Банкеръ Weekly

Briefs

FALSE START THREATENS THE TRADE REGISTER

The debut of the new electronic company register scheduled for next autumn will probably be postponed by several months, the BANKER weekly learned. According to the Trade Register Act published by the Official Gazette at the end of April, the case files transfer
from the court to the Registration Agency
(which is part of the Ministry of Justice) should begin on October 1. A three-year transition period will start running on that day in which all dealers, co-operations and branches of foreign companies operating in Bulgaria should re-register. The members of the National Assembly voted the act after long protraction and considerable pressure from the missions of the IMF and the European Commission in the country. As it is known, Bulgaria took a commitment towards Washington and Brussels to make a new centralized electronic company register by the beginning of 2007. The register must gradually replace the currently operating one (which is on paper) at the regional courts.
Even those uneducated in the field of commercial law understand that complete chaos reigns the actual register. We should only mention the scandal exploded last week about Democrats for Strong Bulgaria's request to call back Sofia mayor Boyko Borissov because of... his involvement (according to information about the actual condition given by the court) in two companies. In turn, the general claimed he left these companies five years ago, but his move was never registered by the magistrates. Dozens of similar examples may be given here. During the last month when property declarations of ministers and their deputies were published in the INTERNET, a number of cases were discussed in which rulers claimed they were neither partners nor shareholders, but at the same time the register showed the opposite.
Not to mention the numerous repeated names of companies all over the country which should (at least according to the Commercial Act) be unique. For example, if we try to search in the DAXI data base a company called Georgi Georgiev Sole Trader, we find about 200 names in the entire country. In the past few years the regional courts in Haskovo and Rousse have each registered 13 Georgi Georgiev companies. In the company department of the Sofia City Court there are accounts of at least half a dozen limited liability companies called Svetlina.
But it seems that, as it often happens in Bulgaria, putting the company files in order
will come a little later
According to senior officials in the Ministry of Justice, the less than two months that remain until the official start of the new company register are extremely insufficient for its preparation. During this period the Registration Agency has to do a lot of work in order to undertake efficiently the new rights entrusted by the Trade Register Act.
Among the biggest obstacles in front of the compliance with the schedule set by the Parliament (October 1) there are the lack of buildings for the agency's territorial units and the lagging creation of the computer software. For example, no later than July 1 (about half a month ago) the Council of Ministers and the regional governors had to be ready with the solution of the problem with the register residences in Sofia and the country. The Registration Agency Director, Dimitar Tsvetanov, told the BANKER weekly that up to now his department had been given buildings in only four of the regional centres (of a total 28). It is still to be decided where the head-office of the department in Sofia will be located. At present, the headquarters of the agency are situated on the ninth floor of the building of the state-owned Information Service AD on Panayot Volov street.
Some hope was inspired by the news that Prime Minister Sergey Stanishev personally took up the solution of
the everyday problems
of the register. The order he issued in the beginning of July led to the establishment of an interdepartment working group of officers from the ministries of justice, regional development, and finance. Soon the experts will have to report about state-owned buildings or rooms in which the Registration Agency might settle.
Even more complicated seems the case with the timely completion of the information online system which is a premise for the normal functioning of the future register. Until now the system has been constructed by the Greek Intracom company, owned by the businessman Sokrates Kokkalis, with resources launched under the EU PHARE 2002 program. The problem is that the executor started working several summers ago when there wasn't even a draft of the Trade Register Act.
Even though the money has been absorbed
the software made must be adapted
to the new requirements. Of course, someone (most probably the budget) has to pay for it. Moreover, even if public procurement is announced immediately, it will take about two months at least. And that's the time left until the day the new system has to start operations.
In this case it would not come as a surprise if the judicial ministry or individual MPs provoke the voting of an amendment to the final regulations of the Trade Register Act. The amendment should stipulate a longer preparation period before the register starts working at full speed. The alternative is to follow the example of the National Revenue Agency which began to work in early January 2006, but was later adapting in course.
Despite the crucial lack of time, the Registration Agency is preparing to announce a competition for 120 clerks in the whole country, as well as 60 registration officials. They are required to have legal degree and at least three years of experience in the field of law. By appointing legally educated people, the agency is expected to clear up doubts that appeared during the discussion of the Trade Register Act in Parliament - that agency officers may not be able to
replace company judges
In fact, this problem should not be underestimated considering that it is those working in the Registration Agency that will control the conformity with the law of the facts declared for registration. Besides, they will appoint experts to assess the aport payments to the capital of joint-stock companies and liquidators to suspend the activities of a company.
Of course, it is not all so dramatic. According to unofficial information, the Ministry of Justice and the Ministry of Finance ended on July 12 their negotiations about the signing of a special agreement on information exchange. It will regulate the forwarding of information from Information Service AD whose principal is the financial ministry to the Registration Agency. In practice, even now the state-owned company through its Delphi unit is maintaining a kind of
a prototype of the future register
Besides, Information Service AD holds the key to a list of reserved corporate names. This is the information that is to be forwarded to the Registration Agency now.
The other positive sign is that the draft Regulation on Keeping, Preserving and Accessing the Trade Register has been prepared. A working copy of the document which is prepared with assistance from experts of the USAID was presented officially to the business branch organisations and the community of lawyers. One of the advantages of the future regulation is that it finally introduces
standardized forms
of applications through which company acts and facts will be registered and cancelled. Special forms are enclosed to the regulation for sole traders, collective and limited joint-stock companies, limited liability companies, joint-stock companies, co-operations and branches of foreign companies. There is also a standard for the order in which a company pledge will be registered, as well as the order in which the reorganisation of one or group of companies will be registered (i.e. takeover, merger or division).
It is explicitly written that applications to the register may be filed both on paper and electronically (for holders of electronic signature). According to lawyers, debatable points in the ordinance are the possibility to use copies of documents (and not the originals alone) when filing applications and the right for penal prosecution in case of declaring wrong data by a representative of the trader. In other words, if a lawyer moves for registration a forged protocol with a decision of the company's general meeting (even not suspecting that) he could be convicted of a crime.
Another controversial matter will be probably the stipulated order for reregistration of traders whose firms' names are the same. The transitional and final provisions of the draft read that the trader who is the first to register according to the new order (i.e. after the law on the trade register has entered into effect) will have the privilege to keep his firms' name. That practically means there will be silent competition between all companies with one and the same names. Those who insist on retaining their name but have been left behind will have the opportunity to add the name of the town of registration to the firm's name. If the names are the same again, a digit showing the order of registration will be added to the name of the respective regional centre.
Having in mind the problems regarding the new firms' register, the debut might turn out to be a false start.

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