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McGregor & Partners Newsletter – September 2015

In focus in Bulgarian legislation

Law on supplement of the Law on Bank Bankruptcy, (SG 61 as of 11.8.2015)

The finally adopted amendments to the Law on Bank Bankruptcy provide all lists that the trustees of the bank in bankruptcy proceedings prepare and are important for its creditors to be published in the Commercial Register.

With amendments to the transitional and final provisions of the Law on Bank Bankruptcy the legislator prepared also amendments to the Law on independent financial audit, which changes provide auditing firms to be punished by up to 10 percent of the total amount of their income for the previous financial year if they commit offenses in checking the annual financial statements of public interest entities, including also banks.

Other changes involve the introduction of open voting in the decision to revoke the right for performing independent audit and deprivation of the right to carry out audit activity. The manner of voting and the motives of each vote are recorded in the minutes of the meeting and are published on the website of the commission.

Law on supplement of the Law on Ownership and Use of Agricultural Lands (SG 61 as of 11.8.2015)

According to the amendments, the owners of orchards plantations on lands of the state and municipal’s land fund, will be able to acquire them at market prices after the expiry of five years from their planting in conditions that this was under a contract with the Minister of Agriculture and Food and the respective mayor. Another condition is these lands to have been acquired through a privatization deal.

In the changes it is set out also that from February 1, 2016 users of holdings with grazing animals will have to have a number and type of animals in accordance with the hired by them areas, according to the norm for the area of a livestock unit as defined in the law.

Furthermore, with the adopted amendments, the Minister of Agriculture and Food may, on the basis of a request by a user or owner, to approve on the legal basis of the agricultural lands, the exclusion of layer “Permanent grasslands” provided that the property does not fall within the protected area, and provided that another area of the holding will accordingly be converted to permanent grass.

Bill of the Public Procurement Act as of 12.08.2015

The proposed bill of the Public Procurement Act is essentially intended to establish a new regulatory framework that governs the spending of public funds in connection with the assigning of contracts for the acquisition of building, supplies or services and the assigning of such contracts in established by the law economic industries.

The bill of the Public Procurement Act has been prepared while taking into consideration of the basic requirement for achieving full compliance with the applicable European directives. By the law in the national legislation are transposed the five relevant directives. Thereby, coverage within a normative act on all matters, relating to the assignment and appealing of public procurement, is achieved.

Secondly, in the bill are also regulated all matters related to the establishment of a national policy – public procurement rules. The rules cover both the procurement of low value and the powers of the authorities for preliminary and subsequent control, including the main national authority, by which the state policy is performed – the Public Procurement Agency. Its functions are regulated in detail in the law. In regard to the authorities for subsequent control – the Court of Auditors and the Agency for State Financial Inspection, as well as the authorities involved in the appealing – the Commission for Protection of Competition and the Supreme Administrative Court, are regulated the issues, concerning their competence in the field of the public procurement, as far as their structure and general powers are subject to separate regulations.

News on European Union Law

Council Recommendation of 14 July 2015 on the 2015 National Reform Programme of Bulgaria and delivering a Council opinion on the 2015 Convergence Programme of Bulgaria is published in the EU Official Journal – C272 18.08.2015, with which the Council of the European Union, taking into account that: 1.On 26.03.2015, the European Council agreed to the Commission’s proposal to launch a new strategy for growth and jobs, Europe 2020; 2.On 14.07.2015, the Council, on the basis of the Commission’s proposals, adopted a Recommendation on the broad guidelines for the economic policies of the Member States and the Union and, on 21.10.2010, it adopted a decision on guidelines for the employment policies of the Member States; 3.On 8.07.2014, the Council adopted a Recommendation on Bulgaria’s National Reform Programme for 2014; 4.On 28.11.2014, the Commission adopted the Annual Growth Survey, marking the start of the 2015 European Semester for economic policy coordination; 5.On 18.12.2014, the European Council endorsed the priorities for fostering investment, intensifying structural reforms and pursuing responsible growth-friendly fiscal consolidation; 6.On 26.02.2015, the Commission published its 2015 country report for Bulgaria; 7.On 30.04.2015, Bulgaria submitted its 2015 National Reform Programme and its 2015 Convergence Programme; 8.Bulgaria is currently in the preventive arm of the Stability and Growth Pact; 9.Tax compliance continues to be a major challenge in Bulgaria; 10.The Bulgarian healthcare system faces several major challenges, including poor health outcomes, low funding and serious inefficiencies in the use of resources; 11.Banking sector turmoil in the summer of 2014 revealed institutional and supervisory weakness; 12.Active labour policies are insufficiently developed in terms both of coverage and of targeting; 13.The low quality of the education and training systems and their limited relevance to the labour market hamper the supply of a suitably skilled labour force to the economy; 14.In spring 2015, the Government presented a proposal for reform of the pension system; 15.A key building block for an investor-friendly business environment is an independent, high-quality and efficient judicial system and effective mechanism to fight corruption; 16.The insolvency framework in Bulgaria has been ineffective, increasing uncertainty among market participants and reducing the country’s overall attractiveness to investors; 17.Strategies for the reform of the public administration and the introduction of e-government were adopted in 2014; 18.In the context of the European Semester, the Commission has carried out a comprehensive analysis of Bulgaria’s economic policy and published in the 2015 country report, RECOMMENDS that Bulgaria takes action in 2015-2016 to:

  1. Avoid a structural deterioration in public finances in 2015 and achieve an adjustment of 0,5% of GPD in 2016. Take decisive measures to improve tax collection and address the shadow economy, based on a comprehensive risk analysis and evaluation of past measures. Improve the cost-effectiveness of the healthcare system, in particular, by reviewing the pricing of healthcare and strengthening outpatient care and primary care.
  2. By December 2015, complete a system-wide independent asset-quality review and a bottom-up stress test of the banking sector, in close cooperation with European bodies. Perform a portfolio screening for the pension funds and insurance sectors. Review and fortify banking and non-banking financial sector supervision, including by strengthening the bank-resolution and deposit-guarantee frameworks. Improve corporate governance in financial intermediaries, including by tackling concentration risk and related-party exposures.
  3. Develop an integrated approach for groups at the margin of the labour market, in particular older workers and young people not in employment, education or training. In consultation with the social partners and in accordance with national practices, establish a transparent mechanism for setting the minimum wage and minimum social security contributions in the light of their impact on in-work poverty, job creation and competitiveness.
  4. Adopt the reform of the School Education Act, and increase the participation in education of disadvantaged children, in particular Roma, by improving access to good-quality early schooling.
  5. With a view to improving the investment climate, prepare a comprehensive reform of the insolvency framework drawing on international best practice and expertise, in particular to improve mechanisms for pre-insolvency and out-of-court restructuring.