CEE Legal Matters

Category: Bulgaria

  • Vassilev & Partners Launches Insolvency Solutions Practice

    Vassilev & Partners Launches Insolvency Solutions Practice

    Vassilev & Partners has expanded its services by providing advice to companies in financial difficulty, as well as those that have been declared insolvent and those experiencing difficulty collecting receivables from insolvent debtors.

    Attorney Konstantin Vassilev was approved as an insolvency administrator by the Bulgarian Ministry of Justice and has been included in the list of the persons who may be appointed as insolvency administrators in insolvency proceedings.

    According to Vassilev & Partners, the firm now assists with the winding-up and liquidation of trade companies and non-profit organizations, the opening of insolvency proceedings of insolvent entities, restoring the assets of an insolvent estate, lodging of claims against deals that decrease the insolvent estate, restructuring insolvent enterprises, and the encashment of assets.

  • Tsvetkova Bebov Komarevski Advises Deutsche Bahn on Acquisition of Assets of VRZ Karlovo

    Tsvetkova Bebov Komarevski Advises Deutsche Bahn on Acquisition of Assets of VRZ Karlovo

    Tsvetkova Bebov Komarevski has advised Deutsche Bahn Bulgarian subsidiary DB Cargo Bulgaria EOOD, a licensed Bulgarian railway cargo operator, on the acquisition of assets of the insolvent railway rolling stock repair company VRZ Karlovo.

    The Tsvetkova Bebov Komarevski team included Partner Ilya Komarevski, Counsel Mariana Velichkova, and Senior Associate Dimitar Grozdanov.

  • Kambourov & Partners Advises on Sale of Petroceltic Bulgaria EOOD

    Kambourov & Partners Advises on Sale of Petroceltic Bulgaria EOOD

    Kambourov & Partners has assisted Petroceltic International PLC with its sale of Petroceltic Bulgaria EOOD, the company’s Bulgarian subsidiary, to an unidentified third party.

    Petroceltic International PLC has a 100% operating interest in three operating gas fields and one field under development in the Galata Exploration Block, located in shallow water in the Bulgarian sector of the Black Sea, which, according to Kambourov & Partners, are the biggest offshore gas reserves in Bulgaria. 

    Petroceltic is a publicly-listed oil and gas exploration and production company headquartered in Dublin, with assets in Algeria, Bulgaria, Egypt, and Italy. Petroceltic’s shares are listed on the Alternative Investment Market of the London Stock Exchange and on the Irish Enterprise Exchange of the Irish Stock Exchange.

    The Kambourov & Partners team was led by Senior Associate Ivo Alexandrov. 

    Kambourov & Partners did not reply to our inquiries about the deal.

  • CMS Successful for Eco Energy Management on Regulatory Decision Repeal

    CMS Successful for Eco Energy Management on Regulatory Decision Repeal

    CMS Sofia has successfully convinced Bulgaria’s Supreme Administrative Court to repeal a regulatory decision by the Bulgarian Energy and Water Regulatory Commission in favor of biomass producer Eco Energy Management Ltd.

    Following two years of litigation, the Supreme Administrative Court issued its final decision repealing the refusal of Energy and Water Regulatory Commission (EWRC) to review the application of the electricity producer for amendment of the Feed-In Tariff (FiT). 

    According to CMS, this is a landmark decision for the court, as in has previously held that the EWRC is not obliged to review applications of electricity companies. The EWRC is expected to undertake the necessary actions and review the application for price amendment.

    The CMS team consisted of Partner Kostadin Sirleshtov and Senior Associate Maria Lazarova. 

  • CMS Wins Regulatory Case for CEZ Electro Bulgaria

    CMS Wins Regulatory Case for CEZ Electro Bulgaria

    CMS Sofia has successfully represented CEZ in an administrative procedure against a regulatory decision from the Energy and Water Regulatory Commission on set prices for electricity sales in Bulgaria.

    On July 1, 2017, Bulgaria’s Energy and Water Regulatory Commission (EWRC) set the prices at which CEZ sells electricity in Bulgaria. 

    According to CMS, the first instant court partially repealed the decision of the EWRC  in regard to the determined price for the “supply of electricity from the end supplier.” The court upheld that the amount approved by the EWRC for the component for the activity was not grounded and would not recover CEZ’s operative expenses. Hence, the component as one of the price elements was found to be unlawfully determined by the regulator. The EWRC appealed the decision. 

    Recently, the Supreme Administrative Court issued a final decision upholding the decision of the first instance court. EWRC should now comply with the decision of the court and the instructions contained therein.

    The CMS team included Partner Kostadin Sirleshtov and Senior Associate Maria Lazarova.

  • Boyanov & Co., Polenak, NNDKP, and Forlexa Advise on Acquisition of Teracomm by Link Mobility Group AS Norway

    Boyanov & Co., Polenak, NNDKP, and Forlexa Advise on Acquisition of Teracomm by Link Mobility Group AS Norway

    Boyanov & Co., Polenak, and NNDKP – three firms from the SEE Legal alliance – have advised Link Mobility Group AS Norway on the acquisition of Terracomm, a provider of B2C messaging services, from Allterco, a Bulgarian listed company. Allterco was advised by Forlexa.

    Competition clearance is needed before the acquisition becomes final.

    The Boyanov & Co. team was led by Partners Damian Simeonov and Nikolay Zisov. The Polenak team included Partners Tatjana Shishkovska and Metodija Velkov, and the NNDKP team included Partner Gabriela Cacerea and Managing Associate Madalina Panca.

    The Forlexa team was lead by Partner Trayan Ivanov.

  • The Buzz in Bulgaria: Interview with Alexandra Doytchinova of Schoenherr

    The Buzz in Bulgaria: Interview with Alexandra Doytchinova of Schoenherr

    Schoenherr Sofia Managing Partner Alexandra Doytchinova starts by talking about what’s happening — or rather, what’s not happening — in the Bulgarian legal market. “Nothing has moved,” she says, “which is not surprising, because Bulgaria is very conservative in this respect. Firms splitting and merging happens once in five years, if at all. So there’s nothing happening there on this front.”

    In terms of business, however, things seem to be moving along so far in 2019. She reports that her firm worked on several major deals so far this year, including the Societe Generale Bulgaria sale that closed in January and the acquisitions by Ireland’s Smurfit Kappa of BalkanPack, a corrugated board and packaging manufacturer, and of Vitavel, another Bulgarian manufacturer of corrugated board and corrugated board packaging. She describes those as “huge transactions for us.” Still, she notes that while “we are satisfied with the first half of the year, we’re completing matters which actually started last year. We’re fairly busy — we can’t complain about utilization — but it’s more finishing existing projects and work on commodity deals than starting new major ones.” She says, “there will be follow-up work on the deals we’ve worked on, so we’re confident we’ll be busy enough, but in terms of new really big transactions, the market is not too optimistic, at least from the current perspective.”

    Of course, there are still some major projects happening. “The concession of the Bulgaria airport, of course, is huge,” Doytchinova says. “That’s the biggest infrastructure project currently on the market.” She cites reports that there are five bidders in the running, with two in particular considered to be ahead. The result of the process is expected for June, she says, noting that “the decisive criteria will be anyway on the commercial side, including envisaged investments — not legal.”

    Doytchinova reports that “another thing that’s a bit of a painful process for various reasons, including political, is the sale of CEZ Bulgaria’s assets.” Last year’s SPA between CEZ and Bulgaria-based Inercom for reportedly approximately EUR 320 million was blocked by Bulgaria’s Commission for Protection of Competition, which concluded that the deal could lead to the establishment of a dominant position. Although Inercom’s appeal is still under consideration, CEZ has reportedly now terminated the SPA (citing “unlawful obstructions” by Bulgaria regarding the deal) and is now conducting exclusive talks with another investor, EuroHold Bulgaria— a Bulgarian listed investment group. There’s also been some interest from India Power.

    Doytchinova also refers to the continued reports that the Bulgarian Telecommunications Company (operating as Vivacom) will be for sale still this year and cites media coverage that the shareholders have hired investment bank Lazard to structure the sales process. According to her, “that’s basically the next biggest thing for the market.”

    Finally, the Schoenherr Sofia Managing Partner turns to the subject of new Bulgarian regulations related to EU’s anti-money laundering directives that require Bulgarian companies and formations to register (and so make public) their ultimate beneficial owner(s) with the Bulgarian commercial register. The new regulations are creating a huge amount of paperwork, she says, “because Bulgaria is being ‘the best student in class,’ and is requiring loads and loads of information obtained from clients, and hundreds of pages to be translated and filed with the register.” According to Doytchinova, “especially with larger clients it’s a bit of a saga, as you have to list not only the ultimate owner(s), but also all the interim entities holding indirect control and their complete data, including all their representatives set out by name, their respective citizenship, addresses, and so on.” As a result, she says, “this is going to be the predominant work of corporate departments in Bulgarian law firms for the next two weeks, because the deadline is May 31.”   

  • Liberalization of the Bulgarian Energy Market: Process in Progress

    The full liberalization of the Bulgarian Energy market has been the main focus in the sector for the last 18 months and continues to be the government’s objective.

    Step one of this liberalization was the introduction of renewable energy projects and co-generators with installed capacity of 4 MW and above 4 MW to the free market as part of the regulated market through long-term Power Purchase Agreements at preferential prices (PPAs), obliging producers to sell electricity on the Independent Bulgarian Energy Exchange (IBEX) solely or through their balancing group coordinator. Co-generators were the pioneers starting on July 1, 2018, but the RES producers enjoyed a transition period until January 1, 2019. As of the beginning of 2019, all affected producers (147 companies in total) have become active players on the Energy market in Bulgaria. 

    The main challenge facing lawmakers was to secure the already-undertaken engagement by the State for the financial stability of the investors and the repayment of the investments in accordance with the approved business plans and the statutorily-determined rate of return throughout the years, which varied between seven and nine percent. After wide-ranging public debates and numerous conferences, roundtables, and expert meetings, the solution found was to replace the PPAs with new Contracts for Compensations with Premiums (CfPs) with the State Energy Safety Security Fund (the “Fund”). The changes to the Energy Act and the Energy from Renewable Sources Act divided the income for the producers into two components: (i) from the sale of electricity on the free market, and (ii) a premium determined annually by the Energy and Water Regulatory Commission (the “Commission”). Thus, the financial burden for the Energy market from participating RES producers and co-generators was partially transferred to the producers.

    It is important to emphasize that the launch of the new selling mechanism has already faced difficulties directly affecting some of the solar, wind, and hydro power plants. At the end of February 2019, the Fund ceased payment of the said premium for the energy projects, as no net specific production of electricity had been determined by the Commission. This situation is expected to be resolved quickly, as otherwise the stability of the sector could be jeopardized.   

    Next Steps and Development of the Energy Market

    As part of the Bulgarian government’s long-term plan to achieve full liberalization, a new Bill to the Energy Act was announced on March 22, 2019, requiring those RES producers with installed capacity between 1 MW and 4 MW having PPAs to participate in the free market as of July 1, 2019. This is seen as the natural next step in the liberalization process and is welcomed by the various stakeholders in the industry. More than 620 new companies, with a total installed capacity of over 1,360 MW, are expected on the IBEX. In comparison to 2018, when a transition period was provided to the RES producers, this time around the government is unlikely to apply such an approach, in spite of the numerous and intense requests from the affected producers and branch organizations. 

    Another obstacle for the development of the Bulgarian Energy market is the import and export taxes for transmission and access currently imposed on cross-border energy deals. Their removal – which is also part of the new Bill – is a crucial and long-awaited improvement for the entire Energy sector. This is seen as a step towards the full liberalization of the Bulgarian Energy market and its harmonization with neighboring markets, as, with this financial burden removed, its capacity can rapidly expand. 

    Another vital step in the development process of the Energy market currently under public discussion is the mandatory participation of industrial consumers in the free market. It is not yet clear when this will be implemented, but it is a crucial component in strengthening the connection between the demand and the supply chain, securing liquidity and transparency in the Bulgarian Energy market. 

    The remaining challenges to full liberalization are numerous, but the Bulgarian government has taken many steps to stimulate competition and free trade, while the specific effects of the new mechanisms on the Energy market will be subject to a detailed analysis in the next few months. 

    By Dobrina Pavlova, Head of Energy and Capital Markets, Gugushev & Partners Law Office 

    This Article was originally published in Issue 6.4 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

  • Bulgaria: Legal Alert for Approaching Deadline of UBO Registration

    Bulgarian anti-money laundering law requires that companies and other entities having their seat in Bulgaria register their ultimate beneficial owner(s). The registration is mandatory, and the deadline for registration is approaching. These obligations arise from the Bulgarian Anti-Money-Laundering Measures Act (2018) transposing Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 (4th AML Directive) into national law.

    Who does this concern?

    • Entities registered in Bulgaria, e.g. limited liability companies, joint stock companies, branches of foreign legal entities, foundations, associations, consortia in the form of civil companies.

    Where to register?

    • The Bulgarian Commercial Register or in certain cases,
    • The BULSTAT Register.

    What data must be registered?

    • Registration of the ultimate beneficial owner(s) of the Bulgarian entity or formation. 
    • Disclosure of all legal entities that directly or indirectly exercise control in the Bulgarian entity.
    • Disclosure of the management of such controlling entities and certain relevant data.
    • Registration of a local contact person if the Bulgarian entity or formation does not have a legal representative permanently residing in Bulgaria.

    What data comes into the public domain?

    • For the time being all of the above data on the ultimate beneficial owner(s); the legal entities exercising control; and the data on their management; and the local contact person.

    What is the filing deadline?

    • 31 May 2019.

    What form is required?

    • Sample form declaration populated with the data which is subject to registration, signed by the representative(s) of the Bulgarian entity with notarised signature(s).
    • The filing with the relevant register can be done electronically.

    What other documents are required?

    • Commercial/companies register excerpts for alllegal entities exercising control in the Bulgarian entity or formation, not older than six months, original(s) with an official/stamped translation into Bulgarian.
    • Power of attorney for the filing.
    • Notarised consent of the local contact person, if any appointed.
    • Others, depending on particularities of the case.

    What is the expected timeline for preparation of the filing?

    • At least two weeks, usually longer depending on the complexity of the corporate structure and the volume of documents to be collected and translated into Bulgarian.

    What are the fines in case of non-compliance?

    • Generally: approx. EUR 500 – EUR 5,000 for the first established incident of non-compliance.
    • Banks, insurers, leasing undertakings, investment intermediaries: approx. EUR 1,000 – EUR 10,000 for the first established incident of non-compliance. 
    • Fines may/will be imposed repeatedly on a monthly basis until the filing of the required data and documents is done.  

    What else?

    • Anti-money laundering laws contain complex and strict requirements, including obligations to prepare certain specific documents and establish internal processes. The requirements have been updated with effect from 11 May 2019 and vary depending on the specific type of business. We recommend obtaining legal guidance should you need more details.

    This is general communication to alert you to the approaching deadline for the registration of ultimate beneficial owners. This communication does not substitute legal advice in relation to the registration of ultimate beneficial owners and/or on the impact of anti-money laundering rules in general. The Schoenherr Sofia team remains available to provide such advice and respond to questions.

    By Stefana Tsekova, Partner, and Gergana Roussinova, Associate Schoenherr 

  • CPC Clears Domuschievi Brothers’ Acquisition of Nova TV

    In March 2019 the Commission for the Protection of Competition (CPC) cleared the acquisition of Nova Broadcasting Group AD (Nova TV) by Advance Media Group EAD, which is owned by the well-known Bulgarian businesspeople Kiril and Georgi Domuschievi. On this decision, Nova’s previous owner, Swedish entertainment company Modern Times Group (MTG), was finally able to sell the TV network and exit the Bulgarian market, after having been prohibited from doing so by the CPC in July 2018.

    Background

    Nova TV and its affiliate TV channels comprise the largest media conglomerate in Bulgaria, having a market share of approximately 40% in the TV distribution and advertising markets. In July 2018 the CPC issued an unprecedented decision prohibiting the investment group PPF, which is owned by Czech businessperson Petr Kellner, from purchasing the TV network.

    The decision was delivered after a detailed phase-two inquiry that lasted approximately two months. Nevertheless, there was a lot of criticism suggesting that the decision lacked valid economic arguments due to the fact that PPF had not participated in the relevant markets and had only a negligible presence in the e-commerce market, in which Nova TV had a presence of around 5%. This was the only market on which the activities of the two undertakings overlapped. Thus, it was not entirely clear how the CPC reached the conclusion that Nova TV’s acquisition would lead to a strengthening of PPF’s dominant position in the relevant market for the distribution of TV services and thus impede effective competition.

    Alongside the fact that it concerned a politically sensitive sector such as media, the rather unconvincing decision led to much speculation as to:

    • whether the CPC’s decision was entirely justified; and
    • who the eventual successor of MTG, as the owner of Nova TV, would be.

    In early 2019 it became clear that the entrepreneurial brothers Kiril and Georgi Domuschievi, who operate multiple businesses ranging from construction to football clubs, were the firm favourites to buy the network.

    No anti-competitive concerns

    In contrast with earlier CPC proceedings regarding the acquisition of Nova TV which took considerable time, in this case the proceedings were initiated on 6 March 2019 and the decision permitting the transaction was delivered approximately two weeks later.

    The CPC was adamant that Advance Media Group’s acquisition of Nova TV would not cause anti-competitive effects in the TV distribution marke because the two companies are not direct competitors; rather, they have a de facto vertical relationship (ie, Nova TV purchases TV content rights and Advance Media Group produces such rights).

    This is evidenced by the fact that Advance Media Group, through its subsidiary Football Media Group, is the exclusive producer and rights holder of the Bulgarian football league, the rights of which were bought in and have been broadcast by Nova TV’s sports channels since 2016. Further, even though these circumstances were mentioned and assessed in the decision, the CPC found no evidence of any anti-competitive concerns. In fact, the CPC established only a “partial overlap” between the activities of the participants in the concentration, which seemed unproblematic.

    Notably, partial overlap was one of the main reasons for rejecting PPF’s bid to acquire Nova TV in July 2018. Moreover, in the 2018 decision prohibiting the transaction, the CPC concluded that there were “significant entry barriers on the media markets”, including the licence to operate as a TV operator.

    However, in its recent decision, the CPC held that the media market has entry barriers, which may be overcome, and it is therefore accessible for new market participants. An important difference between the two decisions is that the 2018 analysis started with an assessment of Nova TV’s leading position in the media market and referred explicitly to its market shares in the relevant markets; alternatively, in the recent decision, Nova TV’s leading position was not discussed and the analysis focused only on the partial overlap.

    Many Bulgarian outlets believe that this decision has huge political significance. Ultimately, it remains to be seen how the Bulgarian market for the provision and distribution of TV services will shape up following this concentration.

    Co-authored by Rosen Manchev (Trainee, Schoenherr Bulgaria).

    By Galina Petkova, Attorney at Law Schoenherr