these regulations as they complement and build on each other.

After the analysis of the current baseline of the company, a plan is drawn up for what policies to be prepared and what registers to be maintained, so that not only the applicable legislation can be observed, but also so that it can be easily updated.

Finally, all this should be brought to the attention of the C-suite, the management bodies responsible for the individual departments and finally to each employee who has access to relevant company information and personal data. There are already enough opportunities and solutions training and awareness to be maintained in understandable language, with the help of a legal adviser.

We currently expect a strengthening of the role of NIS as a regulatory framework (amendments almost ready). Further, the introduction of Directive 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services is still pending for some of the Member States. Without timely preparation by side of the business, catching up with regulatory requirements will become increasingly difficult and violations more and more often.

Member States are likely to need to put a little more effort into awareness-raising campaigns to explain exactly why these new rules are inextricably linked to the rapid development of the digital world and what are the benefits of complying with them. In addition, the IT sector urgently needs to rethink its approach to lawyers – experts in this field (and vice versa), as these two types of professionals should finally join hands to work simultaneously and help provide comprehensive and reliable protection of information and data. Companies that harmonize their technical practices with the legal framework in a timely manner are much more confident in developing their work in a digital environment, as they are restructuring their business in a way that is competitive, up-to-date and prepared for the new challenges of the future.

By Irena Georgieva, Managing Partner, PPG Lawyers

Dimitrov, Petrov & Co. has advised Svilen Maximov – the sole owner of TV- and Internet-provider Networx-Bulgaria – on the sale of 100% of the company’s shares to BTC. Schoenherr advised BTC on the transaction, which remains contingent on regulatory approval.

DPC’s team included Partner Hristo Nihrizov and M&A Expert Rositsa Vasileva.

Schoenherr’s team included Partner Ilko Stoyanov and Attorneys Katerina Kaloyanova-Toshkova and Radoslav Chemshirov.

Djingov, Gouginsky, Kyutchukov, and Velichkov has advised Blocks Group AD on a EUR 30.2 million ten-year secured bond issue, placed on April 12, 2021, and offered to a limited number of specific qualified investors. The anchor investor in the bonds is Bulgarian Development Bank AD.

Blocks Group AD is a rehabilitation and long-term care services provider operating in Southeast Europe. According to DGKV, the company will use the financing to expand its operations in Greece, Bulgaria, and Romania.

DGKV’s team was led by Partner Georgi Tzvetkov and included Senior Associate Gergana Monovska.