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McGregor & Partners Newsletter – June / July 2016

2016 June/July, Issue 5

Highlights in Bulgarian legislation and court practise

Energy companies must disclose information to FSC

According to the latest changes of the Public Offering of Securities Act (POSA) of June 2016 the companies, whose activity is regulated by the Energy Act, should disclose certain information to the Financial Supervision Commission and to the public. The amendments affect energy companies (including renewable energy producers), which meet two of the following three criteria: (1) average number of personnel in the year – equal and more than 10 persons; (2) book value of assets as of 31 December – equal and more than BGN 700 000; (3) net income from sales in the year – equal and more than BGN 300 000.

The companies, which meet the above-mentioned criteria, must submit to the Financial Supervision Commission (FSC) a number of documents and information provided in POSA and Ordinance № 2 from 17.09.2003 on the prospectuses for the public offering and admission to trading on a regulated market of securities and disclosure of information by public companies and other issuers of securities (Ordinance № 2). The first set of documents and information, including an interim financial report, covering the first 6 months of the financial year, should be filed with the Financial Supervision Commission by 30 July 2016. We note that the Financial Supervision Commission has published on its website a bill for Ordinance amending and supplementing Ordinance № 2. Such changes of Ordinance № 2 have not been promulgated in State gazette yet. Hence, they will become effective after three days as of the promulgation, unless the Ordinance provides another term. Until the entry into force of the changes, companies should comply with the current Ordinance № 2.

The disclosure of information to FSC and the public seems to be a quite onerous requirement for energy companies, which are not publicly traded. Nevertheless, those who meet the above-mentioned criteria are advised to comply with the new rules within the statutory terms, as severe sanctions are provided in case of breach of such obligations.

Damages from illegal regulations cannot be sought from the State and the municipalitiesOn June 27, 2016 the Supreme Administrative Court with its Interpretative Decision held that citizens and legal entities are not entitled to seek compensation under the Law on the liability of the State and municipalities for damages (LLSMD) for the damages caused as effect of illegal decrees, ordinances, regulations or tariffs.

The decision was issued due to the contradictory case law on the question: Should the damage caused to citizens and legal entities related to the implementation/ effect/ of a by-law in the period before it was cancelled as unlawful or declared void be subject to compensation pursuant to LLSMD?

The main reasoning of the decisive panel is as follows: the decision by virtue of which a by-law is cancelled as unlawful or is declared void, has no retroactive effect under the Administrative Procedure Code. Until its cancellation the by-law produces its legal effects and the existence of these legal consequences are not affected by the cancellation. According to the explicit provisions of the legislation any relations derived by act up to the time of its cancellation or declaration as void are considered lawful. According to the Supreme Administrative Court, therefore, one of the prerequisites for compensation of damages caused by illegal act of the State or the municipalities under LLSMD is not met, namely the damages are not caused by an unlawful by-law while the latter was effective.