Advice when you need it most
With changes in the Commercial Law the minimal required share-capital to register a limited liability company in Bulgaria has been lowered to 1 Euro. The changes have been published in the State Gazette today and shall be in full force and effect as of 20 October 2009. Before the change the minimal amount required was almost 2600 Euros.
Dnevnik Daily
A new public institution will be set up in Bulgaria to manage and control amounts from all real estate transactions in an effort to bring them into the light and crack down on money laundering in the industry.
The new Deposit and Consignation Fund will be inaugurated by special legislation hammered out by the Ministry of Justice and the Notary Chamber.
The institution will be a state-owned enterprise and not a bank and will be modelled on a system already operational in France, said Notary Chamber head Dimitar Tanev. Under the scheme, the sellers will receive their money with a short delay but it will ensure transparency and security to all loyal parties as well as central and local authorities.
The system will see buyers transfer the money into the fund where it will spent two or three weeks before it is passed on the seller. The period will be used to check up the resource’ origin and charge all dues of the government and municipalities. It is expected to put an end to sham transactions and block cash payment as money will have to be put into the fund by a bank transfer, Tanev explained.
Market values in the different regions will be determined by experts and updated every three or four months. The price will serve as a reference point for actual property transactions to make sure money laundering and tax evasion is prevented. A difference within 10-15% could be assumed thanks to property improvements but current differences topping out at between 300% and 1000% will be impossible, Tanev said.
The Notary Chamber discussed the proposal with representatives of the European anti-fraud office OLAF, who said the project will indicate the country’s commitment to combat abuse and money laundering.
The Bulgarian banks have introduced tougher rules for lending money after two days of stopping crediting. Now they lend money only for the purchase of properties which can be easily sold if reposessed. Families with total income under 1500 levs per month can not take a mortgage to purchase an apartment in one of the larger cities. To such families the banks offer only small size credits with monthly instalments not exceeding 50 Euros. While in the past the banks were satisfied if the monthly repayment instalments were up to 50% of the total income of a family, now they restrict the instalments to not more than 39% of the monthly income. The average mortgage interest is 8.2% per annum and the average instalment is 360 Euros per month, which is an increas of 40 Euros for the last six moths.
All repossessed apartments which are sold by the judicial executors are already publicly announced in the regional courts. This practice came into effect with the launch of new Civil Procedures Code on 1 March 2008. Before that all judicial executors used to hide these sales as usually these properties have been sold for very cheap and well informed buyers used to acquire them.
The lists in Sofia are published in the family department of the Sofia Regional Court, which is situated in the building of the former head quarters of the Building Corps on Tsar Boris III Blvd. Because of the court holidays in August, the building was closed, but now it has re-opened doors. Already there are companies which purchase apartments at these sales at a much lower price and then re-sell them.
The banks wait for a few months for clients who are late with their mortgage instalments. After that they sale the repossessed property, and if the sale price exceeds the amount of the debt, according to the law, the former owner receives the difference. According to the Chairman of the Private Judicial Executors’ Chamber, “the problem is the sale price of a repossessed property, because it has to be 50% of the tax evaluation as per the new Civil Procedures Code and it is rather low.” That is why the judicial executors are forced to give higher evaluations of the prices of repossessed properties.
The biggest Bulgarian legal practices have made a claim at the Commission for the Protection of the Competition against 8 foreign legal firms operating in Bulgaria. The Bulgarian legal firms are unhappy that their foreign competitors are registered only as companies but not according to the Law for the Lawyers and thus avoid many requirements. This puts the Bulgarian lawyers in a position of disadvantage. Batkov, Stoev, Botev and partners, Boyanov and Co, Georgiev, Todorov and Co, Penkov, Markov and partners insist that the commission imposes sanctions for disloyal competition on DLA Piper, CMS Cameron McKenna, CMS Reich-Rohrwig Hainz, Wolf Theiss и CHSH Cerha Hempel Spiegelfeld Hlawati. According to the foreign legal firms, this is just an attempt by their Bulgarian competition to limit their activities in the country. According to the Bulgarian lawyers this is not true, and the law is new and it complies with the EU directives. Four of the foreign legal practices with offices in Bulgaria do not carry out legal work at all which is a precedent. The commission must come with a ruling in 14 days.