Category: Bulgaria

CMS has advised Korea’s Solarian Holdings Ltd. on the acquisition of a 2.25 Megawatt photovoltaic power plant in Bulgaria from Julian Torchanov and Mat Ltd.

The project was financed by Unicredit Bulbank, and financial terms were not disclosed.

The deal marks the second acquisition of a PV power plant by Solarian Holdings in Bulgaria in the last few months, following its acquisition of a 5 MW photovoltaic power plant from FEC Perun in May (as reported by CEE Legal Matters on May 28, 2020).

CMS’s team consisted of Partner Kostadin Sirleshtov and Associate Borislava Pokrass.

On 28.07.2020 in the State Gazette vol. 67, the latest amendments to the Medicinal Products in Human Medicine Act were promulgated (SG vol. 31 of 13.04.2007, last amended and supplemented SG vol. 67 of 28.07.2020) (the ‘Act’), which aims to create the preconditions for the implementation of Commission Delegated Regulation (EU) 2016/161 of 2 October 2015 supplementing Directive 2001/83/EC of the European Parliament and of the Council by laying down detailed rules on safety features appearing on the packaging of medicinal products for human use  (“Delegated Regulation (EU) 2016/161”), including optimization of the control over pharmacies. Summary information about the changes can be found below.

I. REDUCTION OF ADMINISTRATIVE BURDEN

Pursuant to Decision No. 704 of the Council of Ministers of 2018 on the adoption of measures for transformation of the model of administrative services, the Act provides for measures to limit the administrative burden on citizens and legal entities in the registration regimes related to trade in medicinal products.

With respect to the above, there is no need for the presentation of a certificate for lack of criminal record by Bulgarian citizens when applying for a permit for (i) manufacture of medicinal products; (ii) for imports of medicinal products; (iii) wholesale of medicinal products; (iv) retail trade in medicinal products in pharmacies; and (v) drugstores. The same approach is applied in case of a subsequent change in any of the persons performing the specified activities.

In addition, the Bulgarian Drug Agency (BDA) will establish ex officio the circumstances regarding the existence of an usage permit or a certificate for commissioning of the sites for production, control and storage, issued under the Spatial Planning Act, or an another valid document within the meaning of the Spatial Planning Act.

Last but not least, when applying for a permit for retail trade in medicinal products in a pharmacy, the obligation to provide a hygienic opinion by the relevant regional health inspectorate will not apply, and the same will be required ex officio by the BDA.

II. WHOLESALE vs RETAIL TRADE in medicinal products

With the adoption of the amendments to the Act, the activities “wholesale of medicinal products” and “retail trade in medicinal products in a pharmacy” is prohibited to be performed by one and the same person / legal entity. Until 28.07.2020, the Act did not provide for such a restriction and the persons / legal entities which received valid permits to exercise the two activities could exercise them in compliance with the relevant legal requirements.

Within six months, namely until 31.01.2021, according to § 70, para. 1 of the Act, the persons who hold both a wholesale trade permit and a permit for retail trade in medicinal products in a pharmacy, issued before the entry into force of the Act, should bring their activity in compliance with the requirements of the Act.

In case the respective person has not brought his activity in compliance with the new prohibition within this term, the executive director of BDA shall revoke the permit, which was issued with a later date. When the second type of activity is a retail trade in medicinal products, the Executive Director of the BDA will revoke the permits issued to the person for all pharmacies.

The new ban on combining the two activities of wholesale and retail trade in pharmacies of medicinal products also applies to the applications submitted before 31.07.2020.

III. Application of DELEGATED REGULATION (EU) 2016/161

In order to create preconditions for the implementation of Delegated Regulation (EU) 2016/161, the Act provides for the following new registers and obligations to the persons exercising activity under the Medicinal Products in Human Medicine Act.

• National number of medicinal products

The BDA, within 3 months from the entry into force of the Act or until October 31, 2020, should generate a unique national number for identification of each medicinal product and enter it in the register of authorized and registered medicinal products on the territory of the Republic of Bulgaria and medicinal products authorized for use under a centralized procedure pursuant to Regulation (EC) (726/2004 of the European Parliament and of the Council.

• Preventing the entry of counterfeit medicines

With the entry into force of the changes to the Act, it is envisaged that all participants in the legal supply chain of medicinal products will check whether the medicinal products have not been counterfeited, by verifying their authenticity through the safety indicators under the law.

Sanctions: For non-compliance with the obligations regarding safety indicators, the Act provides for the imposition of a fine or a property sanction, which may reach up to BGN 20 000 for holders of a permit for manufacturing or import, use or parallel import, and in case of repeated violation up to BGN 50 000. There are smaller sanctions for retailers.

IV. SALE OF MEDICINAL PRODUCTS

•  Prohibition of return

With the adoption of the changes to the Act, a practice has been documented that pharmacies cannot replace or return already purchased medicinal products. According to art. 234, para. 5 of the Act, as of 31.07.2020, the return of purchased medicinal products is explicitly prohibited.

• Mandatory pricing

According to the latest amendments to the Act, a medicinal product may be sold on the territory of the country only after the entry into force of the decision of the National Council on Prices and Reimbursement of Medicinal Products established by the Minister of Health (the “Council”) for determination of a price or registration of a price, except for the cases provided by law.

In that respect, a medicinal product may not be sold at a price higher than the approved price (for medicinal products included in the Positive Drug List*), the marginal price (medicinal products subject to medical prescription in accordance with the lowest reference prices from Member States) or the registered maximum price (for non-prescription medicinal products).

The Act also provides for restrictions on the formation of the final price of medicinal products that will be paid by medical institutions, as well as the products included in the value of medical care provided.

In addition, medicinal products included in the Positive Medicinal List, which are paid for under the Social Security Act, are not subject to a surcharge for a retailer when they are sold in a pharmacy.

The aim of introducing restrictions on the pricing of medicinal products is to achieve greater control over the trade in medicinal products and transparency in payments between traders and users throughout the supply chain.

*The Positive Drug List is prepared and maintained by the Council and includes medicinal products dispensed on prescription and paid for with funds from the NHIF budget, from the state budget outside the scope of compulsory health insurance, from the budget of medical institutions and from the budget of state-owned medical institutions and / or municipal participation.

V. NATIONAL PHARMACY MAP

The adoption of the Law changes provided for the creation of the so-called National Pharmacy Map, which aims to determine the needs of the population for access to medicinal products on a territorial basis.

The National Pharmacy Map will determine the districts, municipalities and cities with a shortage of open pharmacies by performing an analysis of the population’s access to pharmacies that carry out activities on:

1. granting of medicinal products for home treatment, paid in full or in part by the National Health Insurance Fund;
2. preparation of medicinal products;
3. granting of medicinal products, containing narcotic substances in the sense of the Control over the Narcotic Substances and the Precursors Act;
4. dispensing of medicinal products under a doctor’s prescription, which are not paid with public funds;
5. dispensing of medicinal products without a doctor’s prescription, etc.

The National Pharmacy Map will be elaborated on the basis of regional pharmacy maps.

The law stipulates that the National Pharmacy Map shall contain data on:

1. the regional pharmacy maps;
2. the specific minimum needs of the population for access to medicinal products, dispensed in pharmacies, and to the types of activities, by districts, municipalities and cities;
3. distribution of the opened pharmacies by number of the population by districts, municipalities and cities;
4. graphic indication of the opened pharmacies on the map of the country according to the type of the activities they perform;
5. analysis of the access of the population to medicinal products, dispensed in pharmacies by types of activities by districts, municipalities and cities;
6. determination of the districts, the municipalities and cities, in which during the analysis a shortage of open pharmacies by types of activities has been established.

The National Pharmacy Map should be adopted by a decision of the Council of Ministers on a proposal of the Minister of Health within one year from the entry into force of the Act, namely by 31.07.2021.

*This text does not constitute a legal advice and should not be taken into account in resolving legal disputes, but only to inform readers.

By Tsvetelina Dimitrova, Attorney at Law, and Dobrina Pavlova, Attorney at Law, Georgiev, Todorov & Co.

Tokushev and Partners has advised Intercapital Property Development REIT on its initial public offering of company shares worth over BGN 24 million.

According to Tokushev and Partners, “the prospectus for the IPO was approved by the Bulgarian Financial Supervision Commission on July 30, and the offering will take place through the Bulgarian Stock Exchange in the period between August 24 and the October 1.”

Tokushev and Partners’ team included Managing Partner Viktor Tokushev and Senior Associate Boris Teknedzhiev.

Georgiev Todorov & Co. has advised Bulgaria’s Office Sgradi EOOD on the purchase of 50% of the shares of Medical Center-On Clinic Bulgaria AD from the Netherlands-based On Clinic Advanced Medical Institute B.V. The seller was reportedly advised by Israel’s Epstein Rosenblum Maoz.

Georgiev Todorov & Co.’s team was led by Attorney Tsvetelina Dimitrova.

Epstein Rosenblum Maoz’s team was led by Roni Abelski.

On June 9, 2020, almost 3 years after the start of the public discussions procedure, the new Food Act (the “Act”) was promulgated in the State Gazette, issue no. № 52. It repeals the old law, in force since 1999, and aims to harmonize Bulgarian legislation with European legislation, introducing new concepts, new registration obligations and higher sanctions. In the text below you will find some of the more important legislative changes.

I. NEW CONCEPTS

What is a “business operator”?

This is the person who produces, processes and / or distributes food, and under distribution the Law refers to every stage of food distribution, such as storage, transportation, trade, import and export of food. Namely, the business operator is the person responsible for compliance with legal requirements in the food sector, including:

• have information on food, animals and materials used in the production, processing and / or distribution of food under its control;

• to provide the necessary assistance to the administrative bodies for limitation and liquidation of a food disease which has emerged.

What is a “site”?

This is any unit in which an entrepreneurial activity is carried out for profit or without profit, related to any stage of the production, processing and / or distribution of food, and includes: land (including land under water) with or without buildings, an undertaking, a vehicle (including a boat, a ship, an airplane, a railway wagon or other); mobile, temporary, movable or open site.

The law sets special requirements for persons working in such a facility:

• They are subject to preliminary and periodic medical examinations;

• At least one person employed on an employment contract who has: (i)higher or secondary special education in the food industry, or (ii) a professional qualification with specialized in the food industry, or (iii) higher education with a specialism of “Veterinary Medicine”, or (iv) higher education in the professional field “medicine” or “pharmacy”, when the subject is for the production of nutritional supplements, foods intended for use in intense muscular load, and foods intended for infants and young children, as well as foods for special medical purposes and foods that contain vitamins, minerals and some other substances.

* Hiring a person on an employment contract is not required when the site is managed by a business operator, who meets at least one of the above mentioned requirements for education.

II. WHAT IS SUBJECT TO REGISTRATION?

• Carrying out production, processing and / or distribution of food

Production, processing and / or distribution of food is registered or approved at the location of the site, and the competent authority is the director of the Regional Directorate for Food Safety (“RDFS”). Public registries of business operators and food outlets will be maintained on the websites of the Bulgarian Food Safety Agency (BFSA) and the Ministry of Health-Care.

* The competent authority for registration in the production of bottled natural mineral, spring and dining water is the director of the regional health inspection.

• Production and wholesale trade of materials and objects intended to come into contact with food is carried out after registration

Competent authorities for registration are the directors of RDFS at the location of the site.

• Food transport vehicles

Vehicles used to transport certain types of food, namely: food of animal origin, flour, bread, bakery and confectionery, must be registered and have the appropriate registration sticker. The vehicles for transportation of all other types of food are announced by the business operator in the site registration procedure. The competent director of the RDFS is the one at the registered office of the business operator.

* Vehicles of a business operator registered by a competent authority of another Member State of the European Union are not registered.

• Distance food trade

Distance food trade can only be done after registration. The competent authority is the director of the RDFS at the location of the site or of the headquarters of the means of distance communication.

Distance trade for food for infants and young children, and for food for special medical purposes is prohibited.

An ordinance of the Minister of Agriculture, Food and Forestry is forthcoming, which will establish specific requirements for distance food trade.

• Foods intended for infants and young children, foods for special medical purposes and foods containing vitamins and minerals

When such foods are placed on the market for the first time on the territory of the Republic of Bulgaria, business operators are obliged to submit a notification to the Minister of Health-care. The Minister issues an opinion on compliance or non-compliance of the food with the normative requirements, which is sent to the respective business operator and to the BFSA. If there is compliance with the regulatory requirements, the competent authority shall enter the information listed in the provisions of the law regarding the specific food (type and name, composition, purpose, etc.) in the national registry on the website of the BFSA.

With amendments to the Law, adopted only a month and a half after its promulgation, namely on 21.07.2020, no. 65 of the State Gazette, the adoption of a special ordinance on the requirements for safety and quality of food offered in kinder gardens, school canteens and retail outlets on the territory of schools and kinder gardens, as well as food offered at organized events for children and students, is provided for. This will be the next step in strengthening the food control and quality for the smallest children.

Nutritional supplements and foods for use in intense muscle load

The competent authority for registration of nutritional supplements and foods intended for use in intensive muscle load is the BFSA Executive Director, to whom an application is submitted in a form before placing the respective nutritional supplement or food on the Bulgarian market for the first time. The registration is done by registration in the national registry on the website of the BFSA.

Sanctions:

• A fine or a property sanctions in the amount of BGN 4,000 to 6,000 is imposed on a business operator that carries out activity without the necessary registration or approval.

• The same sanction is imposed in the case of non-fulfillment of the obligation to notify, failure to provide access, etc.

• A business operator, who transports food with unregistered vehicles, when registration is required, shall be punished by a fine or a property sanction in the amount of BGN 2,000 to 3,000.

• For systematic violations of the law, the fine or the property sanctions are five times the highest fine or property sanction imposed.

III. “PRODUCED IN BULGARIA” AND “PRODUCT FROM BULGARIA”

The new Food Act introduces two specific new concepts, namely labels on the products “Produced in Bulgaria” and “Product from Bulgaria“.

What products can be labeled “Produced in Bulgaria“?

The label is placed on primary products that are harvested on the territory of the Republic of Bulgaria.

What products can be labeled “Product from Bulgaria”?

“Primary products” that meet the following additional requirements may be labeled as “Product from Bulgaria“:

• the main ingredient used for their production is extracted on the territory of the Republic of Bulgaria, and

• all stages of the production process are carried out on the territory of the Republic of Bulgaria.

The law allows the label “Product from Bulgaria” to be accompanied by a map or other symbol that contains information that the food is produced in the territory of the country

IV. PARTICIPATION OF CHILDREN IN ADVERTISEMENTS

The new Food Act prohibits the participation of children as performers in advertisements or other forms of commercial communication of the following products:

• genetically modified foods and foods for which there are regulatory applied restrictions on their use by children;

• foods that contain nutrients and substances with a nutritional or physiological effect that do not meet the requirements for healthy eating according to the current regulations.

Sanction: In case of a violation of the prohibition, a fine or a property sanction of BGN 2,000 to 3,000 is envisaged

V. PRE-EXISTING CONDITIONS

It is important to note that the adoption of the new Food Act does not necessarily mean that traders and food producers should take immediate action. The legislator has limited this only to certain entities, such as distance food traders and others.

I have issued a certificate for registration of sites for production and trade in food. Is re-registration required?

Pursuant to the Transitional and Final Provisions of the new Act, the certificates for registration of sites for production and trade with food issued before the entry into force of this Act should retain their validity for the term for which they have been issued.                  

I perform distance trading. Should I apply the new requirements immediately?

Persons who perform distance trading of food have three months from the entry into force of the new Act (until 09.09.2020) to bring their activities in line with legal requirements.

I trade with mineral and spring waters. How should I proceed?

All natural mineral and spring waters offered on the market as of the date of promulgation of the Act should be officially entered in the respective list by the Minister of Health, i.e. it is not necessary to submit an application for registration.

*This text does not constitute a legal advice and should not be taken into account in resolving legal disputes, but only to inform readers.

 The team of Georgiev, Todorov & Co. Law Offices remains available for assistance and additional information related to the regime for placing nutritional supplements on the market and the implementation of the new Food Act.

By Tsvetelina Dimitrova, Attorney at Law, and Aleksandar Leshev, Jurisconsult, Georgiev, Todorov & Co.

CMS has advised OTP Bank, DSK Bank, and Eurobank on the EUR 110 million refinancing of the Business Park Sofia with Arco Capital Corporation. Reed Smith and Wolf Theiss advised Arco Capital on the transaction, which was signed on July 8 and closed on July 31, 2020.

According to CMS, “Business Park Sofia operates the largest office building complex in Bulgaria (16 buildings and more than 200,000 square meters built-up area), one of the most prominent locations for hosting international companies in the CEE.”

CMS’s team included Sofia-based Partner Dimitar Zwiatkow, Senior Associate Ivan Gergov, and Associates Marin Drinov and Marin Sarafov, as well as Belgrade-based Partner Milica Popovic.

Reed Smith’s team was led by Partner Leon Stephenson.

Wolf Theiss’ team was led by Partner Katerina Kraeva and included Associates Konstantin Altandzhiyski and Nikiolay Gergov.

Schoenherr is reporting that the United Group’s EUR 1.2 billion acquisition of Vivacom (Bulgarian Telecommunications Company EAD), the largest telecom operator in Bulgaria — the deal that was signed in November 2019 and won CEE Legal Matters’ 2019 Deal of the Year for Bulgaria — has closed. Paul, Weiss, Rifkind, Wharton & Garrison acted as lead English counsel to the United Group, while CMS and Kambourov & Partners were, respectively, English and Bulgarian counsel to the sellers.

“Signed in November 2019,” Schoenherr reports, “this was the largest deal in Bulgaria in 2019 both in terms of value and size of the assets. The deal received competition approval from the European Commission on April 7, 2020. Schoenherr’s work included legal due diligence review of Vivacom and advising on the Bulgarian aspects of the deal structuring, the negotiations, and the offering memorandum related to the financing.”

More information about the deal can be found in an interview about it that appeared in the May 2020 issue of the CEE Legal Matters magazine, and here.

Editor’s Note: After this article was published CMS and Kambourov & Partners confirmed their involvement in the deal. CMS’s team was led by London-based Partner Eva Talmacsi and included Bucharest-based Consultant David Cranfield and Associate Bogdan Buta, Budapest-based Of Counsel Eszter Torok and Senior Associate Szilvia Kabacs, and London-based Partners Caroline Hobson, Jonathan Warne, Tim Sales, and Anna Burchner, Associates John Kontogeorges and Tom Sandeman, and Trainee Liviu Giuran.

Оn 10 July, 2020, just over two years after Bulgaria formally announced its intention to join the Exchange Rate Mechanism II (ERM II) and the Banking Union, the European Central Bank (ECB) and the Bulgarian National Bank (BNB) announced two very important decisions:

1. The inclusion of the Bulgarian lev in the ERM II, making Bulgaria, together with Denmark and Croatia, one of the three ERM II participants that is not part of the Eurozone (the ERM II Agreement); and
2. The establishment of close cooperation between the ECB and the BNB, triggering the process of Bulgaria’s accession to the Banking Union (i.e. Bulgaria’s accession to the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM)) (the Cooperation Decision).

Following the introduction of various COVID-19 related measures and most notably after the publication of the EC’s 2020 Convergence Report many had speculated that the two decisions would be postponed. However, not meeting in full the convergence criteria for the euro area does not preclude Bulgaria from joining the ERM II.

The ERM II Agreement set the central rate of the Bulgarian lev to BGN 1.95583  for 1 Euro. This is a preservation of the pre-existing exchange rate as defined in Bulgarian law. The new requirement, which stems from EMR II membership itself is that this central rate must be maintained within the standard ERM II fluctuation band of plus or minus 15 percent. 

Maintaining the central rate within the standard fluctuation band should not be a problem, as the ERM II Agreement also notes that Bulgaria joins the exchange rate mechanism with its preexisting currency board arrangement in place (dating back to 1997 and at the time providing for a peg to the German mark), without making any changes to its framework. Furthermore, the ECB and the BNB announced the so-called “compulsory intervention rates” – i.e. the agreed fluctuation limits of the central rate (upper and lower rate), for the purposes of which the so-called automatic intervention would be triggered. Thus, when the upper rate of BGN 2.24920 for 1 euro or the lower rate of 1.66246 BGN for 1 euro is reached, the ECB and the BNB can resort to the “automatic intervention”, a supportive instrument used for the purposes of stabilizing exchange rates. For example, a “very short-term financial facility” can be established, under which the BNB and the ECB mutually create “financial facilities” for each other for an initial period of maximum three months, where each of the central banks spot sales or purchases the corresponding currency.

The decision to include Bulgaria in ERM II is based, inter alia, on the successful fulfillment of the commitments made by the Bulgarian authorities in relation to the ERM II and the Banking Union, which were communicated as part of the submission of the formal notification of intention for joining them. Nevertheless, the ERM II Agreement is accompanied by a number of other post-entry commitments made by Bulgaria with a view to preserving the economic and financial stability and to achieve the aforementioned economic convergence. These post-entry commitments pertain to a number of measures in the area of: (1) the non-banking financial sector and the strengthening of their regulatory and supervisory regimes; (2) the state-owned enterprises and the effective implementation of the Public Enterprises Act; (3) the insolvency framework, providing for a number of legal and organizational changes; and (4) the strengthening of the anti-money laundering framework, by increasing the powers of the supervisors and introducing a number of other measures related to the identification and management of money laundering risks.

It remains to be seen what the specific legislative changes will be, but the Bulgarian financial sector will certainly undergo a number of changes flowing from the applicable requirements in the field of the aforementioned four areas.

At the same time, the banking sector will also undergo a number of other changes in the areas of banking supervision and the recovery and resolution of credit institutions. 

On one hand, with the entry of the Cooperation Decision into force, the anticipated date of which is October 1, 2020, Bulgaria will become part of the Banking Union and a member of the SSM. Thus, the amendments to the Bulgarian Credit Institutions Act (CIA) will also come into force, according to which the BNB should comply with all of ECB’s guidelines and requests and take the necessary measures to implement the ECB’s legal acts. In this context, the powers of the BNB to impose administrative sanctions for violations of both the CIA and a number of directly applicable EU acts (including their implementing acts) will also increase.

This means that, starting from October 1, 2020, and fallowing the completion of the significance assessment process, the ECB will become responsible for the direct supervision of Bulgaria’s significant credit institutions. To date, none of the banks in Bulgaria is considered to meet the materiality criteria as set out in the SSM Regulation (Regulation 1024/2013) and the SSM Framework Regulation (Regulation 468/2014), namely:

1. Size: the total value of its assets exceeds €30 billion; or
2. Economic importance: for the specific country (e.g. possibly the fourth largest bank (see below) or the EU economy as a whole; or
3. Cross-border activities: the total value of its assets exceeds €5 billion and the ratio of its cross-border assets/liabilities in more than one other participating Member State to its total assets/liabilities is above 20%; or
4. Direct public financial assistance: it has requested or received funding from the European Stability Mechanism or the European Financial Stability Facility

The significance status is reviewed annually and it affects not only whether a bank will come under the ECB’s direct supervision but also the amount of the annual supervisory fee, the introduction of which will also be a significant change for Bulgarian banks. Irrespective of whether the significance status criteria is met, however, the ECB also assumes the direct supervision of the three most significant banks in each of the member states, that is either an Eurozone Member State or a member state with which the ECB has established close cooperation.

Thus, following the completion of the initial significance assessment, up to three of the Bulgarian banks will fall under the direct supervision of the ECB. These banks will also have to take into account a number of new developments in the ongoing supervisory procedures, such as the on-site and off-site inspections that are carried out by the ECB. It is expected that at least two of these three banks are part of banking groups that have long been under the supervision of the ECB.

The new supervisory procedures will also affect all other banks, as the ECB is also responsible for the oversight of less significant credit institutions (i.e. those remaining under the direct supervision of the BNB), as well as for all common procedures for all supervised entities. For example, the SSM Framework Regulation stipulates that the BNB should also be given the powers to conduct inspections (including those involving ECB staff) and to issue reports with findings that are binding on banks (including those that potentially affect capital requirements).

On the other hand, the Banking Union membership also means that from 1 October, 2020, Bulgaria will join the SRM. Therefore, banks that will come under the direct supervision of the ECB will also be subject to the direct supervision of the Single Resolution Board (SRB). In its Baking Union resolution authority role, the SRB decides on the resolution of all banks under its direct supervision, as well as all cross-border banking groups (i.e. even if a Bulgarian bank is not subject to the direct supervision of the SRB (e.g. the fourth or subsequent largest bank), it will be subject to indirect supervision by the SRB, if it is part of an EU banking group, where the group is subject to direct SRB supervision). 

Similar to ECB’s role in the SSM, the SRB participates, as an observer, in the restructuring of the less significant institutions, which remain under the direct supervision of the BNB (in its role as national resolution authority). In this context, it is safe to assume that a number of other legal changes will follow, given that the SRB is also responsible for establishing standard rules and procedures for the resolution of entities, some of which are yet to be introduced by the BNB.

Last but not least, the SRM includes the Single Restructuring Fund (SRF), which should be used for resolving insolvent banks, with the aim of minimizing costs for taxpayers and the real economy. The SRF is still in the process of being set-up (the transition period is planned to end in 2023), and its aggregate amount is estimated at about 55 billion euros or at least 1% of the amount of guaranteed deposits of all licensed credit institutions within the Banking Union. 

This means in practice that certain Bulgarian banks (and all investment firms and financial institutions covered by the consolidated supervision of the parent undertaking carried out by the ECB) will have to pay contributions to the SRF. The amount of individual contributions is calculated in proportion to the amount of the bank’s liabilities in relation to the total liabilities of all licensed credit institutions in the Banking Union, excluding equity and guaranteed deposits. The contributions are then risk-weighted, but even if adjusted there is no hypothesis in which the contribution is equal to zero.

In a recapitulation, the ERM II Agreement and the Banking Union membership do mark a new page in Bulgaria’s EU integration, which in turn would lead to a number of legal changes that will affect the entire financial sector and will require extensive revisions of the procedures, policies and systems of both the banking and non-banking financial sectors.

By Kristina Dimitrova, Associate, and Nikolay Bebov, Managing Partner, Tsvetkova Bebov Komarevski

Separate teams from Tsvetkova Bebov Komarevski have advised both EnduroSat and Freigeist Capital on the latter’s investment into the former. Lacore Rechtsanwalte was German counsel to Freigeist Capital. 

According to TBK, “Freigeist Capital is a privately-owned investment firm that funds and builds companies creating cutting edge technologies. EnduroSat is one of the fastest-growing space companies, providing solutions for the global space market. The company designs, builds, and operates class-leading NanoSats for a range of commercial, exploration and science missions. They focus on inter-satellite connectivity and space data applications. The investment will help EnduroSat to unleash next-generation NanoSat services and entire mission solutions.”

Tsvetkova Bebov Komarevski’s team included Partner Venelin Dimitrov, Managing Associate Damyan Leshev, Senior Associate Dimitar Grozdanov, and Associate Petar Ivanov.

Boyanov & Co has successfully represented Organic Land Corporation EOOD, a Bulgarian subsidiary of Tradin Organic B.V., in litigation against an unidentified company operating in the agricultural business. 

According to Boyanov & Co, “the complex case, involving an interpretation of legislative provisions and application of the principles of the burden of proof and the probative value of documents, ended by a decision entirely favoring the position of [our] client.”

Boyanov & Co’s team included Partner Kina Chuturkova and Senior Associate Mihail Vishanin.