BOARD OF DIRECTORS' MONOPOLY TO BE ELIMINATED
Sevdalin Bozhikov, Deputy Minister of Justice, in front of the BANKER weeklyMr. Bozhikov, it seems that the panel of experts working on the amendments to the Commercial Code has not approached very radically the issue of speeding up bankruptcies. Why?- Over the last months we came to the stance that changes in the insolvency procedures are necessary but they should be in compliance with the effective legislation and international practice. We agreed that certain mechanisms, which are Achilles' heel of the law, should be perfected. For example, there are problems with the cashing of debtors' assets, because the Commercial Code refers the matter to the Code of Civil Procedure, which is in force since 1951 and is too outdated. Therefore, the cashing of assets emerged as one of the weaknessess of insolvency proceedings which are delayed and in the meantime the assets are depreciated, possibilities for their ransacking are created, they lose their commercial look, etc.The other problem concerns the trustees in bankruptcy. Their violations are in two directions - personal attitude towards certian creditors and malpractice connected with the duration of insolvency procedures.The third weakness concerns the rehabilitation process. Under the effective regulations, if the creditors accept a rehab plan and it is approved by court, insolvency procedures are cancelled. Thereafter the debtor becomes legally qualified and if he is unconscientious (such cases are not rare) could sell out the assets. Thus, later on when the creditors demand renewal of the insolvency proceedings, there would be nothing left. Therefore, we decided there should be a supervisory body, chosen by the creditors, to control the processes after the approval of a rehabilitation plan. This is one of the major problems, discussed in the rehabilitation of Balkan Airlines. The trustees in bankruptcy filed claims for restoring to the commercial company's patrimony real estates, which had been one way or another transferred to third persons. If the rehab plan is approved and the rights of the management bodies are restored, these claims will be most probably withdrawn. There is no guarantee that the company's valuable assets won't be sold out, as a result of which the creditors' receivables would become useless. Therefore, the debtor whose rights are restored, should be liable to control. Where are trustees in bankruptcy most often confused?- Quite often a trustee in bankruptcy does not hurry to cancel the insolvency proceedings, even when almost all assets of the enterprise have already been cashed down. There are also cases when the trustee in bankruptcy undertakes nothing, while the debtor is interested in stopping the insolvency proceedures by remitting the amount of his liabilities. And then the trustee in bankruptcy who has done nothing for years, shows up demanding remuneration for past time. I'll illustrate this by a concrete example. There was a lawsuit in the Plovdiv Regional Court since 1994. In 2002 the debtor paid off all his liabilities after negotiations with the two creditors and the due interest was written off afterwards. Then it became known that the debtors's liabilities to the creditors were worth some BGN6,500, while the trustee in bankruptcy demanded a remuneration of BGN18,000 for that period when he had done nothing at all.Shall banks be able to act as trustees in bankruptcy? Such an idea was voiced by Deputy Minister of the Economy Kaloyan Ninov.- There is no obstacle because the banks are juristic persons. The question is who will be nominated by the creditors as a permanent trustee in bankruptcy. Of course, there is one condition - the bank should not have receivables from that debtor. An impression has been created that the amendments become imperative because of Balkan Airlines, whose meeting of creditors is scheduled for October. Is there still a possibility for arranging the matter through a debt-for-equity swap, so that the State regains the airline?- I would like to stress that the changes in the insolvency procedures are in no way connected with Balkan, nor are they aimed to settle that case. Regarding the stance of the Ministry of Economy - such an operation does not at all concern the effective provisions in the Commercial Code. There are procedures for effecting such a deal, stipulated in the Code of Taxation Procedures. There are also things, concerning the Commercial Code, but they are rather connected with the rights of the meeting of creditors and the general meeting of shareholders.Why did it become necessary to change the regulations for management of companies?- The changes in corporative management of joint-stock companies have been necessitated by the discontent of both foreign investors and Bulgarian shareholders. The latter are victims of inadequacies in the effective regime, guaranteeing the rights of shareholders and the obligations of companies' managerial teams.Isn't your proposal for adding items on the agenda a little dangerous? For example, a decision for liquidation of a company could be voted on the proposal of a small shareholder at a meeting, which most of the sharehodlers have not attended at all.- Such an item on the agenda does not necessarily mean that the decision would be voted. The idea is that shareholders who have been owners of more than 5% of a company's capital for over three months could include additional items in the agenda after its publication. For the purpose, a list of the items to be included in the agenda should be filed to the commercial register not later than 14 days prior the general meeting of shareholders. And by the following working day at the latest the court is to decide if these items are really important. This creates an opportunity to eliminate the Board of Directors' monopoly. You have stipulated that the general meeting of shareholders only could allow to dispose of a considerable part of the assets. How is the limit set?- This issue should be regulated in the company's articles of association. BGN50,000 is one thing for a small firm, and in another this is the cost of the CEO's car. The shareholders should be entitled to decide what portion of the assets could be sold out. It was not forbidden until now to include such a limit the companies' articles of association, but problems arose when the interested directors asked on what grounds such restrictions were set. And we could not quote a legislative argument. There will be such a legal opportunity in the future, which the shareholders could use.