BULGARIA

COMMERCIAL LAW

Part one

GENERAL PART

Chapter one.

GENERAL PROVISIONS

Merchant

Article 1

1. (Amended, SG No 83/1996) For the purposes of this Act a merchant shall mean any individual or corporate body engaged by occupation in any of the following transactions:

1. purchasing goods or other chattels for the purpose of reselling them in their original, processed or finished form;

2. sale of one's own manufactured goods;

3. purchasing securities for the purpose of reselling them;

4. commercial agency and brokerage;

5. commission, forwarding and transportation transactions;

6. insurance transactions;

7. banking and foreign-exchange transactions;

8. bills of exchange, promissory notes and cheques;

9. warehousing transactions;

10. licence transactions;

11. supervision of goods;

12. transactions in intellectual property;

13. hotel operation, tourist, advertising, information, entertainment, impresario and other services;

14. purchase, construction or furnishing of real property for the purpose of sale;

15. leasing.

2. Merchants are:

1. the companies;

2. the cooperatives, except housing cooperatives.

3. Any person which has established a business, which in accordance with its purposes and volume requires that its activities be conducted on a commercial basis even if not listed under paragraph 1, shall also be deemed a merchant.

Persons Who Are Not Merchants

Article 2

The following shall not be deemed merchants:

1. natural persons engaged in farming;

2. artisans, persons providing services through their own labor or members of the professions, except where their activity may be defined as a business within the meaning of Article 1, paragraph 3;

3. persons providing hotel services by letting rooms in their own home.

Chapter two.

COMMERCIAL REGISTER

Keeping a Commercial Register

Article 3

1. Each district court shall keep a commercial register in which it shall register all merchants and all other relevant circumstances pursuant to this Act.

2. Other registers for individual types of merchants may be kept by virtue of a law.

Obligation to Register

Article 4

1. Every merchant must apply for registration in the commercial register by declaring the circumstances established by the preceding Art..

2. The persons which shall be under an obligation to declare the circumstances subject to registration shall be determined by law.

3. Any person under an obligation to apply for registration, or respectively to present the documents or signatures provided for in this Act, shall do so within seven days of the occurrence of the circumstance, unless the law provides otherwise.

Activity of the entry (new, SG 84/00)

Article 4a:

The third persons can refer to all circumstances subject to entry, although the entry may not have been made yet, unless a law explicitly stipulates an activity after the entry.

Public Nature of the Commercial Register

Article 5

Everyone shall be free to inspect the commercial register and the documents pursuant to which the entries have been made, as well as to obtain copies thereof.

Publishing of Registration

Article 6

1. The court shall publish the registrations made in the commercial register in the State Gazette when required by law.

2. (Revoked, SG, No 103 1993)

Chapter three.

TRADE NAME AND SEAT

Definition

Article 7

1. A trade name shall be the name under which a merchant shall carry on its business and under which it shall sign.

2. (Amend., SG, No 103 1993) In addition to the necessary content established by law, a trade name may also denote the purposes of a business, the names of the partners, and a freely chosen extension. A trade name must correspond to the truth, must not deceive, and must not be offensive to public order and morals.

3. (SG, No 103 1993) The merchant shall mandatorily inscribe its trade name in Bulgarian. It may additionally inscribe it in a foreign language.

Trade Name of a Branch

Article 8

The trade name of a branch shall incorporate the trade name of the merchant and the extension "branch".

Trade Name During Liquidation

Article 9 (Suppl., SG, No 63 1994)

The trade name of a merchant which has been declared in liquidation shall carry the extension "in liquidation", and upon declaration of bankruptcy - "in bankruptcy".

Change of Trade Name

Article 10

1. A trade name may be changed upon an application by the merchant which has registered it.

2. Should a trade name contain the name of a retiring partner, it may be preserved only with that partner's consent.

Exclusive Right

Article 11

1. A trade name may be used only by the merchant which has registered it.

2. In case of use of another's trade name the interested parties shall be free to seek an injunction, as well as damages for such use.

Seat and Registered Office

Article 12

1. A merchant's seat shall be the community where its registered office is located.

2. A merchant's address shall be the address of its registered office.

Obligation to Provide Data

Article 13

1. (prev. Article 13 - SG 84/00)A merchant shall provide the following data on all its commercial correspondence: trade name; seat and registered office; court of registration; registration number and bank account. A merchant may also provide a forwarding address.

2. (new, SG 84/00) The trade correspondence of the branch, besides the data under para 1 for the merchant who has opened the branch, shall obligatorily indicate the court in the commercial register where the branch has been entered, as well as the number of its registration.

Change of Seat

Article 14. (amend., SG 58/03)

1. Any relocation of a merchant's office to another community shall be declared for entry before the court with which the merchant is registered.

2. When the new seat is within the region of another court the court of the initial registration of the merchant shall register the change and shall forward, ex-officio, the corporate case to the court at the new seat.

3. The court at the new seat shall open a file of the merchant in the commercial register on the grounds of the decision under para 2, ex-officio, or when it has been presented by a person authorised to declare the entry.

4. Where the change of the seat is subject to promulgation it shall be made by the court at the initial registration of the merchant and by the court at his new seat.

Chapter four.

ENTERPRISES AND TRANSACTIONS WITH THEM

Transactions With an Enterprise

Article 15

1. An enterprise as a set of rights, obligations and factual relations shall be transferable by a transaction in writing with the signatures attested by a notary public. The transferor shall advise all creditors and debtors of the effected transfer.

2. (new, SG 58/03) When the whole enterprise of a trade company is transferred a decision taken pursuant to Article 262p shall be required.

3. (prev. para 2 - amend., SG 58/03) Absent another agreement with the creditors, upon the transfer of an enterprise the transferor shall be liable jointly and severally with the transferee up to the size of the obtained rights. Creditors of recoverable liabilities shall first address the transferor.

Registration

Article 16

1. (amend., SG 58/03) The transfer of an enterprise shall be registered in the commercial register in the sections of both the transferor and the transferee.

2. (new, SG 58/03) When the seats of the transferor and of the transferee belong to the regions of different courts of law the transfer shall be entered by the court of registration of the transferor. The court of registration of the transferee shall enter the transfer on the grounds of the decision of the court of registration of the transferor, ex-officio, or where it is presented by a person authorised to declare the entry.

3. The entries under the preceding paras shall be promulgated in the State Gazette by the court of seat of the transferor and by the court of seat of the transferee.

4. (Amended SG 104/1996; prev. para 2 - SG 58/03) Should the contract transfer real property or another interest therein, the contract shall be registered with the recordation office as well.

Securing of the creditors

Article 16a. (amend, SG 58/03)

1. The transferee shall manage independently the trade company transferred to him for a period of 6 months. The period shall run individually for the creditors of the transferor from the date of promulgation of the transfer at the seat of the transferor, and for the creditors of the transferee - from the date of promulgation of the transfer by the court at the seat of the transferee.

2. Within the period under para 1 every creditor of the transferor or the transferee, whose receivable has not been secured and has occurred before the date of the respective entry of the transfer, may require execution or security in compliance with his rights. If the request is not satisfied the creditor shall have the right to preferential satisfaction of the rights having had belonged to his debtor.

3. The members of the managing body of the transferee shall be jointly and severally responsible before the creditors for the individual management.

Chapter five.

BRANCHES

Branch

Article 17

1. A merchant may open a branch outside the community where its seat is located.

2. The branch shall be registered in the commercial register of the court in whose district its seat is located on the grounds of a written application containing:

1. seat and subject of activity of the branch;

2. data for the person managing the branch and for the extent of his representative authority.

3. Attached to the application under para 2 shall also be a notary certified consent along with a specimen of the signature of the person managing the branch.

4. The court in which the merchant has been registered shall forthwith forward a copy of the decision for registration of the branch along with a copy of the registration of the merchant in the commercial register. The branch shall be registered by the court under para 2, ex-officio, or when it is procured by a person authorised to declare the entry.

5. All changes with respect of the branch shall be registered by the court of its district. Immediately after the registration a copy of the court decision in the merchant's district shall be sent for registration in the file of the merchant.

6. (new, SG 58/03) The court in the district of the merchant shall send, ex-officio, to the court in the district of the branch a copy of any decision by which changes regarding the merchant are entered for registration in the file of the branch.

7. (new, SG 58/03) A branch of a foreign person, registered along with the right to carry out commercial activity according to his national law, shall be entered in the commercial register of the court in the district of the branch.

Relocation of a Branch

Article 18

The rules pertaining to a merchant shall apply mutatis mutandis to the seat and registered office of a branch and its relocation.

Account Books of a Branch

Article 19

A branch shall keep its account books as an independent merchant, without preparing a separate balance sheet. The branch of a legal person which is not a merchant within the meaning of this Act and the branch of a foreign person shall further prepare a balance sheet.

Jurisdiction

Article 20

Actions based on disputes arising from a direct relationship with a branch may be brought against the merchant at the seat of the branch as well.

**Chapter six. **

AGENCY

**Section I **

Direct Agency Procurator (Manager)

Article 21

1. (Amended, SG No 70/1998) A procurator shall be a natural person commissioned and authorized by a merchant to manage its firm for compensation. Such authority may be given to more than one person for either a separate or joint exercising of the procuration. The signatures on the procurator's mandate (procuration) shall be notarized and it shall be submitted by the merchant for registration in the commercial register together with a specimen signature of the procurator.

2. A procurator shall sign by adding his own name to the merchant's trade name and an extension indicating the procuration.

Procurator's Powers

Article 22

1. A procurator shall be entitled to perform or effect any acts or transactions related to the carrying on of the business activities, to represent the merchant, and to authorize third parties to perform specific acts. He may not authorize third parties with those of his powers which are derived by operation of law.

2. A procurator may not alienate or encumber any real property of the merchant except when expressly authorized to do so. The authorization may be restricted to the business of a single branch. No other restrictions shall be binding upon third parties.

Relationship Between Merchant and Procurator

Article 23

The relationship between a merchant and a procurator shall be governed by an agreement.

Binding Effect of Authorization upon Third Parties

Article 24

An authorization shall be binding upon third parties only after being registered in the commercial register.

Termination of Authorization

Article 25

1. An authorization shall be terminated upon withdrawal by the merchant, and the registration of such withdrawal in the commercial register.

2. An authorization shall not be terminated by virtue of a merchant's death or placing under judicial disability.

Agent

Article 26

1. An agent shall be a person authorized by a merchant to perform, for compensation, the acts set forth in the mandate. Absent any other instructions, an agent shall be deemed authorized to perform all acts related to the merchant's usual business. The authorization shall be made in writing and the signature shall be notarized.

2. An agent shall need express authorization to alienate or encumber real property, to accept bills of exchange, to obtain a loan, or to engage in litigation. Any other restrictions on its mandate shall be binding upon a third party only if that party new or ought to have known of such restrictions.

3. An agent may not transfer its powers to a third party without the merchant's consent.

4. An agent shall sign by adding its own name to the trade name and an extension indicating the agency.

Relationship Between Merchant and Agent

Article 27

The relationship between a merchant and an agent shall be governed by an agreement.

Termination of the Mandate

Article 28

The authorization of an agent shall be terminated in accordance with the provisions of civil law.

Restrictions and Liability

Article 29

1. A procurator or agent may not, without the merchant's consent, effect commercial transactions either on their own behalf or on the behalf of a third party within the framework of their authorization. Consent shall be deemed given if at the time of authorization the merchant knew of the carrying on of such activities and their termination was not agreed upon expressly.

2. In case of a breach of the obligations set forth in the preceding paragraph the merchant shall be entitled to seek damages or to state that the transactions effected by the authorized persons have been effected on its behalf. The statement shall be made in writing not later than one month of its becoming aware of the transaction, but not later than one year of the effecting of the transaction, and shall be addressed to the procurator or agent and to the third party.

3. Actions pursuant to paragraph 2 shall expire by limitation after five years from the date the transaction was effected.

Shop Assistant

Article 30

1. The relationship between a merchant and its assistant shall be governed by a contract.

2. A shop assistant may not effect transactions on the merchant's behalf. When working in a generally accessible sales area, a shop assistant shall be deemed authorized to effect the transactions which are usually effected in such an area.

Restrictions

Article 31

A shop assistant may not engage in any commercial activity independently or on the behalf of third parties in competition with his employer, except with the latter's express consent.

Section II.

Sales Representative

Definition

Article 32

1. A sales representative shall be a person engaged independently and by occupation in assisting the business of another merchant. A sales representative may be authorized to effect transactions in the name of the merchant, or in its own name but on the behalf of the merchant.

2. The contract between the merchant and the sales representative shall be executed in writing.

Sales Representative's Obligations

Article 33

(Amended, SG No 83/1996) A sales representative shall cooperate or effect transactions with due care, taking into consideration the merchant's interests. It shall forthwith notify the merchant of any transaction effected by it.

Merchant's Obligations

Article 34

1. A merchant shall provide the sales representative with all relevsnt information concerning the conclusion and performance of a contract.

2. A merchant shall forthwith notify the sales representative whether it accepts a transaction effected without authorization.

Commission Under Del Credere Contracts

Article 35

A sales representative which undertakes to be personally liable for the performance of obligations under effected transactions shall be entitled to an additional commission which shall be agreed upon in writing. The parties may not agree in advance that no such commission shall be owed.

Right to Commission

Article 36

1. A sales representative shall be entitled to a commission for all transactions effected by it or through its assistance during the term of its contract with the merchant.

2. Where a sales representative is entrusted with a specified territory or circle of clients, it shall also be entitled to a commission for all transactions concluded without its assistance, but with persons from the same territory or with the same clientele.

3. A sales representative shall be entitled to a commission for any of the merchant's claims which it has collected.

4. Either party shall be entitled to request from the other abstracts from the account books concerning the transactions concluded on the basis of the agency agreement.

Commission Rate

Article 37

Where the commission has not been agreed upon, it shall be deemed to amount to the customary rate paid for the specific activities.

Commission Payment Term

Article 38

A sales representative's commission shall be paid on a monthly basis, unless the agreement provides otherwise.

Reimbursement for Customary Expenses

Article 39

A sales representative shall be entitled to reimbursement for the customary expenses related to its activities, unless the agreement provides otherwise.

Compensation Upon Termination or Avoidance

Article 40

1. A sales representative shall be entitled to a compensation upon termination of its agreement, when the merchant continues to enjoy benefits from the clientele established by the sales representative.

2. Such compensation shall be equal to the sales representative's average annual commission for the entire duration of its agreement.

3. Compensation pursuant to the preceding paragraph shall not be due when the agreement is avoided through the sales representative's fault.

4. (Amend., SG, No 103 1993) Upon termination of the agreement the sales representative may claim compensation for already concluded or pending contracts.

Restrictions Following Termination of Contract

Article 41

1. Any restrictions on the activities of a sales representative subsequent to the termination of the agreement shall be agreed upon in writing.

2. Restrictions must encompass the same territory and type of goods or services as the agency agreement. They may not be for more than two years following the termination of the contract. The merchant shall owe a respective compensation for the period of restriction.

3. Should a sales representative declare the agreement avoided through a fault of the merchant, the sales representative shall be free to discharge itself from the said restrictions not later than one month from the date of the avoidance.

Effect of Restriction

Article 42.

Even when not authorized to conclude contracts a sales representative may accept acts performed by third parties to protect their rights against imperfect performance by the merchant. A sales representative may act to secure evidence in name of the merchant. Any restriction on these rights shall be binding upon third parties only if they knew or ought to have known of the said restriction.

Ratification of Contract

Article 43

Should a sales representative conclude contracts without authorization, and the third party did not know of that fact, the contract shall be deemed ratified by the merchant if the merchant fails to reject it upon being notified of it by the sales representative or the third party and inform them correspondingly.

Prohibition on Representation of Competitors

Article 44

A sales representative may represent several merchants as long as they are not in competition among themselves. It may reach agreement with a merchant to be its exclusive sales representative.

Scope of Agency

Article 45

The subject and territory of a sales representative shall be determined by the agency agreement.

Relationship Between Merchant and Sales Representative

Article 46

1. The internal relationship between the sales representative and the merchant shall be governed by the agreement between them. Absent any other provision, a sales representative shall arrange for its own premises. If the compensation is not indicated in the agreement, the customary compensation for the type of representation shall be due.

2. Representation under the preceding paragraph may not be delegated to another party in the same territory.

3. A sales representative shall indicate in the documents issued by it and on its commercial correspondence the information required under Article 13.

Termination of Representation

Article 47

1. (New SG, No 103 1993) Where the sales representation agreement has been concluded for an indefinite term, during the first three years following the date of conclusion each of the parties may terminate it with a monthly notice and, after the end of the third year, with a three months' notice.

2. (New SG, No 103 1993) An agreement which has been concluded for a definite period may be terminated before its expiration if the party wishing to terminate it compensates the other party for the damages caused.

3. (New SG, No 103 1993) The rights of the sales representative under Article 40 may not be prejudiced by the termination pursuant to paragraphs 1 and 2.

4. (Previous para 1 SG, No 103 1993) A sales representative which has ceased its activities shall apply to the court, within the time period set forth in Article 4, to delete its registration.

5. (Previous para 1 No SG, No 103 1993) Should a representation be terminated by reasons of death or placing under disability of the sales representative, the heirs or, respectively, the guardian, and in case of bankruptcy the respective court, shall inform the court of the deletion.

6. (Previous para 1 No SG, No 103 1993) Where no application has been made for the deletion pursuant to the previous paragraph, the deletion shall be made by the court on its own motion as soon as it learns of the grounds thereof.

Applicability

Article 48

The provisions of articles 32 to 47 shall not apply to persons engaged as representatives or brokers in stock exchange transactions, or as representatives of persons engaged in auction operations.

Section III.

Broker

Definition

Article 49

1. A broker shall be a merchant which by occupation acts as an intermediary so that transactions may be entered into.

2. (Amend., SG, No 86 1996) As far as brokerage for contracts for the carriage of goods by sea and for stock exchange transactions are concerned, the provisions for the said activities shall apply even when the brokerage is performed by a mercantile broker.

Broker's Journal

Article 50

1. A broker shall keep a journal in which it shall record on a daily basis all executed contracts. At the end of each day the broker shall date and undersign all entries for that day.

2. Contracts shall be recorded consecutively in the order of their execution;an entry shall include the names of the contracting parties, the time of execution of the contract and the essential arrangements.

3. A broker must, upon request, provide the parties with an abstract from its journal containing the full entry concerning their contract.

Brokerage

Article 51

A broker shall be entitled to a commission from one or both parties in accordance with the arrangement reached. Absent such an arrangement, the customary brokerage for the type of transaction in the specific circumstances shall be owed by both parties.

Section IV.

Trade Secrets Obligation to Protect Trade Secrets

Article 52

In carrying on their activities a procurator, an agent, a shop assistant, a sales representative and a broker must protect the trade secrets of the persons which have commissioned them to perform certain acts, as well as their good name as merchants.

**Chapter seven. **

**ACCOUNT BOOKS **

Obligation to Keep Accounts

Article 53

1. A merchant shall keep accounts in which it shall record the movements of its enterprise's property. Such movements shall be recorded in chronological order.

2. A merchant shall, through inventory performed within the time periods prescribed by the Accountancy Act, establish the availability and value of the items of the assets and liabilities of its enterprise's property.

3. A merchant shall sum up the results of its commercial activities on the basis of the entries in its books and inventory, and prepare an annual financial statement and, where necessary, the relevant accounting notes. The annual financial statement shall be verified by a certified public accountant.

Continuity Of Opening and Closing Balance Sheet

Article 54

The opening balance sheet for each year shall correspond to the closing balance sheet for the preceding year. A balance sheet shall also be prepared when a merchant winds up its activities.

Admissibility as Evidence

Article 55

1. Regularly kept account books and entries therein shall be admissible as evidence between merchants for establishing commercial transactions.

2. Account books kept in violation of the provisions of this Act or the Accountancy Act shall be inadmissible as evidence in favor of the party whose duty it is to keep them.

Part two.

TYPES OF MERCHANTS

Division one.

SOLE ENTREPRENEUR

Chapter eight.

NATURAL PERSON MERCHANT

Definition

Article 56

Any natural person possessing capacity whose domicile is in the country may register as a sole entrepreneur.

Restrictions

Article 57

Ineligible to be a sole entrepreneur shall be a person:

1. who is bankrupt and his rights have not been restored;

2. who has intentionally gone bankrupt and has left unsatisfied creditors.

3. who has been convicted for bankruptcy.

Registration

Article 58

1. A sole entrepreneur shall be registered on the basis of an application which shall state:

1. the name, domicile, address and Unified Civil Code (EGN);

2. the trade name under which the activities shall be carried on;

3. the seat and the address of the registered office;

4. the purposes of the business.

2. A specimen of the merchant's signature and an affidavit stating that the person has not been deprived of the right to carry on commercial activities shall be attached to the application.

3. (Amend., SG, No 124 of 1997) Entered in the register shall be the data of para 1.

4. (Amend., SG, No 124 of 1997) A person may register only one trade name as a sole entrepreneur.

Trade Name of Sole Entrepreneur

Article 59

A sole entrepreneur's trade name shall incorporate without abbreviation the person's given name and either the surname or patronymic by which he is generally known.

Transfer of Trade Name

Article 60

1. A sole entrepreneur's trade name may be transferred to a third party only together with his enterprise. The consent to transfer a trade name shall be given in accordance with Article 15, paragraph 1.

2. A sole entrepreneur's heirs, on acquiring the enterprise, shall be free to retain its trade name.

3. In cases under the preceding paragraphs the new owner's name shall be added to the trade name.

4. The transfer shall be registered in the commercial register and shall be published in the State Gazette.

Deletion from the register (New, SG 84/00)

Article 60a. The entry of the sole entrepreneur shall be deleted from the commercial register:

1. in case of termination of his activity or establishing his residence abroad - upon his written request to the court;

2. in case of his death - upon written request by his successors;

3. for placing under judicial disability - upon written request by the guardian or trustee.

Division two.

STATE - OWNED AND MUNICIPAL ENTERPRISES Chapter nine.

PUBLIC ENTERPRISE MERCHANT

Status

Article 61

A state-owned and municipal enterprise shall be either a single person limited liability company or a single person joint stock company. State-owned and municipal enterprises may also form other companies or groups of companies.

Formation

Article 62

1. State-owned enterprises shall be formed as or transformed into single person limited liability companies or single person joint stock companies pursuant to a procedure to be established by a law.

2. Municipal enterprises shall be formed as or transformed into single person limited liability companies or single person joint stock companies through a resolution of the municipal council.

3. State-owned enterprises which are not companies may be formed with a law.

Division three.

COMPANIES

Chapter ten.

GENERAL PROVISIONS

Definition

Article 63

1. A company is an association of two or more persons for effecting commercial transactions with joint means.

2. In cases provided by a law a company may be incorporated by one person.

3. Companies shall be legal persons.

Types of Companies

Article 64

1. The types of companies are:

1. general partnership;

2. limited partnership;

3. limited liability company;

4. joint stock company;

5. partnership limited by shares.

2. Only the companies set forth in this Act may be established.

3. (new, SG 58/03) The trade companies under para 1, item 1 and 2 shall be personal, and those under item 3 - 5 - capital.

4. (prev. para 3 - amend., SG 58/03) A law may stipulate that an activity may be carried out only by a certain kind of trade companies.

Partners in a Company

Article 65

1. A company's founders shall be Bulgarian or foreign individual or corporate bodies possessing capacity.

2. A person may participate in one or more companies to the extent such participation is not prohibited by law.

3. (new, SG 84/00) When a trade company participates in another company its rights as a partner or sole owner shall be exercised by the person who has the right to represent it or by an explicitly authorised person.

Preliminary Agreement to Form a Company

Article 66

Persons wishing to form a company may reach agreement on the acts which must be performed so that the incorporation may be prepared. For a breach of obligations based on that agreement the parties shall be liable only for the actual damages caused.

Formation of a Company

Article 67

A company shall be deemed formed on the date of its registration in the commercial register. The application for registration shall be filed by the appointed managing organ.

Interpretation of the Statutes

Article 68

The will of the parties and the objective of the interpreted provision shall be taken into account when interpreting the statutes.

Liability for Acts Performed by the Company Prior to Registration

Article 69

1. Any acts by the founders performed in the name of the as yet unincorporated company prior to the date of its registration shall create rights and obligations for the persons who have carried out the said acts. When transactions are effected it shall mandatorily be noted that incorporation is pending. The persons who have effected the transactions shall be liable jointly and severally for undertaken obligations.

2. When the transaction has been effected by the founders or a person authorized by them, the rights and obligations shall be transferred ex lege to the incorporated company.

Voidability of Incorporated Company

Article 70

1. (amend., SG 84/00) The constitution of the company shall be void only when one of the following offences has been admitted:

1. there is no constituent contract or it has not been worked out in the form stipulated by the law;

**2. for joint-stock or a limited joint-stock company with stocks the requirements of Article 159 and 163 have not been met;

3. the company has been registered not by the court at its headquarters;

4. the subject of activity of the company contradicts the law or the good ethics;

5. the constituent contract or the statutes do not contain the company, the subject of activity of the company or the size of the instalments, as well as the capital when the law so requires;

6. the part of the capital stipulated by the law has not been installed;

7. less able persons than the number stipulated by the law have participated in the constituting of the company.

2. (amend., SG 84/00; suppl., SG 58/03) Any interested party, as well as the public prosecutor, may request from the district court at the place of registration of the company that the company be declared void within a period of one year after the institution of the company, and when the institution has been subject to promulgation - after its promulgation. In the cases under para 1, item 3, 4, 5 and 6 the court shall declare the company void only if the offence has not already been repealed or it has not been repealed within a suitable term defined by the court.

3. The court's ruling to declare the company void shall be effective from the date of entry into force. As of that moment the company shall be deemed terminated and that fact shall be registered on the court's own motion in the commercial register, after which liquidation shall be carried out by a court-appointed liquidator.

4. (new, SG 58/03) The court shall send, ex-officio, for attachment to the corporate case of the company a copy of the claim request under para 2 upon institution of the proceedings, of the enacted definition for its termination, as well as of an enacted decision by which the claim is rejected.

5. (prev. para 4 - SG 58/03) Where acts in the name of the company declared void have been carried out, the founders shall be liable jointly and severally and their liability shall be unlimited.

6. (prev. para 5 - SG 58/03) (new, SG 84/00) Article 498 of the Civil Procedure Code shall not apply regarding the constitution of a trade company.

Protection of Partnership

Article 71

Any partner in a company may bring an action to the district court of the company's seat to protect its right to be a partner and its individual rights as a partner, when these have been violated by the company's organs.

Non-Monetary Contributions

Article 72

1. Should a partner or, respectively, a shareholder, make a non-monetary contribution, the articles or, respectively the statutes, shall state the name of the contributor, a full description of the non-monetary contribution, its monetary value, and the grounds for the contributor's rights.

2. (suppl., SG, No 103 1993; amend., SG 84/00) The contribution in a limited liability company, a joint stock company or a partnership limited by shares shall be valued by three experts appointed by the court which shall register the company, at the request of the contributor. The conclusion of the experts must contain full description of the non-pecuniary instalment, the method of assessment, the obtained assessment and its compliance with the size of the share of the capital or of the number, the nominal and the issued value of the stocks registered by the contributor. The conclusion shall be presented to the commercial register for entry upon its acceptance by the court.

3. new, SG 84/00) The assessment in the corporate contract, respectively in the statutes, cannot be higher than the one given by the experts in the court.

4. (prev. para 3 - SG 84/00) Should the contributor not agree with the valuation, it may participate in the company with a monetary contribution or withdraw from participation in the company.

5. (prev. para 4 - SG 84/00) The contribution may not have as a subject future labor or services.

Paying Up of Non-Monetary Contributions

Article 73

1. The contribution of a right for the creation or transfer of which a notarial form is required shall be effected with the articles. For contributions to a joint stock company the consent in writing of the contributor and a description of the contribution with a notarized signature shall be attached to the statutes.

2. The contribution of any other rights shall be made pursuant to the form the law provides for their creation or transfer.

3. (suppl., SG 84/00) The contribution of a claim shall be made with the articles or, respectively, the statutes, and the contributor shall attach evidence of having notified the debtor of the transfer of the claim. The requirement for notification shall not apply when the taking regards the company itself.

4. Title to a contribution shall be acquired from the moment of the company's formation.

5. (Amended SG 104/1996) Where a contribution has as a subject a real right over real property, the respective organ of the company shall, after such right has arisen, present an abstract of the articles, certified by a recordation judge, for recording in the recordation office and, whenever necessary, separately the contributor's consent as well. Such organ shall present an abstract of the statutes certified by a recordation judge and the contributor's consent. In making the recording the recordation judge shall ascertain the contributor's rights.

Prohibition of remittal and deduction (new, SG 84/00)

Article 73a.

The obligation of the partners of the limited liability company and of the stock holders for instalments in the capital cannot be remitted, except in its reduction, neither can it be deducted.

Hidden non-pecuniary instalment (new, SG 84/00)

Article 73b.

1. When a joint stock company, within 2 years from its constitution acquires rights at a price exceeding 10 percent of the capital from a person who has registered stocks at the time of constitution of the company, decision for it shall be taken by the general assembly of the stock holders and Article 72, para 2 shall apply for the transferred rights.

2. The transaction shall be valid upon the entry of the decision of the general assembly in the commercial register. The decision shall be promulgated.

3. Para 1 and 2 shall not apply for rights acquired in the process of the usual activity of the company, at the stock exchange or under supervision of an administrative or court body.

Payments to partners and stock-holders

Article 73c. (new, SG 58/03)

Payments to partners and stock-holders ensuing from shares and stocks of a trade company, pledged or distrained, shall be made if the creditor does not object, by a pledge or distraint, within one month upon a written notice. In case of an objection the due sum shall be deposited in a bank for securing the creditor.

Repeal of a Resolution of the Company's General Meeting

Article 74

1. Every partner or shareholder may bring an action before the district court of the company's seat for the repeal of a resolution of the general meeting when such resolution is inconsistent with a mandatory provision of the law or with the articles or, respectively, the statutes of the company. The action shall be brought against the company.

2. The action shall be brought within 14 days of the date of the meeting when the plaintiff was present or was duly notified, or otherwise within 14 days of learning of the resolution, but not later than three months after the date of the general meeting.

3. A partner or shareholder may intervene in a proceeding in accordance with the provisions of the Code of Civil Procedure. It may carry on the proceedings even after the withdrawal of the original plaintiff.

Subsequent Voiding of Annulled Resolution

Article 75

1. The instructions given by the court in repealing a general meeting resolution concerning the interpretation of the law, the memorandum of association or the statutes shall be binding on the general meeting whenever it discusses the same issue again.

2. Resolutions or acts by the company's organs which are in contravention of an effective court ruling are null and void. Each partner or shareholder may at any moment refer to such nullity or request its proclamation by the court.

**Chapter eleven. **

**GENERAL PARTNERSHIP **

Section I.

General Provisions

Definition

Article 76

A general partnership shall be a company formed by two or more persons for the purpose of effecting commercial transactions by occupation under a joint trade name. The partners shall be liable jointly and severally and their liability shall be unlimited.

Trade Name

Article 77

The trade name of a partnership shall consist of the surnames or trade names of one or more of the partners with the extension "sabiratelno druzhestvo" [general partnership] or "sadruzhie" ("s-ie") [partners].

Content of articles of Partnership

Article 78

A partnership's articles shall be drawn up in writing with notarized signatures of the partners and shall state:

1. the name and domicile or, respectively, the trade names and seat, as well as the address of each partner;

(Amend., SG, No 124 of 1997)

2. the trade name, the seat, the address of management and the purposes of the partnership;

3. the type and amount of each partner's contribution and the valuation thereof;

4. the manner of distribution of profits and losses among the partners;

5. the manner of management and representation of the partnership.

Registration of the General Partnership

Article 79

1. The application for registration of the general partnership in the commercial register shall be signed by all partners and the articles of partnership shall be attached to it.

2. Registered in the register shall be the information under items 1, 2 and 5 of the preceding Art..

3. The persons authorized by the articles of partnership to represent the partnership shall submit specimen signatures.

Section II.

Partners' Relationships

Primacy of the articles

Article 80

The partners' legal relationships shall be governed by this Section, unless the articles of partnership provide otherwise, with the exception of the provision of Article 87.

Compensation for Expenses and Damages

Article 81

1. A partner shall be entitled to reimbursement for necessary expenses incurred in the course of the partnership's business and to compensation for damages suffered in connection with such business.

2. The partnership shall pay the interest as set by law on such expenses incurred or damages suffered by a partner.

Obligation to Pay Interest

Article 82

A partner which is in arrears in paying its monetary contributions or receives or, respectively, takes partnership money for itself without being entitled to do so, shall owe the partnership the repayment of all such moneys and the interest as set by law. Should the damages for the partnership be greater, the partnership may seek compensation for the balance.

Prohibition on Competition

Article 83

1. (Amend., SG, No 103 1993) A partner may participate in another company or enter into transactions related to the purposes for which the partnership was set up, on its own account or on account of a third party, only with the consent of the other partners.

2. (Amend., No 103 1993) In case of a violation of paragraph 1 the partnership may request compensation for the damages suffered or state that it shall assume the rights and obligations under the concluded transactions. The statement must be made in writing within one month of acquiring knowledge of the transaction, but not later than one year of its conclusion, and be forwarded to the partner and the third party.

3. The right to an action pursuant to the preceding paragraph shall expire after three months from the date of the partners' becoming aware of the said act, or after three years of the commitment of the said acts when the partners have no knowledge of them.

Management

Article 84

1. Each partner shall be entitled to take part in the management of the partnership's business, except when management has been assigned with the articles of partnership to one or several of the partners or to a third party.

2. The consent of all partners shall be required for the acquisition or disposal of real rights over real property, for the appointment of a manager who is not a partner, or for executing an agreement for a cash loan exceeding a sum fixed in the articles of partnership.

Revocation of Management Assignment

Article 85

The resolution to assign the management to one or several partners may be revoked by the district court of the partnership's seat upon an action brought by some of the partners, if the managers have committed a breach of their obligations, as well as on other grounds provided for in the articles of partnership. The ruling shall be registered upon the court's own motion.

Partner's Right to Exercise Control

Article 86

A partner which does not participate directly in the management shall be entitled to obtain information on the partnership's business, to inspect the books, the partnership and other papers, and to ask for explanations from the managers.

Resolutions

Article 87

Where the articles of partnership require that resolutions be adopted with a majority vote, each partner shall be entitled to one vote. Resolutions shall be recorded in the minutes book.

Section III.

Partners' Relationship With Third Parties

Liability of the General Partnership

Article 88 (Amend., SG, No 103 1993)

When bringing an action against the partnership the plaintiff may also name as defendants one or several of the partners. Forcible execution shall be directed first against the partnership, and, in case of impossibility for satisfaction, against the partners.

Representation

Article 89

1. Each partner shall represent the partnership, unless the articles of partnership provide otherwise.

2. A limitation upon the representative powers of a partner shall not be binding upon bona fide third parties if it is not registered in the commercial register.

Revocation of Representative Powers

Article 90

The representative powers of a partner may be revoked pursuant to Article 85.

Partners' Plea

Article 91

A partner may, in addition to the partnership's pleas, make its personal pleas before the partnership's creditors.

Liability of Newly Admitted Partners

Article 92

The liability for all of the partnership's debts of a newly admitted partner in an existing partnership shall equal that of the other partners.

Section IV.

Dissolution of a Partnership and Termination of a Partners' Participation Grounds for Dissolution

Article 93

A general partnership shall be dissolved upon:

1. (suppl., SG, No 103 1993) expiration of its term or under other circumstances provided in the articles of partnership;

2. the agreement of the partners;

3. declaring the partnership bankrupt;

4. where there is no other provision, death or the placing under judicial disability of a partner or dissolution of a partner which is a legal person;

5. (amend., SG, No 63 1994) request of the trustee in bankruptcy in case of bankruptcy of a partner;

6. notice of termination from a partner;

7. a court ruling in the cases established by law.

Dissolution upon Notice from a Partner

Article 94

Where a partnership has been formed for an indefinite period of time each partner may request its dissolution by sending at least six months prior notice in writing to all remaining partners, unless the articles of partnership provide otherwise.

Dissolution by Court Order Dismissal of Partner

Article 95

1. The district court may dissolve a partnership upon an action brought by a partner when another partner has deliberately or in gross negligence omitted to perform an obligation of its under the articles of partnership or the performance of the obligation has become impossible. This rule shall also apply whenever a partner acts against the interests of the partnership.

2. Upon an action brought by a partner the court may, instead of dissolving the partnership, dismiss the partner which is at fault.

Dissolution upon Notice from a Private Creditor of a Partner

Article 96

1. The creditor of a partner which in the course of six months cannot be satisfied by forcible execution upon the debtor's personal property may attach that partner's liquidation share and request the dissolution of the partnership upon a notice in writing pursuant to the procedure set forth in Article 94.

2. A partnership shall not be dissolved in case the partnership or the remaining partners repay the debt following the attachment pursuant to the preceding paragraph. In this case only the participation of the debtor partner shall be terminated, unless the partners decide otherwise.

Perpetuation of Partnership

Article 97

1. The partners may provide in the articles that the partnership shall continue to exist in the case of termination of the participation of a partner. In this case the remaining partners shall buy out the share of the partner which has terminated its participation, and in the case of a partner's death, those of its heirs who wish shall be admitted as partners. The heirs shall state their intent to be admitted as partners not later than three months from the date of the opening of the succession.

2. In case the heirs do not wish to be admitted as partners, as well as in case of termination of the participation of a partner, the partnership shall pay the value of the share in the partnership's assets of the decedent or the partner which has terminated its membership, and their share in the annual profits for the period up to the death or termination of the participation.

Limitation

Article 98

1. The right of action against a partner for obligations of the partnership shall expire by limitation after five years, except where the right of action against the partnership is subject to a shorter limitation.

2. (suppl., SG 58/03) The limitation period shall run from the date on which the dissolution of the partnership, its transformation or the termination of the participation of the partner is registered in the commercial register.

3. An interruption of the limitation with respect to the dissolved partnership shall also apply to those partners which were partners at the time of the dissolution.

Chapter twelve.

LIMITED PARTNERSHIP

Section I.

General Provisions Definition

Article 99

1. A limited partnership shall be formed with articles of partnership between two or more persons for carrying out commercial activities under a common trade name, whereby for the partnership's obligations one or more of the partners shall be liable jointly and severally and their liability shall be unlimited, and the remaining partners' liability shall not exceed the amount of the agreed upon contribution.

2. (Revoked, previous para 3 - SG, No 103 1993) The provisions for the general partnership shall apply mutatis mutandis to the limited partnership, to the extent this chapter does not provide otherwise.

Form

Article 100

The articles of partnership shall be drawn up in writing with notarized signatures of the partners.

Trade Name

Article 101

1. The company's trade name shall contain the extension "komanditno druzhestvo" [limited partnership] or the abbreviation "KD" and the name of at least one of the general partners.

2. The names of limited partners shall not be incorporated in the trade name of a limited partnership, but in case this has occurred those partners shall be deemed to bear unlimited liability vis-а-vis the creditors of the partnership.

Content of the articles of Partnership

Article 102

A limited partnership's articles shall state:

1. the trade name of the partnership;

2. the seat and the registered office;

3. the purposes for which the partnership is set up;

4. the names or, respectively, the trade names and the addresses of the partners and the extent of their liability;

5. (revoked, SG 84/00);

6. the type and amount of the partners' contributions;

7. the manner of distribution of profits and losses among the partners;

8. the manner of management and representation of the partnership.

Registration

Article 103

A limited partnership shall be registered with the commercial register of its seat by the general partners, which shall file the articles of partnership and specimen signatures.

Section II.

Partners' Legal Relationships Primacy of the articles of Partnership

Article 104

The partners' legal relationships, to the extent the articles of partnership contain no provision to the contrary, shall be governed by this Section.

Management

Article 105

A limited partnership shall be managed and represented by the general partners. A limited partner has no right to manage the partnership and block resolutions of the general partners.

Acts by a Limited Partner

Article 106

Should a limited partner effect transactions in the name and on behalf of the partnership without being the partnership's manager or agent it shall be personally liable, except when the partnership ratifies the transaction.

Prohibition Concerning an General Partner

Article 107

The rule of Article 83 shall apply to a general partner.

Limited Partner's Rights

Article 108

A limited partner may inspect the partnership's books and request a transcript of its annual financial statement. In case of refusal the district court shall, on the motion of such partner, order that these be placed at the disposal of the partner.

Limited Partner's Participation in Profits and Losses

Article 109

1. Where a limited partner has not paid in full the stipulated contribution, such contribution shall be deducted from its share of the profits.

2. A limited partner shall participate in losses up to the amount of the stipulated contribution. It shall not be bound to pay back any profits it has received to offset subsequent losses.

Prohibition on Distribution of Profits

Article 110

Where at the end of a calendar year it is established that a partnership has shown losses which affect the contributions made, no profits shall be distributed before the contributions have been restored to their stipulated amounts.

Section III.

Partners' Legal Relationships With Third Parties

Liability of Limited Partner

Article 111

A limited partner shall be liable towards the partnership's creditors to the extent of its stipulated contribution, even when it has not been paid in full.

Liability Prior to Registration

Article 112

A limited partner shall bear unlimited liability with respect to transactions entered into by it in the name of the partnership prior to its formation, or after such formation whenever the creditor did not know that it was contracting with a limited partner.

Chapter thirteen.

LIMITED LIABILITY COMPANY

Section I.

General Provisions Definition

Article 113

A limited liability company may be formed by one or more persons which shall be liable for the company's obligations with their contributions to the company's registered capital.

Form of articles of Incorporation

Article 114

1. (New - SG, No 103 1993) The articles of incorporation shall be executed in writing.

2. (Previous sole para - SG, No 103 1993) A partner may be represented by an agent holding a special power of attorney with notarized signature.

3. (New SG, No 103 1993) When the limited liability company is formed by one person, a constitutive deed shall be drawn up instead of articles of incorporation.

Content of articles of Incorporation

Article 115

The articles of incorporation shall state: (Amend., SG, No 124 of 1997)

1. the trade name, the seat and address of management of the company;

2. the purposes and the time period for which the company is being set up;

3. the names or, respectively, the trade names of the partners;

4. (suppl. SG 84/00) the registered capital. Where the full amount has not been paid at incorporation, the articles shall set the time periods and terms for payment. The term of final instalment of the whole size of the capital cannot be longer than two years from the registration of the company, respectively from the increase of the capital.;

5. the interests of the partners;

6. the management and manner of representation;

7. the privileges of the partners, where agreed upon;

8. other rights and obligations of the partners.

Trade Name

Article 116

1. The trade name of a company shall contain the extension "druzhestvo s ogranichena otgovornost" [limited liability company] or the abbreviation "OOD".

2. Should all the capital be owned by one person, the trade name shall contain the extension "ednolichno OOD" [single person limited liability company]

Capital and Shares

Article 117

1. (Amend., SG, No 100 of 1997) The registered capital of a limited liability company shall be not less than 5 000 levs. It shall consist of the interests of the company's partners, and no interest shall be smaller than 10 levs.

2. The sum total of all interests shall be equal to the registered capital, and the value of each interest shall be a multiple of 100.

3. The interests of the individual partners may be of unequal value.

4. An interest may be held jointly by several persons.

Liability of Founders

Article 118

1. The founders shall be liable jointly and severally before the company for damages caused in the course of its formation, if they have not acted with due care.

2. The founders shall not be entitled to remuneration for the formation of the company from the registered capital.

Company Registration

Article 119

1. For registration of a company in the commercial register it shall be necessary:

1. to file the articles of incorporation;

2. to have an appointed manager or managers;

3. (amend., SG 84/00) each partner to have paid at least one third of its interest, but not less than10 levs;

4. at least 70 per cent of the registered capital to have been paid.

2. The data under items 1, 2, 3, 4 (only the amount of the registered capital) and 6 of Article 115 shall be registered in the register and published.

3. (New - SG 114/99) For entering in the commercial register the implementation of activity as investment broker as well as other activities for which certain law provides accomplishment with a permission of a state body, shall be presented the corresponding permission.

4. (new, SG 84/00) For amendment and supplement of the company contract a copy of it shall be presented at the commercial register, which shall contain all amendments and supplements, certified by the body representing the company.

Section II.

Partners' Rights and Obligations

Shares

Article 120

1. Each partner shall pay up or contribute its interest as provided in the articles of incorporation.

2. (revoked - SG 84/00)

Consequences of Failure to Pay Up or Contribute One's Share

Article 121

1. The failure to pay up or contribute an interest shall constitute grounds for the expulsion of a partner from the company. A partner which has failed to pay up or contribute its interest within a specified period shall owe interest at a rate determined by operation of law, and compensation for damages in excess of such interest.

2. Where the interest cannot be paid up or contributed by the partner owing such payment or contribution, and cannot be sold to a third party, the remaining partners must pay up the balance in proportion to their interests or reduce the company's registered capital in accordance with established procedures.

Admitting a New Partner

Article 122

A new partner shall be admitted by the general meeting upon an application in writing, in which it shall state that it accepts the terms of the articles of incorporation. The resolution to admit the partner shall be registered in the commercial register.

Partners' Rights

Article 123

Each partner shall be entitled to take part in the management of the company, in the distribution of profits, to be informed of the company's affairs, to review the company's books and to liquidation proceeds.

Partners' Obligations

Article 124

The partners must pay up or contribute their interests, take part in the management of the company, provide assistance for the carrying out of its activities, as well as carry out the resolutions of the general meeting.

Termination of Participation in a Company

Article 125

1. The participation of a partner shall be terminated upon:

1. death or disability;

2. expulsion;

3. dissolution and liquidation, in the case of a legal person; 4. bankruptcy.

2. A partner may terminate its participation in a company with a notice in writing made at least 3 months prior to the termination.

3. Accounts shall be settled on the basis of the balance sheet for the last day of the month of termination of the participation.

Expulsion of a Partner

Article 126

1. (amend., SG 58/03) A partner who has not paid up or deposited his share within a period additionally determined by the general meeting, which may not be shorter than one month. The period shall be determined by a majority of more than half of the capital. The manager shall inform in writing the partner about the additional period and shall notify him about the expelling.

2. In the case of paragraph 1 the partner shall lose its title to any contributions made.

3. A partner may be expelled by the general meeting following a notice in writing where it:

1. fails to perform its obligations for providing assistance for the carrying out of the activities of the company;

2. fails to abide by resolutions of the general meeting;

3. acts against the interests of the company.

4. (new, SG 84/00; amend., SG 58/03) for failure to pay up an additional monetary instalment, if the partner has not exercised his right to leave according to Article 134, para 2.

Company Share

Article 127

Each partner shall have a company interest in the company's assets the amount of which shall be determined in proportion to its interest in the registered capital, unless otherwise agreed.

Certificate of Participation

Article 128

The certificates issued to the partners for evidencing their participation in the company shall not be negotiable securities.

Transfer of Shares

Article 129

1. An interest in a limited liability company may be transferred and inherited. The transfer of an interest from one partner to another shall be unrestricted, and the transfer to third parties shall be subject to the provisions for admitting new partners.

2. An interest in a limited liability company shall be transferred with notarized signatures and shall be registered in the commercial register.

Liability upon Transfer

Article 130

The transferee shall be liable jointly and severally with the transferor for any payments to the registered capital due at the date of transfer.

Partition of a Share

Article 131

The partition of an interest shall be admissible only with the consent of the partners, unless otherwise agreed.

Joint Ownership of an Interest

Article 132

Where one interest belongs to several persons they may exercise their rights over it only jointly. They shall be liable jointly and severally for any obligations arising from such interest. The joint owners of the interest shall designate a person to represent them before the company.

Profits and Payments

Article 133

1. The partners cannot claim their interests as long as the company exists. They are only entitled to part of the profits in proportion to their interests, unless otherwise agreed.

2. No interest on the partner's profits may be agreed upon.

Additional Monetary Contributions

Article 134

1. For covering losses and in case of temporary shortage of cash the partners may be required, by a general meeting resolution, to make additional monetary contributions within a fixed period. The additional contributions shall be in proportion to the respective interests in the capital, unless otherwise determined.

2. (amend., SG 58/03) A partner who has not voted for the decision under para 1 shall have the right to terminate his participation in the company according to Article 125, para 2 and 3. This right may be exercised within one month from the meeting - for the partners who have not attended or have been regularly invited , or from the notification - for all other partners.

3. (suppl., SG 58/03) The additional contributions shall not affect the company's registered capital. It may be agreed that the company shall pay interest on them. Article 73c shall not apply for reimbursement of additional monetary instalments.

Section III.

Management

Types of Organs

Article 135

1. The company's organs shall be:

1. the general meeting;

2. the manager (managers).

2. The manager does not necessarily have to be a partner.

General Meeting of Partners

Article 136

1. The general meeting of partners shall consist of the partners.

2. The company's manager shall take part in the general meeting's sittings in a consultative capacity.

3. Where the number of employees exceeds 50, they shall be represented in the general meeting in a consultative capacity.

Powers of the General Meeting

Article 137

1. The general meeting shall:

1. amend the articles of incorporation;

2. (Amend, SG, No 103 1993) admit and expel partners, give consent on the transfer of an interest to a new partner;

3. approve the annual report and balance sheet, distribute the profits and resolve on their payment;

4. resolve on the increase or decrease of the registered capital;

5. appoint a manager, fix his remuneration and relieve him of liability;

6. resolve on setting up or closing down branches and participation in other companies;

7. resolve on the acquisition or alienation of real property and real rights therein;

8. resolve on bringing a company action against the manager or comptroller and appoint an attorney to proceed with the suits against them;

9. resolve on additional monetary contributions.

2. Each partner has as many votes in the general meeting as its interest of the capital, unless the articles provide otherwise.

3. (Amend., SG, No 103 1993; SG 84/00; suppl., SG 58/03) Resolutions under para 1, items 1, 2 and 9 shall be adopted by a majority of more than three thirds of the capital and the decisions under item 4 - unanimously by all partners, and the company contract can stipulate a larger majority. The partner whose expulsion is put to a vote shall not vote and his share shall be deducted from the capital in determining the majority. All remaining resolutions shall be adopted with a majority of the capital, unless the Articles provide otherwise.

4. The partners may vote by proxy only when such proxy holds a special power of attorney in writing; the above rule shall not apply to partners which are legal persons or to agents by operation of law.

5. The general meeting shall adopt resolutions on labor and social issues only after hearing the position of a representative of the company's employees.

Convening a General Meeting

Article 138

1. A general meeting shall be convened by the manager at least once every year.

2. The manager shall also convene a general meeting upon the request in writing of the partners whose interests amount to at least one tenth of the capital. Should the manager fail to convene a general meeting within two weeks, the partners which have requested its convening shall be entitled to do so.

3. (suppl., SG 58/03) The manager shall convene a general meeting immediately should the losses exceed one fourth of the registered capital, as well as when the net value of the property of the company under Article 247a, para 2 drops under the size of the registered capital.

Notice of General Meeting

Article 139

1. The general meeting shall be convened by a notice in writing received by each partner at least 7 days before the date of the meeting, unless the articles provide otherwise. The notice shall specify the business to be transacted.

2. general meeting resolutions may be adopted in absentia when all partners have stated in writing their consent for the resolution.

Registration of Resolutions

Article 140

1. The general meeting resolutions which are related to registrations pursuant to Article 119, paragraph 2 shall be registered in the commercial register.

2. Paragraph 1 shall apply to the resolutions of the owner of a single person company.

3. (new, SG 84/00; amend., SG 58/03) The decisions regarding amendment and supplement of the company contract and termination of the company shall enter into force upon their entry in the commercial register.

4. (new, SG 58/03) Increase and reduction of the capital, acceptance and exclusion of a partner, transformation of the company, election and release of a manager, as well as appointment of liquidator shall have effect from the time of their entry in the commercial register.

Management and Representation

Article 141

1. The manager shall organize and direct the activities of the company in accordance with the law and the general meeting resolutions.

2. (suppl., SG 84/00) The company shall be represented by the manager. Where several managers have been appointed each one of them may act independently, unless the Articles provide otherwise. Other restrictions of the representative authority of the manager shall not have effect regarding third persons.

3. (amend., SG 84/00) The name of the manager, who shall present a notary certified consent with a specimen of the signature, shall be registered in the commercial register. The registration shall be published in the State Gazette.

4. (new, SG 58/03) The authorisation of the manager may be withdrawn at any time and his name may be written off the commercial register.

5. (new, SG 58/03) The manager may request to be written off the commercial register by a written notification to the company. Within one month from receipt of the notification the company shall enter his release in the commercial register. Should the company fail to do so the manager may declare himself the entry of this circumstance and the court shall register it regardless of whether another person has been elected in his place.

6. (new, SG 58/03) The relations between the company and the manager shall be settled by a contract for commissioning of the management. The contract shall be concluded in writing on behalf of the company through a person authorised by the general meeting of the partners or by the single owner.

Prohibition on Competition

Article 142

1. Without the consent of the company the manager may not:

1. effect commercial transactions in his own or in a third party's name;

2. participate in partnerships and partnerships limited by shares, and in limited liability companies;

3. hold positions in managing organs of other companies.

2. The limitations under paragraph 1 shall apply when the activities carried out are similar to those of the company.

3. (amend., SG 58/03) For violations of his obligations under paragraph 1 the manager shall owe compensation for damages caused to the company.

Company Books

Article 143

1. The company shall keep a book of interests and minutes book on the general meeting resolutions.

2. The value of each partner's interest, the payments made and all relevsnt changes thereto shall be recorded in the book of interests.

3. The manager shall be responsible for the regular keeping of the company books.

Comptroller

Article 144

1. The articles may provide for the appointment of a comptroller (comptrollers) who shall supervise the observance of the articles, the taking of proper care of the company's property and shall report to the general meeting.

2. The following may not be comptrollers:

1. the managers, their deputies and company employees;

2. spouses, descendants or ascendants and collateral relatives to the third degree of the persons under the preceding item;

3. persons who with a sentence have been deprived of the right to hold a position of financial accountability.

3. In a single person company the comptroller shall be appointed by the owner.

Liability of the Manager and the Comptroller

Article 145

The manager and the comptroller shall be financially liable for damages caused to the company.

Auditors

Article 146

1. The company's annual financial statement shall be audited by one or several auditors who shall be certified public accountants.

2. Such audit shall be a condition for approving the annual financial statement.

3. The auditors shall be appointed by the general meeting before the expiration of the calendar year. They shall be liable for the proper and unbiased audit and for maintaining confidentiality.

4. (new, SG 84/00) The inspected and accepted annual accountancy report shall be presented to the commercial register and an announcement regarding it shall be promulgated in the State Gazette, unless the law stipulates that the annual accountancy report of the company may not be inspected by expert accountants.

Management of a Single Person Limited Liability Company

Article 147

1. The single owner of the capital shall manage and represent the company either personally or through an appointed by it manager. In case the owner is a legal person the manager of such legal person or a person designated by him shall manage the company.

2. (amend., SG 84/00) The single owner of the capital shall resolve on the issues falling within the powers of the general meeting, for which a written statement shall be made in the form for the decisions of the general meeting.

3. (new, SG 84/00) The contracts between the sole owner and the company, when it is represented by him, shall be concluded in writing.

Section IV.

Amending the articles of Incorporation

Increase of Registered Capital

Article 148

1. The registered capital may be increased through:

1. increasing the value of the interests;

2. subscribing new interests;

3. admitting new partners.

2. The partners may increase the value of the interests pro rata to their holdings, unless the articles of incorporation or the general meeting resolution provide otherwise.

Reduction of Registered Capital

Article 149

1. (Amend., No 70/1998; SG 84/00) The capital may be reduced to the minimum established by a law by a resolution to amend the company contract observing the requirements of Articles 150 and 151. Carried out in this case can be simultaneously increase or reduction of the capital by the order of Article 203.

2. The resolution shall state the purpose of the reduction, its amount and the manner through which it shall be accomplished.

3. The reduction may be effected through:

1. reducing the value of interests;

2. cancellation of the interest of a partner which has terminated its participation;

3. relieving of the obligation to pay up the unpaid portion of the registered capital.

Notice to Creditors

Article 150

1. The resolution to reduce the registered capital shall be published in the State Gazette. In the notice the company shall state that it is ready to provide security for claims or to pay its obligations as of the date of publication to the creditors which do not agree with the reduction.

2. The creditor's consent for the reduction shall be assumed if within three months of the publication they do not express in writing their objection.

3. (revoked - SG 84/00)

Registration of the Reduction

Article 151

1. The amendment to the articles with which the registered capital is reduced shall be registered upon expiration of the time period specified in the previous Art..

2. Attached to the application for registration shall be proof of observance of the requirements of Article 150 and a statement in writing of the manager that either security has been provided or the debt has been repaid to the creditors which have not consented to the reduction.

Managers' Liability

Article 152

Should the data for registration of the reduction provided by the manager prove to be untrue, he shall be liable for the damages suffered by the creditors to the extent they could not be satisfied by the company. In the case of several managers they shall be liable jointly and severally.

Payments Pursuant to Reduction

Article 153

(Suppl. SG 84/00)Payments to the partners pursuant to a reduction of the registered capital may be made only after the reduction has been registered and after the creditors who have expressed disagreement with the reduction have received indemnification or payment.

Section V.

Dissolution and Liquidation of the Company

Dissolution of the Company

Article 154

1. The company shall be dissolved:

1. with the expiration of the term set in the articles;

2. (amend., SG 84/00) upon decision of the partners adopted with a majority of 3/4 of the capital, unless the company contract stipulates a higher majority;

3. through a consolidation or merger with a joint stock company or another limited liability company;

4. upon being declared bankrupt;

5. by a decision of the district court in cases provided for by law.

2. The articles may provide for other grounds for dissolution of the company.

Dissolution by a Decision of the Court

Article 155

The company may be dissolved by a decision of the district court of its registration upon:

1. an action by the partners showing serious cause. The action shall be brought against the company if the plaintiffs' interests represent more than one fifth of the registered capital;

2. (amend., SG 84/00) by an action by the public attorney where activities of the company are in contravention to the law.

3. (new, SG 58/03) by an action of the public attorney when no manager of the company has been registered.

Liquidation of a Company

Article 156

1. In the case of dissolution of a company pursuant to Article 154, items 1, 2 and 5 and Article 155 a liquidation procedure shall be initiated.

2. The company's liquidator shall be its manager, except where another person has been appointed with the articles or with a resolution of the general meeting.

3. Upon request of the comptroller or of partners holding at least one tenth of the interests the court may appoint another liquidator.

4. The liquidation of the company shall be performed pursuant to Chapter Seventeen.

Dissolution of a Single Person Limited Liability Company

Article 157

1. A company in which the capital is owned by a single natural person shall be dissolved upon the death of such person, except where provided otherwise or where the heirs wish to continue its activities.

2. Where the capital is owned by a single legal person the company shall be dissolved with the dissolution of that legal person.

Chapter fourteen.

JOINT STOCK COMPANY

Section I.

General Provisions Definition

Article 158

1. A joint stock company is a company the capital stock of which is divided into shares. The company shall be liable before its creditors with its assets.

2. The trade name of the joint stock company shall include the extension "aktsionerno druzhestvo" [joint stock company] or the abbreviation "AD".

Number of Founders

Article 159(amend., SG 84/00)

1. A joint stock company can be found by one or more individuals or corporate bodies.

2. When a joint-stock company is formed by one person a constituent act shall also approve the statutes and the first supervisory board or board of directors shall be appointed.

3. The constituent act shall be issued in writing.

Founders

Article 160

1. (amend., SG 84/00) Founders are those persons who have registered stocks at the constituent assembly.

2. Persons declared bankrupt may not be founders.

Capital and Shares

Article 161

1. The capital stock and the value of the shares shall be designated in levs.

2. (Amend., SG, No 100 of 1997; SG 84/00) The minimum value of the capital of a joint-stock company shall be 50 000 levs.

3. (Amend., SG, No 70 of 1998) The minimum amount of the capital stock required for performing banking, insurance activities or activity on voluntary health assurance shall be determined by a separate law.

4. (suppl., SG 84/00) The capital stock must be fully subscribed. The company cannot register stocks from its capital. When this prohibition is violated at the time of founding the company the founders shall be jointly liable for the instalments against the registered stocks.

Nominal Value of a Share

Article 162 (amend., SG 84/00)

The minimum nominal value of a stock shall be 1 lev. Larger nominal values of stocks must be determined in integer levs

Section II.

Incorporation Prospectus

Constituent assembly

Article 163 (Amended - SG No 63/1995; SG 84/00)

1. The joint-stock company shall be constituted at a constituent assembly which shall be attended by all persons who register stocks. Founder can be represented by a proxy with an explicit letter of attorney with notary certified signature.

2. The stocks shall be registered at the constituent assembly.

3. The constituent assembly shall:

1. take decision for constituting the company;

2. adopt the statutes;

3. establish the size of the expenses related to the constituting;

4. elect supervisory board, respectively board of directors.

4. The decisions under para 3, item 1 and 2 shall be adopted unanimously, issuing written statement for which Article 232 shall apply.

5. When a joint-stock company is founded by one person a constituent act shall be issued.

Content of the Prospectus

Article 164

(Repealed - SG No 63/1995)

Contents of the statutes

Article 165(amend., SG 84/00)

The statutes must contain:

1. the firm, the headquarters and the address of management of the company;

2. the subject of activity and the term, if any;

3. size of the capital, the type and the number of the stocks, the rights for the individual classes of stocks, the special conditions for their transfer, if any, as well as the nominal value of the individual stock;

4. the bodies of the company, their mandate and the number of their members;

5. the type and the value of the non-pecuniary instalments, if any, the persons who make them, the number and the nominal value of the stocks to be granted;

6. the advantages which the said founders shall keep for themselves personally, if such are stipulated;

7. the conditions and the order of issuing stocks subject to reverse purchase, if such is stipulated;

8. the way of distribution of the profit;

9. the way of convening the general assembly;

10. other conditions in connection with the constituting, the existence and the termination of the company.

Payments

Article 166

1. (amend., SG 84/00) Monetary payments shall be made to a bank account opened by the managing board, respectively by the board of directors, to the name of the company, with an indication of the name of the payer, and any payments with deposited sums shall be effected with the unanimous decision of this body.

2. The provisions of Articles 72 and 73 shall apply mutatis mutandis to non-monetary contributions.

3. (new, SG 84/00) If, within three months the managing board, respectively the board of directors, does not certify before the bank that the company has been declared for registration the payers can draw back the instalments in full. The members of the respective board shall be jointly responsible for the payment of the instalments.

Interim Certificate

Article 167

1. (amend., SG 84/00) For payments or contributions for subscribing to shares the stockholders shall receive interim certificates signed by an authorised member of the managing board, respectively the board of directors.

2. The stockholders shall receive their shares upon presentation of interim certificates.

Constituent Meeting

Article 168(revoked, SG 84/00)

Subscription (amend., SG 58/03)

Article 169 (amend., SG 58/03)

A joint-stock company may be incorporated through subscription for raising capital only if a law explicitly stipulates the requirements and the order thereof.

Objectives of the Constituent Meeting

Article 170 (revoked, SG 84/00)

Incorporation of a Company with the Subscribed Capital

Article 171(revoked, SG 84/00)

Content of the Statutes

Article 172 (revoked, SG 84/00)

Founders' Liability

Article 173(revoked, SG 84/00)

Requirement for Registration of the Company

Article 174

1. For the registration of a joint stock company in the commercial register it shall be necessary that:

1. the statutes have been adopted;

2. the full amount of the capital stock has been subscribed;

3. (amend., SG 84/00) to have had paid the part of the value of each stock stipulated by the statutes, but no less than 25 percent of the nominal or issued value of each stock stipulated by the statutes;

4. (suppl., SG 58/03) the members of the board of directors or, respectively, the supervisory and managing board have been appointed;

5. the remaining requirements of the law have been fulfilled.

2. (amend., SG 84/00; suppl., SG 58/03) Entered in the commercial register shall be the data under Article 165, item 1 - 4, 5 (only the type and the value of the non-pecuniary instalment) and 10, as well as the names of the members of the board of directors, respectively of the supervisory and managing board, and the entry shall be promulgated. Promulgated shall also be the date of the decision of the court for entry in the commercial register. Presented to the register shall be the constituent statement and a list of the persons who have registered stocks at the time of constituting certified by the managing board or by the board of directors. When, after the constituting of the company the stocks are acquired by one person entered in the commercial register shall be the name, respectively the company, of the stock holder.

3. (New - SG 114/99) For entering into the commercial register the implementing of banking and insurance activity, activity at the stock exchange, investment broker, investment company, managing company and other activities for which certain law provides accomplishment with a permission by a state body shall be necessary the corresponding permission to be presented.

4. (new, SG 84/00) For amendment or supplement of the statutes in the commercial register shall be presented the statutes with the amendments by the respective date, certified by the person or by the persons representing the company.

Section III.

Shares Nominal Value of the Shares.

Denominations

Article 175

1. A share shall be a security which shall attest to the fact that its owner participates in the capital stock with the nominal value indicated on it.

2. A joint stock company may not issue shares of a different nominal value.

3. Shares may be issued in denominations of 1, 5, 10 and multiples of 10 shares.

Issue Price

Article 176

1. The issue price is the price at which the shares shall be purchased by the founders or, respectively, the subscribers in case the capital is raised through subscription.

2. The issue price shall not be lower than the nominal value. Shares may also be subscribed at a price higher than the nominal value.

3. The difference between the nominal value and the issue price shall be set aside for the company's reserve fund.

Indivisibility

Article 177

Shares are indivisible. Where a share belongs to several persons they shall exercise their rights in it jointly by designating a proxy.

Types of Shares

Article 178

1. Shares may be registered or bearer shares. Preferred shares may also be issued.

2. (new, SG 84/0) The joint-stock company can also issue non-cash stocks. The issuance and the administering of non-cash stocks shall be carried ut by an order established by a law.

3. (prev. para 2 - SG 84/00) Bearer shares shall not be delivered until payment of their nominal value or issue price.

4. (prev. para 3 - SG 84/00) Where bearer shares are delivered before payment of the full issue price the amount of the instalments shall be indicated on them.

Stockholders' Register

Article 179

The joint stock company shall keep a stockholders' register in which the names and addresses of the owners of registered shares shall be recorded and the type, nominal value and issue price, quantity and serial numbers of the shares shall be indicated. The same shall be applied for interim certificates.

Exchange of Shares

Article 180 (amend., SG 84/00)

Bearer shares shall be exchanged for registered shares and vice versa upon request of the shareholder after payment in full of their price, unless the statutes provide an order for it.

Shareholder's Rights

Article 181

1. A share entitles its owner to one vote in the general meeting of stockholders, to a dividend and to a share in the assets in case of liquidation in proportion to the nominal value of the share.

2. Where a company issues shares with special rights this must be indicated and provided for in the statutes.

3. (suppl., SG 84/00) The shares providing equal rights form a separate class. Not admitted shall be restriction of the rights of individual stock holders of one class.

Preferred Shares

Article 182

1. (Suppl., SG, No 103 1993) Preferred shares may provide a guaranteed or additional dividend or share in the company's assets in case of liquidation, as well as other rights provided for in this Act or the statutes. The statutes may provide that preferred shares have no voting rights, which must be indicated on the respective share.

2. Preferred shares having no voting rights shall be included in the nominal value of the capital stock.

3. (New - SG No 63/1995) It shall not be allowed more than 1/2 of the shares to be non-voting shares.

4. (Previous para 3 - SG, No 63 1995) Where a dividend due from a preferred share without voting rights is not paid in the course of 1 year and the delayed payment is not made during the following year together with the dividend due for that following year, the preferred share shall acquire voting rights pending payment of the delayed dividends. In this case the preferred shares shall be taken into account in determining the quorum and majority.

5. (Previous para 4 - SG, No 63 1995) In order to adopt a resolution with which the advantages arising from the nonvoting preferred shares are to be restricted, it shall be necessary to obtain the consent of the preferred stockholders, which shall convene at a separate meeting. The meeting may conduct business if not less than 50 per cent of the preferred shares are represented. Resolutions shall be adopted with a vote of at least three quarters of the shares so represented. The preferred shares shall acquire the right to vote upon the removal of the advantages.

Contents of a Share

Article 183

1. A share shall contain:

1. the designation share' for a denomination of one or shares' for larger denominations, preceded by the respective number thereof;

2. type of the shares;

3. the number of the denomination and the serial numbers of the shares comprised therein;

4. the trade name and seat of the joint-stock company;

5. the amount of the capital stock;

6. the total number of shares, their individual nominal value and their denomination structure;

7. the coupons and their maturity;

8. the signatures of two persons having authority to bind the company, and the date of issue.

2. (New - SG No 63/1995) A printed signature on the share shall also be considered valid signature.

3. (Previous para 2 - SG, No 63/1995) Filled in on the face of a registered share shall be the name of its first owner.

Coupons

Article 184

1. Unless otherwise provided in the statutes, shares shall be issued with dividend coupons for 20 years.

2. Coupons may not be transferred separately from the shares.

3. A coupon shall carry the designation `Coupon', the trade name of the joint stock company, the number of the coupon, indication as to the share and its denomination, and the year for which dividend is payable on presentation thereof.

Administering shares (amend., SG 58/03)

Article 185

1. (suppl., SG 58/03) Bearer shares shall be transferred and pledged by delivery.

2. Registered shares shall be transferred by endorsement which, to be binding on the company, must be recorded in the registered stockholders register. The statutes may provide for other conditions for the transfer of registered shares.

3. (new, SG 58/03) Registered shares shall be pledged by endorsement with "warranty clause", "pledge clause" or other expression meaning security. The pledge shall have effect for the company from the time of its registration in the book of the registered stock holders. The right to vote on pledged shares shall be exercised by the stock holder, unless the pledge contract stipulates otherwise. Article 473 shall not apply.

Liability of Transferor of Registered Shares

Article 186

The transferor of registered shares which have not been fully paid up or from which other obligations towards the company arise shall be liable jointly and severally with the transferee. The transferor's liability shall lapse upon the termination of a period of two years from the date that the transfer was recorded in the stockholders register.

Transfer of Interim Certificates

Article 187

1. An interim certificate may not be transferred prior to the incorporation of a company.

2. Transfers of interim certificates shall be subject to the provisions of Article 185, paragraph 2.

Acquisition of own stocks

Article 187a (New - SG 84/00)

1. The company can acquire own stocks only:

1. for reduction of the capital under Article 200, item 2;

2. for universal legal succession, except in cases of merging or incorporation;

3. if this is gratuitous;

4. if it carries out, by profession, transactions with securities or acquires the stocks in fulfilment of an order of a third person;

5. for exclusion of a stock holder according to Article 189, para 2 and 3;

6. as a result of compulsory fulfilment of an obligation og a stock holder to the company;

7. if they have been issued as privileged stocks specially by this privilege;ђpar 8. for reverse purchase.

2. In the cases under para 1, item 2, 6, 7 and 8 the stocks must be paid in full.

3. The company shall terminate the exercising of the rights on the own stocks until their transfer.

4. The total nominal value of the own stocks acquired according to para 1, with exception of those under item 1 and 7, cannot exceed 10 percent of the capital. The company shall be obliged to transfer, within three years, the possessed own stocks which exceed this amount.

5. If the stocks acquired in the cases under para 1, item 2 - 8 are not expropriated within the period under para 4 they shall be invalidated and Article 200, item 2 shall apply.

6. (amend., SG 58/03) The own stocks shall not be taken into consideration in determining the net value of the property of the company under Article 247a, para 2.

Reverse purchase of stocks

Article 187b (New - SG No. 84/00)

1. The company can buy own stocks on the grounds of a decision of the general assembly of the stock holders which shall determine:

1. the maximal number of stocks subject to reverse purchase;

2. the conditions and the order upon which the board of directors or the managing board shall carry out the purchasing within a definite period not longer than 18 months;

3. the minimal and the maximal size of the purchase price.

2. The decision under para 1 shall be taken by a majority of the represented capital and, if the reverse purchase is not explicitly stipulated by the statutes - by a majority of two thirds of the represented stocks. The decision shall be entered in the commercial register and an announcement for it shall be promulgated in the State Gazette.

3. The purchasing shall be carried out by respectively applying Article 247a, para 1 and 2.

Stocks with privilege for reverse purchase

Article 187c (New - SG No. 84/00)

1. The statutes can stipulate the purchasing of stocks subject to reverse purchase, under conditions and by an order stipulated by it.

2. The company shall present to the commercial register the proposal for reverse purchase, announcement for which shall be promulgated in the State Gazette.

3. The purchasing can be carried out only by sums designated for distribution according to Article 247a, para 1, 2 and 3.

4. The company shall be obliged to form a reserve amounting to the nominal value of all purchased stocks under para 1. This reserve can be distributed among the stock holders only in reducing the capital by the purchased stocks, as well as to be used for increase of the capital.

Inadmissible acquisition of own stocks

Article 187d. (new, SG 84/00)

If the company has acquired own stocks in violation of Article 187a through 187c, they must be transferred within one year from their acquisition. Otherwise the stocks shall be invalidated and Article 200, item 2 shall apply.

Disclosure of information

Article 187e. (new, SG 84/00)

The annual accountancy report of the company shall obligatorily show:

1. the number and the nominal value of the acquired and transferred through the year own stocks;

2. the grounds for the acquisitions made through the year, as well as the paid price;

3. the number and the nominal value of the possessed own stocks.

Cases equalised to acquisition of own stocks

Article 187f.(new, SG 84/00)

1. The rules of Article 187a through 187e shall also apply when:

1. stocks of the company are acquired and possessed by one person for the account of the company;

2. stocks of the company are acquired and possessed by another company where the first one directly or indirectly possesses a majority of the right of voting or on which it can exercise directly or indirectly control;

3. the company shall accept own stocks or stocks of a company under item 2 as a pawn.

2. When the company has registered own stocks at the time of its constituting or increase of the capital applied for them shall be Article 187a, para 3, Article 187d and art 187e.

3. The company cannot grant loans or secure the acquisition of its stocks by a third person. The restriction shall not apply for transactions concluded by banks or non-banking financial institutions during their usual activity.

Section IV.

Contributions

Obligation to Make a Contribution

Article 188

1. The stockholders shall be obligated to make contributions for the shares subscribed, which shall cover the fixed by the statutes portion of the value of the shares.

2. Partial contributions may vary for individual stockholders, if the statutes provide so expressly.

Consequences of Delaying Contributions

Article 189

1. The stockholders which have not made their contributions within the specified time periods shall owe interest, unless the statutes do not provide for liquidated damages. In case of a delayed non-monetary contribution, compensation for actual damage suffered may be claimed.

2. Stockholders whose contributions are overdue, if they do not make the due contributions within one month of written notice to do so, shall be deemed expelled. The notice must be published in the State Gazette unless the transfer of the shares is subject to the consent of the company.

3. A shareholder so expelled shall lose its shares and any contributions made. The shares of a shareholder so expelled shall be canceled and destroyed. The company shall offer for sale new shares substituting the canceled ones. The contributions made by the expelled shareholder shall be appropriated to the company's reserve fund.

Interest

Article 190

1. The stockholders shall not be paid interest on contributions made, except in cases provided for in the statutes.

2. (amend., SG 84/00) Where the stockholders have made partial contributions in different proportions, interest shall be due on the difference, unless the statutes provide otherwise. The interest shall be paid prior to the dividends according to Article 247a regardless of the decision of the general assembly of the stock holders for distribution of the profit.

3. The fruits derived from contributions made prior to incorporation shall be in the company's favor, unless the statutes provide otherwise.

Security

Article 191

The statutes may provide that the stockholders shall provide security for the portion not contributed.

Section V.

Increase of the Capital Stock

Prerequisites

Article 192

1. The capital stock may be increased by issuing new shares, by increasing the nominal value of shares already issued, or by converting bonds into shares pursuant to Article 215.

2. The general meeting of stockholders resolution to increase the capital stock shall be adopted by a two thirds majority of the votes of the shares represented at the meeting. The statutes may provide for a larger majority, as well as for additional conditions.

3. Where shares of various classes exist, the resolution shall be adopted by each class at a separate meeting.

4. Where the new shares are to be sold at a price exceeding their nominal value, the minimum sale price shall be specified in the general meeting resolution.

5. An increase of the capital stock is admissible only after the specified by the statutes amount has been fully paid up.

6. (new, SG 84/00) In case of increase of the capital in violation of Article 161, para 4 the members of the managing board, respectively of the board of directors, shall be jointly liable for the instalments for the registered own stocks.

7. (New - SG No 63/1995, prev. para 6 - amend., SG 84/00) In the case of increase of capital Chapter Fourteen, Sub-section II shall apply, respectively, and increase of the capital through subscription shall be carried out under conditions and by an order established by a law.

8. (New - SG 114/99; prev. para 7 - SG 84/00) For entering the increase of the capital with subscription shall be necessary to be presented a confirmation of a prospectus except in the cases when such is not required by the law.

Requirements for entering the increase of the capital

Article 192a.(New, SG 84/00)

1. For entering the increase of the capital in the commercial register shall be necessary:

1. to have registered the new stocks;

2. to have installed at least 25 percent of the nominal value of the registered new stocks;

3. to have paid the difference between the nominal and the issued value of the new stocks.

2. When the new stocks are not registered in full the capital shall be increased only by the value of the registered stocks if the decision of the general assembly for the increase admits such possibility.

3. Presented at the commercial register shall be a list of the persons who have registered the new stocks, certified by the managing board, respectively by the board of directors.

Increase of the Capital Stock by Non-Monetary Contributions

Article 193

Where the capital stock is increased by non-monetary contributions, the general meeting resolution shall specify the subject of each contribution, the contributor, and the nominal value of shares given for such contribution.

Preferential Right of Stockholders

Article 194

1. (amend., SG 84/00) Each shareholder is entitled to acquire a part of the new shares in proportion to its share in the capital stock prior to the increase.

2. (amend,. SG 84/00) For stocks of different classes the right under para 1 shall be valid for the stock holders of the respective class. The rest of the stock holders shall exercise their advantage after the stock holders of the class for which new stocks are issued.

3. (new, SG 84/00) The right of the stock holders under para 1 and 2 shall be redeemed within a period determined by the general assembly but at least once a month after the promulgation in the State Gazette of an invitation for registering the stocks. The invitation for registration of new stocks shall be promulgated after presentation of the decision for increase of the capital in the commercial register.

4. The right of the stock holders under para 1 and 2 can be restricted or dropped by a decision of the general assembly taken by a majority of two thirds of the votes of the represented stocks. The managing board, respectively the board of directors shall present a report regarding the reasons for revoking or the restriction of the advantages and shall substantiate the issued value of the new stocks. The decision of the general assembly shall be submitted to the commercial register and shall be promulgated.

Conditional Increase of the Capital Stock

Article 195

The increase of the capital stock may be conditional upon the buying of the shares by certain persons at a certain price, or against bonds issued by the company.

Increase of the Capital Stock by the Supervisory Board (Board of Directors)

Article 196(amend., SG 84/00)

1. (prev. Article 196 - amend., SG 84/00) The statutes may empower the managing board, or the board of directors as the case may be, to increases the capital stock up to a certain nominal amount in the course of five years from the date of incorporation, by issuing new shares. A resolution to the same effect may also be passed by amending the statutes in compliance with the requirements of Article 192, para 3, for a period not exceeding five years from the date of registration of the amendment.

2. (new, SG 84/00) For increase of the capital under para 1 shall apply Article 194, para 1 and 2.

3. (new, SG 84/00) The managing board, respectively the board of directors, can exclude or restrict the right of the stock holders under Article 194, para 1 only if it has been authorised to do so by the statutes or by a decision of the general assembly taken by a majority of 2/3 of the votes of the represented stocks. The authorisation cannot be given for a period longer than the period under para 1. In this case the increase of the capital can also be made by the order of Article 193 and 195.

Increase of the Capital Stock from Company Funds

Article 197

1. The general meeting may resolve to increase the capital stock by partial capitalisation of profits. The resolution shall be adopted within three months from the date that the annual statement for the previous year is approved, with a majority of the votes of three quarters of the shares represented at the meeting.

2. The company's balance sheet shall be presented and the fact that the increase is from the company's own funds shall be explicitly stated upon filing the resolution to increase the capital stock for registration with the court.

3. (amend., SG 84/00) The new shares shall be allocated among stockholders, including the company when it possesses own stocks on a pro rata basis. Any general meeting resolution in contravention of the latter provision shall be null and void.

Receipt of Shares

Article 198

1. Upon registering the increase of the capital stock pursuant to the preceding Art., the supervisory board, or the board of directors as the case may be, shall, without delay, invite the stockholders to receive their shares.

2. New bearer shares which have not been claimed within one year of the date that the resolution to increase the capital stock was published in the State Gazette shall be sold on the stock exchange. The stockholders' rights shall lapse, and moneys from the sale shall be appropriated to the company's reserve fund.

Section VI.

Reducing the Capital Stock

Ordinary Reduction

Article 199

1. A reduction of the capital stock shall be implemented by a general meeting resolution.

2. (amend., SG 84/00) If there are several classes of shares, resolutions of each class of stockholders shall be necessary to reduce the capital stock.

3. The resolution shall set forth the purpose of the reduction and the method by which it is to be effected.

Methods of Reduction

Article 200

1. The capital stock may be reduced:

1. by reduction of the nominal value of shares;

2. by cancellation of shares.

Reduction of Capital Stock by Cancellation of Shares

Article 201

1. Shares may be canceled forcibly or after their acquisition by the company.

2. (amend., SG 84/00) Forcible cancellation of shares shall be allowed if provided for in the statutes and the stocks registered under this condition.

3. The prerequisites for, and the method of, forcible cancellation shall be set forth in the statutes.

Protection of Creditors

Article 202(amend., SG 84/00)

1. For creditors whose claims have arisen prior to publication of the resolution on reduction of the capital shall apply respectively the rules of Article 150-153.

2. The rule of para 1 shall not apply when the reduction of the capital has been made with the purpose of covering losses. In this case the stockholders shall not be released from the obligation for instalments.

3. The rule of para 1 shall also not apply when the reduction is made by own stocks which have been paid up in full and have been acquired gratuitously or by resources under Article 247a, para 1 - 3. In these cases Article 187c, para 4 shall apply respectively.

Regime of Security or Payment

Article 203(amend., SG 84/00)

1. (Amended, SG No 83/1996) The capital of the company can be simultaneously reduced and increased, so that the reduction shall have effect only if the planned increase of the capital is carried out.

2. In the cases under para 1 the capital can also be reduced under the minimal size established by the law if by increasing the capital at least the minimum established by the law is achieved.

3. The rule of Article 202, para 1 shall not apply if, as a result from the increase the size of the capital before its change is not achieved or exceeded.

Section VII.

Bonds

Procedure for Issuing Bonds

Article 204

1. (amend. SG 114/99; amend., SG 58/03) Bonds can be issued by a joint stock company. Issuance of bonds through public offering may be carried out at least two years after the entering of the company in the commercial register and if there are two annual accounts approved by the general meeting.

2. (amend. SG 114/99) The requirement of para 1 shall not refer to bonds issued or guaranteed by the state.

3. (amend. and suppl., SG 61/02) Resolutions to issue bonds may be adopted by the general meeting of stockholders, which can empower for that the board of directors, respectively the managing board by the order of Article 196.

4. Bonds of same issue and same nominal value shall rank pari passu.

5. (New - SG No 63/1995; suppl., SG 6102) Bonds may be in the form of bond stock and bond certificates. The rules for shares stipulated in this Act, with exception of Article 176, para 2 and Article 184, para 2, shall apply to the issue, transfer and pledge of bond stock and bond certificates.

Requirements and order of issuing bonds (Amend., SG 61/02)

Article 205

1. The issuance of bonds through subscription or other form of public offering shall be carried out under conditions and by an order established by a law.

2. When issuing bonds in cases other than those under para 1 the company shall work out a proposal for registering bonds containing at least:

1. the decision under Article 204, para 3;

2. (revoked, SG 58/03)

3. the total nominal and issuance value of the bond loan;

4. number, type, nominal and issuance value of the offered bonds, as well as estimated restrictions of their transfer;

5. for active bonds - the period until the maturity of the bonds, the scheme of acquittal of the bond loan, including the gratis period, if such is stipulated, the interest payments, the way of their calculation and the periodicity of the payments;

6. for bonds with other form of income - the way of formation of the income and the maturity of the payments;

7. the type and the size of the submitted security, if any;

8. the way and the term of payment of the interest and the main part;

9. initial and final date, as well as place and order of registering the bonds;

10. conditions of registering the bonds;

11. minimal and maximal size of the collected instalments›y which the loan shall be considered concluded.

3. The bonds shall be issued only after the full payment of their issuance value.

4. The decision under Article 204, para 3 for issuing public issue of bonds can stipulate the application of, respectively,ђhe provisions of the law regarding the agent of the bond holders and the security of a public issue of bonds.

Holding Offering (Title amend., SG 61/02)

Article 206

1. (Amend., SG 61/02) The raising of moneys and the delivery of the bonds shall be performed by a bank or investment mediator.

2. (Amend., SG 61/02) Subscribers shall pay the relevant moneys into an accumulation account with a bank specified by the company. The sums in the said account may not be used prior to the announcement according to para 6.

3. (Amend., SG 61/02) The decision under Article 204, para 3 shall determine the conditions under which the loan shall be considered concluded. Obligatory condition is for the issuance value of all registered bonds to be paid in full.

4. (Amend., SG 61/02) Within 14 days from the conclusion of the offering the company shall conclude a contract with a bank settling the order and the way of servicing the payments under the bond loan.

5. (Amend., SG 61/02) Should the term under Article 205, para 2, item 9 expire short of compliance with the terms provided for the contracting of the loan, moneys paid up shall be reimbursed to the subscribers together with such interest as accrued by the bank.

6. (New, SG 61/02) Within one month from the final date for registration of the bonds under Article 205, para 2, item 9 the managing body of the company shall promulgate in the State Gazette announcement for the concluded bond loan indicating:

1. the size of the loan;

2. the date of beginning of the period to maturity;

3. the date of maturity - for interest and main part payments;

4. the bank under para 4 servicing the payments on the bond loan;

5. the place, the date, the hour and the agenda of the first general meeting of the bond holders.

7. (New, SG 61/02) The date of the first general meeting of the bond holders cannot be later than 30 days from the promulgation under para 6. The place of holding the meeting cannot be different from the headquarters of the company.

8. (New, SG 61/02) The company shall inform immediately the representatives of the bond holders under Article 209 and the bank servicing the payments on the bond loan about all changes of their trading activity related to its obligations regarding the issued bonds.

Nullity of a decision for issuing bonds (amend., SG 61/02)

Article 207

Null shall be every decision of the company for:

1. change of the conditions under which issued bonds have been registered;

2. issuance of new bonds with preferential regime of payment without the presence of consent at the general meetings of the bond holders from previous unpaid issues.

First General Meeting of Bond-Holders

Article 208

(Suppl. SG, No 103/93; Amend., SG 61/02) The first general meeting of the bond holders shall be legal if 1/2 of the registered loan is represented.

Representation of Bond-Holders

Article 209

1. The holders of bonds of the same issue shall form a group for the protection of their interests before the company.

2. The group shall be represented by trustees elected by the general meeting of bond-holders. These trustees may not be more than three.

Limitations on Representation

Article 210

1. The following may not be trustees as per the preceding Art.:

1. the debtor company;

2. (Amend., SG 61/02) persons related to the debtor company;

3. companies which have guaranteed, in part or in total, the liabilities assumed;

4. members of the supervisory board, the managing board or the board of directors of the company, or descendants, ascendants and spouses thereof;

5. persons who are prohibited by law from serving on company governing bodies;

2. Trustees may be recalled by a general meeting resolution of bond-holders.

Powers of the Trustee

Article 211

Trustees may perform acts to protect the bond-holders' interests pursuant to resolutions of the general meeting of bond-holders.

Participation of Trustees in the General Meeting of Stockholders

Article 212

1. The trustees of bond-holders may participate in the general meeting of stockholders without the right to vote. They may obtain information under the same terms as stockholders.

2. Where decisions are adopted concerning the performance of obligations under the terms of the bond loan, the general meeting of stockholders shall hear the opinion of the bond-holders' trustees.

Remuneration of Trustees

Article 213

1. The remuneration of the bond-holders' trustees shall be fixed by the company and shall be paid on its account. Should the company fail to fix such remuneration, the general meeting of bond-holders shall do so.

2. Should the company object to the amount so fixed, the remuneration shall be fixed by an order of the district court upon application by the trustees.

General Meeting of Bond-Holders

Article 214

1. (Suppl., SG 61/02) The general meeting of bond-holders shall be called by the trustees of the bond-holders by an invitation promulgated in the State Gazette at least 10 days before the meeting.

2. (Amend., SG 61/02) The general meeting may also be called upon the request of the holders of not less than 1/10 of the respective issue of bonds or, if liquidation proceedings have commenced,

upon the request of the liquidators of the company.

3. The trustees of the bond-holders shall be bound in duty to call the general meeting of bond-holders upon receipt of notice from the governing bodies of the joint stock company as to:

1. a proposed amendment of the company's purposes or type, or for transformation of the company;

2. (Amend., SG 61/02) proposal for issuance of a new issue of preferred bonds.

4. Each issue of bonds shall constitute a separate general meeting.

5. The provisions for the general meeting of stockholders shall apply mutatis mutandis to the general meeting of bond-holders.

6. The general meeting of stockholders shall be bound in duty to review a general meeting of bond-holders resolution.

Section VIII. Conversion of Bonds into Shares

Resolution on Conversion of Bonds into Shares

Article 215

1. The general meeting may resolve on the issuing of convertible bonds. This type of bonds may not be issued by companies in which the State owns more than 50 per cent of the capital stock. The stockholders may subscribe preferentially such bonds under the terms which apply to a subscription for a new issue of shares.

2. The procedure for the conversion of bonds into shares shall be specified in the general meeting resolution on the issuing.

3. The general meeting of stockholders may lay down the terms under which holders of bonds which are not redeemable by conversion into shares may so convert them.

4. The issue price of the converted bonds may not be lower than the nominal value of the shares which the bond-holders would acquire by conversion.

5. In case of reduction of the capital stock because of losses through a reduction of the number of shares or of the nominal value thereof, the rights of bond-holders shall be reduced proportionally.

Terms of Validity of Resolution to Issue of New Bonds

Article 216

A resolution to issue new bonds convertible into shares shall be valid subject to approval by the general meeting of bond-holders which have acquired the right to convert bonds into shares.

Conversion upon Increase of Capital Stock

Article 217

Upon adoption of a resolution to increase the capital stock, the managing board, or the board of directors as the case may be, shall determine the period within which bonds may be converted into shares. This period may not exceed three months.

Registration of the Increased Capital Stock (Amend, SG 61/02)

Article 218

The managing board, respectively the board of directors, shall declare for registration the increase of the capital stock occurring as a result of conversion of bonds into stocks.

Section IX.

Joint Stock Company Organs

Types of Organs

Article 219

1. (prev. Article 219 - SG, 84/00) The joint stock company organs shall be:

1. the general meeting of stockholders;

2. the board of directors (one-tier system), or the supervisory board and the managing board (two-tier system).

2. (new, SG 84/00) In a sole owned joint-stock company the sole owner of the capital shall decide on the issues of competence of the general assembly.

Subsection I General Meeting of Stockholders

Composition of the General Meeting

Article 220

1. (suppl., SG 58/03) The general meeting comprises the voting stockholders. A voting shareholder may participate in a general meeting either in person or by proxy. A member of the board of directors, respectively of the supervisory and managing board may not represent a stock holder.

2. (amend., SG 58/03) The stock holders of preference stocks without voting right, as well as the members of the board of directors, respectively of the supervisory and managing board, when they are not stock holders, shall participate in general meeting proceedings without the right to vote.

3. (new, SG 58/03) When the persons hired by the company are more than 50 they shall be represented in the general meeting by one person with advisory power. Their representative shall have the rights under Article 224.

Competence

Article 221

The general meeting shall:

1. amend the statutes;

2. resolve on increase or reduction of the capital stock;

3. resolve on transformation and dissolution of the company;

4. (amend., SG 58/03) elect and recall the members of the board of directors, or of the supervisory board as the case may be;

5. (new, SG 58/03) determine the remuneration of the members of the supervisory board, respectively of the members of the board of directors to whom the management will not be commissioned, including their right to receive a part of the profit of the company, as well as to acquire shares and bonds of the company;

6. (prev. item 5 - SG 58/03) appoint and dismiss CPA auditors;

7. (prev. item 6 - amend., SG 58/03) approve the annual financial statement as certified by the appointed auditor, take decision for distribution of the profit, for complementing Fund "Reserve" and for payment of dividend;

8. (prev. item 7 - SG 58/03) resolve on issuing of bonds;

9. (prev. item 8 - SG 58/03) appoint liquidators upon dissolution of the company, except in the event of bankruptcy;

10. (prev. item 9 - SG 58/03) relieve of responsibility the members of the supervisory board and managing board, or of the board of directors as the case may be;

11. (prev. item 10 - SG 58/03) resolve on other matters which by virtue of the law or the statutes are in its competence.

Holding of General Meeting

Article 222

1. (amend. and suppl., SG 58/03) A general meeting of stockholders shall be held at least once a year in the seat of the company unless the statutes stipulate another place on the territory of the Republic of Bulgaria.

2. (new, SG 58/03) The first general meeting shall be held not later than 18 months from the incorporation of the company and the next regular meetings - not later than 6 months from the end of the year of account.

3. (new, SG 84/00; prev. para 2 - SG 58/03) If the losses exceed one second of the capital general assembly shall be held not later than there months from establishing the losses.

4. (prev., para 2 - SG 84/00; prev. para 3 - SG 58/03) The general meeting shall elect a chairman and a secretary of the meeting, unless the statutes provide otherwise.

Convening the General Meeting

Article 223

1. (amend., SG 58/03) The general meeting shall be convened by the board of directors, or by the managing board as the case may be. A general meeting may also be convened by the supervisory board, as well as on the request of the owners who have possessed shares for a period longer than three months, representing at least 5 percent of the capital.

2. (Amend., SG, No 33 of 1999; amend. and suppl., SG 58/03) Should, within one month from filing the request of the stock holders, holding at least 5 percent of the capital, under para 1, it is not granted or if the general assembly is not held within 3 months from filing the request the district court shall convene a general assembly or shall empower the stock holders who have requested the convening or their representative to convene the assembly. The circumstance that the stocks have been possessed for a period longer than three months shall be established in court by a notary certified declaration.

3. (Amend., SG, No 100 of 1997; SG 84/00) The general meeting shall be convened by an invitation in the State Gazette. If stocks have not been issued to a bearer the statutes can stipulate for the convention to be carried out only by written invitation.

4. As a minimum the notice shall state:

1. the trade name and seat of the company;

2. the place, date and hour of the meeting;

3. the type of general meeting;

4. the formalities, if provided for in the statutes, to be satisfied for attendance and exercise of the right to vote;

5. (Amend., SG 61/02) the agenda and business to be transacted, and the concrete proposals.

5. (Amend., No 100 of 1997) The time period from the publication to the opening of the meeting shall not be less than 30 days.

Including issues in the agenda (new, SG 58/03)

Article 223a. (new, SG 58/03)

1. Stock holders who have possessed for a period longer than three months stocks representing at least 5 percent of the capital of the company may, upon promulgation or sending invitation, include other issues in the agenda of the general meeting.

2. Not later than 15 days before the opening of the general meeting the persons under para 1 shall furnish to the commercial register a list of the issues to be included in the agenda, the proposals for decisions and the written matters related to them. The court shall rule by a definition on the request for their presentation on the day of its filing or on the next working day at the latest.

3. The circumstance that the stocks have been possessed for a period longer than three months shall be established in court by a notary certified declaration.

4. Not later than the next working day after the definition of the court under para 2 the stock holders shall present the list of issues, the proposals for decisions and the written matters at the seat and address of management of the company. Article 224 shall apply respectively.

Right to Information

Article 224.

1. (prev. text of Article 224 - amend., SG 58/03) All papers relative to the agenda of a general meeting must be placed at the disposal of the stockholders not later than the date of publication or mailing of the notice thereof.

2. (new, SG 58/03) When the agenda includes an election of members of the board of directors, respectively of the supervisory board, the materials under para 1 shall also include data for the names, the permanent address and the professional qualification of the persons nominated for members. This rule shall also apply when the issue is included in the agenda by the order of Article 223a.

3. (new, SG 58/03) On request the written matters shall be submitted to every stock holder free of charge.

List of Participants

Article 225

A list shall be drawn up of the stockholders or proxies present at the meeting, and the respective number of shares owned or represented. The stockholders or proxies shall certify their presence at the meeting by signature. The list shall be authenticated by the chairman and the secretary of the meeting.

Proxy

Article 226

A shareholder shall have the right to attend a general meeting by proxy executed in writing.

Quorum of Stockholders

Article 227

1. (prev. text of Article 227 - amend., SG 58/03) The statutes may provide for a quorum of the stockholders.

2. (new, SG 58/03) The decisions under Article 221, item 1 - 3 shall be adopted only if at least half of the capital is represented at the general meeting. The statutes may provide for a bigger quorum.

3. (new, SG 58/03) For lack of quorum in the cases under para 1 and 2 a new meeting may be set not earlier than 14 days and it will be legal regardless of the capital represented in it. The date of the new sitting may also be indicated in the invitation for the first sitting.

Voting

Article 228

1. Voting rights shall originate upon payment of the contribution, unless otherwise provided in the statutes.

2. (amend., SG 58/03) Where a proposed resolution affects the rights of a class of stockholders, the voting shall be in classes whereas the requirements for quorum shall apply for each class individually.

Conflict of Interest

Article 229

A shareholder may not, either in person or by proxy, vote on:

1. actions brought by the company against it;

2. proceedings to realise the liability of such shareholder to the company.

Majority

Article 230

1. General meeting resolutions shall be passed by majority vote of the shares represented, unless the law or the statutes provide otherwise.

2. (amend., SG 58/03) Resolutions under 221, items 1, 2 and 3 (only for termination), shall require a majority of at least two thirds of the shares represented. The statutes may provide for another bigger majority for these cases.

3. (new, SG 58/03) Where the law or the statutes provide for voting in classes the rules for quorum and majority shall apply for each class individually.

Minority

Article 230a (new, SG 84/00; revoked, SG 58/03)

Resolutions

Article 231

1. (amend., SG 58/03) The general meeting may not pass resolutions on matters of which there has been no announcement pursuant to Article 223 and 223a, unless all stockholders are present or are represented at the meeting and no one objects to the submission of such matters to debate.

2. General meeting resolutions shall take effect immediately, unless such effect is deferred.

3. (Amend., SG, No 100 of 1997; SG 84/00; amend., SG 58/03) The decisions regarding amendment and supplement of the statutes and closing of the company shall be enacted upon their entry in the commercial register.

4. (new, SG 58/03) Increase and reduction of the capital, transformation of the company, election and release of members of the boards, as well as appointment of liquidators shall have effect as of their entry in the commercial register.

Minutes

Article 232

1. The minutes of a general meeting shall be kept in a special book and shall comprise:

1. the place, date and hour of the meeting;

2. the names of the chairman and the secretary, and of the vote tellers;

3. the attendance of the managing and the supervisory board, and of other persons which are not stockholders;

4. the motions made on the substance of the debate;

5. the votes taken and the results thereof;

6. the objections made.

2. The minutes of the meeting shall be signed by the chairman and the secretary, and by the vote tellers.

3. Attached to the minutes shall be:

1. the list of participants;

2. the documents relative to the convening of the meeting.

4. (new, SG 58/03) On request of a stock holder or a member of a board attending the general meeting may be a public notary who will prepare findings records under Article 488a of the Civil Procedure Code. Copy of the findings records shall be attached to the minutes of the general meeting.

5. (prev. para 4 - SG 58/03) The minutes and the documents attached thereto shall be kept on file for not less than five years. Any shareholder shall have the right to inspect the file on demand.

Resolutions of the sole owner

Article 232a. (new, SG 84/00)

Written statements shall be issued for the resolutions of the sole owner of the capital.

Subsection II General Provisions for the Two Systems of Administration Terms of Office

Article 233

1. The members of the board of directors, the supervisory board and managing board shall be elected for not more than a five-year term of office, unless a shorter term is provided for in the statutes.

2. The members of the first board of directors, or of the first supervisory board as the case may be, shall be elected for not more than a three-year term of office.

3. Directors may be reelected for any number of terms.

4. (new, SG 84/00; suppl., SG 58/03) The members of the board of directors and of the supervisory board can be released from their occupations before the expiration of the mandate for which they have been elected.

5. (new, SG 58/03) A member of the board may request his writing off the commercial register by a written notification to the company. Within 6 months from receipt of the notification the company shall enter his release in the commercial register. Should the company fail to do so the interested member of the board may declare himself for entry this circumstance and the court shall register it regardless of whether another person has been elected in his place.

Directors

Article 234

1. A director may be any natural person possessing capacity. Where the statutes so provide, a director may be a legal person. In this case the legal person shall designate a representative for performance of its duties on the board. The legal person shall bear unlimited liability and shall be liable jointly and severally with the other directors for the liabilities arising from acts of its representative.

2. A person may not be a director, if it:

1. (amend., SG 84/00) has been a member of an executive or controlling body of a company terminated due to bankruptcy during the last two years preceding the date of the decision for declaring bankruptcy if there remain unsatisfied creditors;

2. (revoked, SG 84/00)

3. does not meet other requirements provided for in the statutes.

3. (new, SG 58/03) The members of boards shall be entered in the commercial register where they shall submit a notary certified consent and a declaration that there are no obstacles under para 2.

Representative Powers

Article 235

1. The members of the board of directors, or of the managing board as the case may be, shall represent the company collectively, unless otherwise provided by the statutes.

2. The board of directors, or, as the case may be, the managing board subject to approval by the supervisory board, may delegate authority to one or several of its members to represent the company. The authority so delegated may at any time be revoked.

3. The names of the authorized representatives shall be registered in the commercial register and published in the State Gazette. For registration they shall present notarized signatures.

4. (amend., SG 84/00) Restrictions on the representative authority of the board of directors, of the managing board and of the persons authorised by them according to para 2 shall not be binding upon bona fide third parties.

5. The authorization and the revocation thereof shall be binding upon bona fide third parties after registration and publication.

Contracts of the sole owner

Article 235a. (new, SG 84/00)

The contracts between the sole owner of the capital of the company, when it is represented by him, shall be concluded in writing.

Special Rules for conclusion of transaction (amend., SG 58/03)

Article 236 (amend., SG 58/03)

1. The statutes of the company my provide for certain transactions to be concluded after a preliminary permit of the supervisory board, respectively by the unilateral decision of the board of directors. Such restrictions may also be set by the supervisory board, respectively by the board of directors.

2. Only by a decision of the general meeting of the stock holders may the following transactions be concluded:

1. transfer or ceding the administering of the whole trade company;

2. administering assets whose total value, during the current year, exceeds half of the value of the assets of the company according to the latest certified annual accountancy report;

3. undertaking obligations or submitting securities to one person or to related persons, whose size during the current year exceeds half of the value of the assets of the company according to the latest certified annual accountancy report.

3. The statutes of the company may explicitly provide for the transactions under para 2 to be carried out by a decision of the board of directors, respectively of the managing board. In this case it shall be necessary to have an unanimous decision of the board of directors, respectively a prior permit of the supervisory board.

4. A transaction concluded in violation of para 1 - 3 shall be valid and the person who has concluded it shall be responsible to the company for the caused damages.

Rights and Obligations

Article 237 (amend., SG 58/03)

1. The members of the boards shall have equal rights and obligations, regardless of any internal division of functions among them and the ceding of right of management and representation of some of them.

2. The members of the boards shall be obliged to perform their functions by due diligence to the interest of the company and all stock holders.

3. A person nominated for a member of a board shall be obliged, before his election, to inform the general meeting of the stockholders, respectively the supervisory board, about his participation in trade companies as unlimited liable partner, about the possession of more than 25 percent of the capital of another company, as well as about his participation in the management of other companies or cooperations as a procurator, manager or member of a board. Should these circumstances occur after the person has been elected as a member of the board he shall owe an immediate written notification.

4. The members of the board of directors and of the managing board shall not have the right, on their or someone else's behalf, to carry out commercial transactions, to participate in trade companies as unlimited liable partners, as well as to be procurators, managers or members of boards of other companies or cooperations carrying out competitive activity with respect of the company. This restriction shall not apply if the statutes explicitly so admits or where the body electing the member of the board has given its explicit consent.

5. The members of the boards shall be obliged not to make public the information having become known to them in this quality, if this would affect the activity and the development of the company, including after they cease to be members of the board. This obligation does not regard the information which, by virtue of a law, is accessible to third persons or it has already been made public by the company.

6. Paragraphs 1 - 5 shall also apply for the individuals representing corporate bodies - members of boards according to Article 234, para 1.

Quorum and Majority

Article 238

1. The boards may pass resolutions if at least half the directors are present, whether in person or represented by another director. No director present may represent more than one absent director.

2. Resolutions shall be passed by a simple majority, unless otherwise provided by the statutes.

3. The statutes may provide that the board may pass resolutions in absentia if all directors have stated in writing their approval for the resolution.

4. (new, SG 58/03) Not later than the beginning of the sitting a member of the board shall be obliged to inform in writing its chairman that he or a related person is interested in an issue to be discussed and he will not participate in taking the decision.

Minutes

Article 239 (suppl., SG 58/03)

Minutes shall be kept of all resolutions of the managing board, the supervisory board and the board of directors which shall be signed by all present members of the respective board, indicating the vote of each of them on the considered issues.

Liability

Article 240

1. The directors shall deposit a guarantee for their management of the affairs of the company in an amount determined by the general meeting, but not less than their three month gross income. The guarantee may be in the form of shares or bonds deposited with the company.

2. The directors shall be liable jointly and severally before the company for any damages caused through a fault of theirs.

3. Any director may be held harmless if it is established that it has no fault for the damage suffered by the company

Responsibility on request of stock holders (new, SG 58/03)

Article 240a. (new, SG 58/03)

Stock holders, possessing at least 10 percent of the capital of the company, may lay a claim for holding responsible members of the board of directors, respectively of the supervisory and managing boards, for damages caused to the company.

Contracts with the members of boards and related persons (new, SG 58/03)

Article 240b. (new, SG 58/03)

1. The members of boards shall be obliged to inform in writing the board of directors, respectively the managing board, when they or their related persons conclude contracts with the company beyond its usual activity or substantially depart from the market requirements.

2. The contracts under para 1 shall be concluded on the grounds of a decision of the board of directors, respectively of the managing board.

3. A transaction concluded in violation of para 2 shall be valid, and the person having concluded it, knowingly or having been able to know that such a decision is missing, shall be liable for caused damages to the company.

Subsection III Two Tier System Managing Board

Article 241

1. The joint stock company shall be managed by a managing board which shall act under the control of a supervisory board.

2. The members of the managing board shall be appointed by the supervisory board, which shall determine their remuneration and shall have the right to recall them at any moment.

3. No person may simultaneously serve on both the managing board and the supervisory board of one company.

4. (amend., SG 58/03) The number of members of the managing board shall be 3 to 9 persons and it shall be determined by the statutes.

5. The rules of procedure of the managing board shall be approved by the supervisory board.

6. (new, SG 58/03) The relations between the company and a member of the managing board shall be settled by a contract for commissioning of the management. The contract shall be concluded in writing, on behalf of the company, through the chairman of the supervisory board or through a member authorised by him.

Supervisory Board

Article 242

1. The supervisory board may not take part in the management of the company. The supervisory board shall represent the company only in its relationship with the managing board.

2. (amend., SG 84/00) The members of the supervisory board shall be appointed by the general meeting of stockholders. Their number may be from three to seven persons.

3. The supervisory board shall adopt its own rules of procedure and shall appoint a chairman and vice chairman from among its members.

4. (new, SG 58/03) The supervisory board shall gather for regular sittings at least once in three months.

5. (prev. para 4 - SG 58/03) The chairman shall call meetings of the supervisory board on his own initiative, as well as upon request by the members of the supervisory board or the members of the managing board.

6. (new, SG 58/03) The relations between the company and a member of the supervisory board shall be settled by a contract. The contract shall be concluded on behalf of the company through a person authorised by the general assembly of the stock holders or by the single owner.

Reporting and Supervision

Article 243

1. (suppl., SG 58/03) The managing board shall report on its activity to the supervisory board at least once every three months. The report shall respectively contain the data under Article 247, para 2 and 3.

2. The managing board shall immediately inform the chairman of the supervisory board of all circumstances which have arisen which are material to the company.

3. The supervisory board may at any time require that the managing board provide information or a report on any matter concerning the company.

4. (suppl., SG 58/03) The supervisory board may carry out any necessary investigations in performance of its duties, as its members shall have access to the entire necessary information and documents. For purposes of such investigation it may employ the services of experts.

Subsection IV One Tier System

Board of Directors

Article 244

1. (amend., SG 84/00) The company shall be managed and represented by a board of directors. The board of directors shall consist of minimum three and maximum nine persons.

2. The board of directors shall adopt its own rules of procedure and shall elect a chairman and vice chairman from among its members.

3. The board of directors shall meet regularly not less than once every three months to discuss the company's state of affairs and prospects for development.

4. (amend., SG 58/03) The board of directors shall commission the management of the company to one or several executive members elected from among its members and shall determine their remuneration. The executive members shall be less than the remaining members of the board.

5. Each of the officers must immediately inform the chairman of the board of all circumstances which have arisen which are material to the company.

6. Each director may request that the chairman call a meeting to discuss particular matters.

7. (new, SG 58/03) The relations between the company and an executive member of the board shall be settled by a contract for commissioning of the management which shall be concluded in writing on behalf of the company, through the chairman of the board of directors. The relations with the remaining members of the board may be settled by a contract to be concluded on behalf of the company through a person authorised by the general meeting of the stock holders or by the single owner.

Section X.

Annual Closing of Accounts and Distribution of Profits Documents

Article 245

Each year not later than the last day of February the board of directors, or the managing board as the case may be, shall draw up the annual report and the financial statement for the previous calendar year, and shall submit these to the certified public accountants appointed by the general meeting.

Reserve Fund

Article 246

1. The company shall set up a reserve fund.

2. The sources of financing the reserve fund shall be:

1. At least one tenth of profit which shall be set aside until the fund's assets reach one tenth or more of the company's capital stock or such other larger proportion as the statutes may provide;

2. the proceeds obtained in excess of the nominal value of shares and bonds upon their issuing;

3. the total of the additional payments made by the stockholders for preferences given them with shares;

4. other sources provided for by the statutes or by a general meeting resolution.

3. Disbursements from the reserve fund may be made only for:

1. covering losses for the current year;

2. covering losses for the previous year.

4. When the assets of the reserve fund exceed one tenth of the company's capital stock, or any other larger proportion thereof as may be provided for in the statutes, the excess amount may be used for increase of the capital stock.

Contents of Annual Report

Article 247

1. (prev. text of Article 247) The annual report shall comprise a review of the company's operations over the year and its current state of affairs, and the accounting notes to the annual financial statement.

2. (new, SG 58/03) The report on the activity shall obligatorily indicate:

1. the total remuneration received during the year by the members of the boards;

2. the acquired, possessed and transferred stocks and bonds of the company by the members of the boards during the year;

3. the rights of the members of the boards to acquire stocks and bonds of the company;

4. the participation of the members of the boards in trade companies as unlimited liable partners, the possession of more than 25 percent of the capital of another company, as well as their participation in the management of other companies or cooperations as procurators, managers or members of boards;

5. the contracts under Article 240b concluded during the year.

3. (new, SG 58/03) The report shall also indicate the planned economic policy for the next year, including the expected investments and development of the personnel, the expected revenue from investments and development of the company, as well as the forthcoming transactions of substantial importance for the activity of the company.

Payment of dividends and interest

Article 247a.(new SG 84/00)

1. (amend., SG 58/03) Dividends and interest under Article 190, para 2 shall be paid only if, according to the inspected and accepted, according to section XI, accountancy report for the respective year, the net value of the property reduced by the dividends and interest are subject to payment, is not less than the sum of the capital of the company, fund "Reserve" and the other funds which the company is obliged to establish by virtue of a law or statutes.

2. In the context of para 1 the net value of the assets is the difference between the value of the rights and liabilities of the company according to its balance.

3. The payments under para 1 shall be made up to the size of the profit for the respective year, the undistributed profit from past years, the part of fund "Reserve" and the other funds of the company, exceeding the minimum determined by the law or the statutes, reduced by the uncovered losses from previous years and the deductions for fund "Reserve" and the other funds which the company is obliged to establish by virtue of a law or statutes.

4. If payments have been made in the absence of the preconditions under para 1 - 3 the stockholders shall not be obliged to return the received sums, except if the company proves that they have known or would have known about the lack of preconditions.

5. (new, SG 58/03) The company shall be obliged to pay to the stock holders the dividend voted by the general meeting within three months from its holding, unless the statutes provide for a longer period.

Section XI.

Annual Audit

Object and Scope of Audit

Article 248

1. The annual financial statement shall be audited by the certified public accountants appointed by the general meeting.

2. The audit shall have as its object to ascertain whether the provisions of the Accountancy Act and the statutes on annual closing have been observed.

Appointment and Responsibility of Certified Public Accountants

Article 249

1. Where the general meeting has failed by the end of the calendar year to appoint Certified Public Accountants, the Court shall, upon request of the board of directors, or of the managing or the supervisory board as the case may be, or of an individual shareholder appoint Certified Public Accountants.

2. The Certified Public Accountants shall assume responsibility for the bona fide and unbiased performance of audit, and nondisclosure of secrets.

Report of Certified Public Accountants

Article 250

Upon receipt of the report of the Certified Public Accountants, the managing board shall submit it to the supervisory board, together with the annual financial statement and annual report. The managing board shall also submit the draft resolution on distribution of profit to be discussed by the general meeting.

Approval of Annual Closing of Accounts

Article 251

1. The supervisory board shall verify the annual financial statement, the annual report and the draft on distribution of profit, and shall, upon approval thereof, resolve to call a regular general meeting of stockholders.

2. In the one-tier system the draft on distribution of profit shall be prepared by the board of directors, which shall then convene the general meeting.

3. (suppl., SG 58/03) The annual financial statement may not be approved by the general meeting without an audit by Certified Public Accountants. The certified accountant shall participate in the sitting of the supervisory board, respectively of the board of directors under para 1 and 2.

4. (amend., SG 84/00) The inspected and approved annual accountancy statement shall be presented to the commercial register, promulgating an announcement about that in the State Gazette.

Inspection on request of stock holders (new, SG 58/03)

Article 251a. (new, SG 58/03)

1. Stock holders possessing at least 10 percent of the capital of the company may request from the general meeting an appointment of a controller who will inspect the annual accountancy report.

2. If the general meeting does not adopt a decision for appointment of a controller the stock holders under para 1 may request his appointment by the district court at the place of sitting of the company.

3. The appointed controller shall prepare a report for his findings, which shall be presented at the next general meeting.

4. The expenses related to the inspection shall be for the account of the company.

Section XII. Dissolution Grounds for Dissolution

Article 252

1. (prev. text of Article 252 - SG 58/03) A joint stock company shall be dissolved:

1. by resolution of the general meeting of stockholders;

2. upon the expiration of the time period for which it was formed. The general meeting may pass a resolution to dissolve the company prior to the expiration of the said period;

3. upon a declaration of bankruptcy;

4. by a ruling of the court with which the company is registered upon an action brought by the public attorney where the company pursues objectives prohibited by law;

5. (amend., SG 58/03) when the net value of the property of the company under Article 247a, para 2 drops below the size of the registered capital; if within one year the general meeting fails to pass a resolution to reduce the capital, to transform or dissolve the company, the company shall be dissolved pursuant to item 4;

6. (new, SG 58/03) if, within 6 months, the number of the members of a board of the company is less than the minimum stipulated by the law it may be dissolved by the order of item 4;

7. (prev. item 6 - SG 58/03) upon the occurring of the grounds provided for in the statutes.

2. (new, SG 58/03) A private limited company shall not be dissolved with the death or with the dissolution of the single owner of the capital.

Chapter fiveteen.

PARTNERSHIP LIMITED BY SHARES

Partnership Limited by Shares Defined

Article 253

1. A partnership limited by shares shall be formed by articles of incorporation, whereby limited partners are issued with shares against their contributions to the capital. The limited partners shall be not less than three.

2. The provisions for the joint stock company shall apply mutatis mutandis to the partnership limited by shares, unless this chapter provides otherwise.

3. The trade name of a partnership limited by shares shall include the extension, Komanditno druzhestvo s aktsii' [Partnership limited by shares], or the abbreviation KDA'.

Founders

Article 254

1. The partnership limited by shares shall be formed by the general partners. They shall have the right to select stockholders among subscribers.

2. The general partners shall draw up the statutes and shall convene the constituent meeting.

Contributions

Article 255

1. The amount of the partners' contributions shall be specified by the statutes.

2. Revoked, SG, No 103 1993)

Partnership Organs

Article 256

The organs of the partnership limited by shares shall be those set forth by this Act for a one-tier system joint stock company.

General Meeting

Article 257

1. Only limited partners shall have the right to vote in the general meeting. General partners, even when they own shares, shall take part in the meeting in a consultative capacity.

2. The powers of the general meeting shall be set forth in the statutes.

3. The general meeting shall submit to consideration and resolve on the requests of limited partners for auditing the activities of the partnership.

Board of Directors

Article 258

The board of directors shall consist of the general partners.

Adoption and Amendment of the Statutes

Article 259

1. The statutes shall be adopted and amended, and the partnership shall be dissolved, subject to the consent of the general partners.

2. The partnership shall not be dissolved with the death or bankruptcy of a limited partner, unless the statutes provide otherwise.

Liquidation Proceeds

Article 260

The liquidation proceeds of each partner shall be proportionate to its contributions in the partnership.

Chapter sixteen.

TRANSFORMATION OF TRADE COMPANIES (amend., SG 58/03; in force from January 1, 2004)

Section I.

General Provisions Forms of transformation

Article 261. (amend., SG 58/03)

1. Trade companies may be transformed through merging, incorporation, splitting and split off from itself another company or a change of the legal form.

2. In all forms of transformation the transforming and newly established companies (participating in the transformation) may be of different kind, inasmuch as a law does not stipulate otherwise.

3. A single owner trade company may also be transformed through a transfer of its whole property to the single owner if he is an individual.

Transformation of a company in liquidation and bankruptcy

Article 261a. (new, SG 58/03)

1. A company in liquidation may be transformed by the order of this chapter in the presence of the conditions under Article 274, para 1.

2. A company for which bankruptcy proceedings have been instituted may be transformed if the recovery plan provides for continuation of the activity. The rules of this chapter shall apply for the transformation.

Exchange ratio

Article 261b. (new, SG 58/03)

1. In transformation the partners or stock holders of the transforming companies shall become partners or stock holders of one or more of the newly established and/or receiving companies. The acquired shares and stocks after the transformation shall be equivalent to the fair price of the shares and stocks of the transforming company possessed before the transformation.

2. For achieving equivalent exchange ratio may be made payments to the partners or stock holders amounting to no more than 10 percent of the total nominal value of the acquired shares and stocks.

Liability of the members of the managing bodies

Article 261c. (new, SG 58/03)

The members of the managing bodies of the transforming and receiving companies shall be liable to the partners and stock holders of the company for damages caused by non-fulfilment of their obligations in preparing and carrying out the transformation.

Third persons rights retaining

Article 261d. (new, SG 58/03)

1. In transformation existing pledges and distraint on shares and stocks of transforming companies shall pass on to the shares and stocks of receiving and/or newly established companies acquired in exchange.

2. The transferred pledges and distraint shall be entered ex-officio, or on request of the creditor, in the commercial register or in the book of the stock holders, kept by the company or by the Central Depository.

Section II.

Transformation through joinder, merger, splitting and separation Joinder

Article 262. (amend., SG 58/03)

1. In case of a joinder the whole property of one or more trade companies (transforming companies) shall pass on to one existing company (receiving company) which shall become their legal successor. The transforming companies shall be dissolved without liquidation.

2. In the case of para 1 a change of the legal form of the receiving company may not be done simultaneously.

Merger

Article 262a. (new, SG 58/03)

In case of merger the whole property of two or more trade companies (transforming companies) shall pass on to one newly established company which shall become their legal successor. The transforming companies shall be dissolved without liquidation.

Splitting

Article 262b. (new, SG 58/03)

1. In splitting the whole property of a trade company (transforming company) shall pass on to two or more companies which shall become its legal successors for a respective pArticle The transforming company shall be dissolved without liquidation.

2. The companies to which the property of the transforming company shall pass on may be existing companies (receiving companies) in cases of splitting through acquisition, newly established companies upon splitting through establishment, as well as existing and newly established companies simultaneously.

3. A change of the legal form of the receiving company may not be carried out simultaneously with the splitting.

Separation

Article 262c. (new, SG 58/03)

1. In separation a part of the property of a trade company (transforming company) shall pass on to one or several companies which shall become its legal successors for this part of the property. The transforming company shall not be dissolved.

2. The companies to which the part of the property of the transforming company is being passed on may be existing companies (receiving companies) in cases of splitting through acquisition, newly established companies after separation through establishment, as well as existing and newly established companies simultaneously.

3. It shall be impossible, on separation, to implement simultaneously a change of the legal form of the transforming or receiving company.

Separation of single owner trade company

Article 262d. (new, SG 58/03)

1. On separation of a single owner trade company a part of the property of a trade company (transforming company) shall pass on to one or more single owner limited liability companies and/or single owner joint-stock companies (newly established companies), whereas the transforming company becomes single owner of their capital. This transformation may be carried out simultaneously with the separation under Article 262c.

2. The rules for separation through incorporation shall apply in the separation of a single owner trade company, inasmuch as this law does not stipulate otherwise.

Contract and plan for transformation

Article 262e. (new, SG 58/03)

1. Prior to taking a decision for transformation the participating receiving and/or transforming companies shall conclude a contract for transformation.

2. The contract for transformation may also be concluded after a decision is taken. in such a case the transforming and receiving companies shall prepare a draft contract for which all rules regarding the contract for transformation shall apply. As date of the contract, in the meaning of this section, shall be considered the date of the draft contract.

3. Contract shall not be concluded on splitting with incorporation, separation with incorporation and separation of a single owner trade company. In these cases the transforming company shall prepare a plan for transformation.

Form of the contract and the plan for transformation

Article 262f. (new, SG 58/03)

1. The contract for transformation shall be concluded by the persons representing the company in writing, with a notary certification of their signatures.

2. When a draft contract is prepared it shall be worked out in writing with a notary certification of the signatures of the persons representing each of the transforming and receiving companies.

3. The plan for transformation shall be worked out in writing with a notary certification of the signatures by the managing body of the company or by the partners with a right of management in a personal company.

Contents of the contract and of the plan for transformation

Article 262g. (new, SG 58/03)

1. The contract for transformation shall settle the way by which the transformation will be carried out.

2. The contract for transformation shall contain at least the following:

1. the legal form, the firm and the seat of each of the transforming and receiving companies;

2. ratio of exchange of the stocks or shares determined by a specific date;

3. the size of the monetary payments, if such are provided for according to Article 261b, para 2, as well as the term of payment;

4. description of the shares, stocks or membership which every partner or stock holder acquires in the newly established and/or receiving companies;

5. the requirements regarding the distribution and submission of the stocks of the newly established or receiving companies;

6. the moment from which the participation in a newly established or receiving company entitles to a share of the profit, as well as all particularities pertaining to that right;

7. the moment from which the actions of the transforming companies are considered fulfilled for the account of the newly established or receiving companies for the purposes of the accountancy;

8. the rights which the newly established or receiving companies give to the stock holders with special rights and to the holders of securities which are not stocks;

9. every advantage granted to the inspectors under Article 262k or to the members of the managing and control bodies of the companies participating in the transformation.

3. The plan for transformation, besides the data under para 2, shall also contain:

1. exact description and distribution of the rights and obligations of the property of the transforming company which are passed on to every newly established company;

2. the distribution of the shares, stocks and membership in the newly established and/or transforming companies among the partners or stock holders of the transforming companies and the criterion for this distribution.

4. The ratio of exchange shall be determined by a date which may not be earlier than 6 months before the date of the contract or the plan for transformation and later than the date of the contract or the plan for transformation.

Effect of the contract for transformation

Article 262h. (new, SG 58/03)

1. The contract for transformation shall have effect from the moment of its conclusion for each of the transforming and receiving companies. If the contract is not approved by the decision for transformation of one of the participating companies it shall be terminated. In this case no responsibility for damages shall be born.

2. prior to the decision for transformation the contract may be terminated by the managing body of the company. Upon taking a decision for transformation and before the registration of the transformation the contract may be terminated only by a decision taken by the respective majority under Article 262o.

Report of the managing body

Article 262i. (new, SG 58/03)

1. The managing body of the transforming and receiving companies shall prepare a written report for the transformation. The report for the personal companies shall be prepared by the partners with right of management.

2. The report under para 1 shall contain a detailed legal and economic rationale of the contract or the plan for transformation and, particularly of the ratio of exchange, and on splitting and separation - of the criterion for distribution of the shares and stocks. The report shall obligatorily indicate data for the appointed inspector and for the authorised depositary under Article 262w, as well as the difficulties of assessment, if such have occurred.

Presentation of the contract, the plan and the report in court

Article 262j. (new, SG 58/03)

1. The contract and the plan for transformation and the report of the managing body shall be presented in the court at the place of the seat of each transforming and receiving company.

2. The presentation of the documents under para 1 of the participating capital companies shall be promulgated in the State Gazette within a period not less than 30 days before the date of the general meeting for adopting the decision for transformation.

Inspection of the transformation

Article 262k. (new, SG 58/03)

1. The contract or the plan for transformation shall be inspected by a special inspector for each transforming or receiving company.

2. The inspector shall be appointed by the managing body or by the partners with a right of management for each transforming or receiving company. At a common request of the managing bodies the court under Article 263c, para 1 or Article 263d, para 1 may appoint one inspector for all transforming and receiving companies.

3. The inspector shall be a registered auditor. An inspector may not be a person who, during the last two years has been auditor of the company which appoints him, or who has prepared an assessment of contributions in kind. The appointed inspector may not be appointed auditor of some of the companies participating in the transformation two years after the date of the transformation.

4. Access shall be provided to the auditor to any information and written materials regarding any of the transforming and receiving companies with respect of his task.

Report of the inspector

Article 262l. (new, SG 58/03)

1. The appointed inspector shall prepare a report on the inspection to the partners or stock holders of the respective company. When one inspector is appointed he shall prepare a common report for all companies.

2. The report of the inspector shall contain an assessment of whether the ration of exchange stipulated by the contract or the plan for transformation is adequate and reasonable, and shall indicate:

1. the methods used in determining the ration of exchange;

2. to what extent is the using of these methods appropriate and correct in the specific case;

3. the values obtained by using each method and the relative importance of each method in determining the value of the stocks and shares;

4. the particular difficulties of the assessment, if any.

3. The inspector shall be responsible to all companies participating in the transformation and to their partners and stock holders for damages caused by non-fulfilment of his obligations.

Obligation for providing information

Article 262m. (new, SG 58/03)

1. Submitted at the disposal of the partners and stock holder, prior to adopting the decision for transformation, shall be:

1. the contract or the plan for transformation;

2. the report of the managing body;

3. the report of the inspector;

4. the annual accountancy reports and the reports on the activity of all transforming and receiving companies for the last three financial years, if any;

5. the accountancy balance by the last day of the month before the date of the contract or of the plan for transformation, unless the last accountancy report regards a financial year which has ended less than 6 months before this date;

6. the new corporate draft contract or statutes of each of the newly established companies, respectively of amendments and supplements of the statutes or of the corporate contract of each of the transforming and receiving companies.

2. The materials under para 1 shall be submitted at the seat and at the address of the capital trade companies within 30 days before the date of the general meeting. On request, copies of the materials or abstracts from them shall be submitted to each partner or stock holder free of charge.

3. The term under para 2 may not be observed if all partners or stock holders have voted for the transformation.

4. The managing bodies of each transforming or receiving companies shall be obliged to inform the general meeting of the partners or stock holders about every change of the property rights and obligations having occurred between the preparation of the contract or the plan for transformation and the day of the general meeting. The change shall also be announced to the managing bodies of the other transforming or receiving companies which shall be obliged to notify the general meetings of their companies.

Decision for transformation

Article 262n. (new, SG 58/03)

1. The decision for transformation shall be taken individually for every transforming or receiving company.

2. The decision for transformation shall approve the contract or the plan for transformation.

3. If the general meeting has approved a draft contract for transformation the managing body of the company shall be obliged to conclude it only if this has been explicitly stipulated by the decision.

4. The decision for transformation shall also adopt decisions stipulated by this section regarding all changes related to the transformation.

Majority necessary for adopting the decision for transformation

Article 262o. (new, SG 58/03)

1. Transformation of a general or limited partnership shall be carried out by the consent of all partners, given in writing with notary certification of the signatures.

2. The decision for transformation of a limited liability company shall be taken by the general meeting of the partners by a majority of 3/4 of the capital.

3. The decision for transformation of a joint-stock company shall be taken by the general meeting of the stock holders by a majority of 3/4 of the represented stocks of voting right. For stocks of different classes the decision shall be taken by the stock holders of each class.

4. For transformation of a partnership limited by shares shall be necessary a decision of the unlimited liable partners, taken unanimously in writing, with a notary certification of the signatures and a decision of the general meeting of the stock holders, taken by a majority of 3/4 of the represented stocks of voting right.

Consent for transformation

Article 262p. (new, SG 58/03)

1. Where, as a result of transformation, a partner of a limited liability company or a stock holder becomes an unlimited liable partner his explicit consent shall be required.

2. The consent shall be considered given if the partner or the stock holder has voted for the decision for transformation. In such a case a public notary shall attend the general meeting, who shall issue findings records under Article 488a of CPC, copy of which shall be attached to the minutes of the general meeting.

3. Should a partner or a stock holder not participate in taking the decision his consent may be given in writing with a notary certification of his signature.

Newly incorporated company

Article 262q. (new, SG 58/03)

1. Where, on transformation, a new company is incorporated, the decision of each of the transforming companies shall accept the corporate contract and/or the statutes of each of the newly incorporated companies and bodies shall be elected.

2. Considered, by taking the decision under para 1, shall be met the requirements for a form of the corporate contract or statutes.

3. The size of the capital of the newly incorporated company may not be larger than the net value of the property passing on to the company on transformation. Article 262s, para 3 shall apply respectively.

4. The rules for the concrete kind of trade company shall apply for the newly incorporated company.

Amendment of the corporate contract or statutes

Article 262r. (new, SG 58/03)

1. The amendments or supplements of the corporate contract and/or statutes of a receiving company, introduced on transformation, shall be adopted by the decision of each of the transforming companies and by the decision of this receiving company.

2. The amendments or supplements of the corporate contract and/or statutes of a transforming company shall be adopted by the decision for its transformation.

3. The requirements for a form of the corporate contract and/or statutes shall be considered met by the adoption of the decision under para 1 and 2.

Increase of the capital

Article 262s. (new, SG 58/03)

1. The capital of a receiving company shall be increased for the purposes of the transformation inasmuch as it is necessary to create new shares or stocks for the partners and stock holders of the transforming companies. The size of the increase may not be larger than the net value of the property passing on to this company upon the transformation.

2. Increase of the capital of a receiving company may be made where:

1. it possesses own stocks, or

2. a transforming company possesses stocks of the receiving company and they have been paid in full.

3. Increase of the capital of the receiving company may not be made if:

1. it possesses stocks of the transforming company;

2. a transforming company possesses own stocks, or

3. a transforming company possesses stocks of the receiving company and they have not been paid in full.

Inspection of the capital

Article 262t. (new, SG 58/03)

1. Where, on transformation, a capital trade company is incorporated, or an increase of the capital of a receiving company is made, the inspectors of all companies shall prepare, besides the report under Article 262l, a general report stating whether the requirements of Article 262q, para 3 and Article 262s, para 1 have been met.

2. The net value of the property shall be established as a difference between the fair price of the interest and liabilities which, at the time of transformation, shall pass on to the newly incorporated or receiving company.

3. The rules for instalments in the capital shall not apply in the cases of para 2.

Reduction of the capital

Article 262u. (new, SG 58/03)

1. Where, on separation, a reduction of the capital of the transforming company is made payments to the partners and stock holders may not be made. The rules for protection of the creditors shall not apply.

2. Paragraph 1 shall also apply when a receiving company reduces its capital for the purposes of transformation.

Holders of special rights

Article 262v. (new, SG 58/03)

1. The holders of securities which are not stocks and provide special rights shall be given equal rights in the receiving or newly incorporated companies after the transformation.

2. Article 262w shall apply for the transfer of securities under para 1.

3. Paragraph 1 shall not apply if the meeting of the holders of these securities, if so stipulated by the law, has agreed with the change of the rights thereof, or every holder individually has given his consent for a change of his right or may claim the securities he possesses for buying-back.

Submitting stocks

Article 262w. (new, SG 58/03)

1. After taking a decision for transformation by all participating companies the managing body of a receiving or newly incorporated joint-stock company or partnership limited by shares shall submit to a depositary interim certificates or shares to be received by the partners or stock holders of the transforming companies.

2. The depositary shall be an individual or corporate body authorised by the managing body of an individual transforming company. The rules of a mandate contract shall apply regarding the relations between the depositary and the partners or stock holders. The depositary shall not exercise the rights of the submitted stocks.

3. The depositary shall be obliged, after the registration under Article 263c, para 1 and Article 263d, para 1, to submit to the stock holders, within two months, the interim certificates or shares. The period shall run individually for the partners or stock holders of each of the transforming companies from the date of promulgation of the transformation by the court at the place of its sitting.

4. The interim certificates or shares not received within the period under para 3 shall be returned to the managing body of the receiving or newly incorporated company. The shares of a bearer not claimed within one year shall be sold by the managing body, and the rights of the previous stock holders shall be lapsed and the obtained sums shall be deposited in Fund "Reserve". The one-year period shall run from the expiration of the period under para 3.

5. Where the partners or stock holders of the transforming companies must receive dematerialised shares the managing body of a receiving or newly incorporated company shall declare to the Central Depositary the registration of the issue of stocks, including the opening of accounts or the transfer of already issued stocks. After the registration under Article 263c, para 1 and Article 263d, para 1 the Central Depositary shall register the issue and shall distribute the stocks to accounts or shall register the transfer of the stocks.

Exchange of stocks of a bearer

Article 262x. (new, SG 58/03)

1. The holders of stocks of a bearer in a transforming company shall be indicated in the list of the persons acquiring shares, stocks or membership of a newly incorporated or receiving company in the book of stock holders kept by the company or by the Central Depositary, or in the commercial register, indicating the class and the numbers of the stocks possessed by them.

2. Where a holder of stocks of a bearer, until the announcement of the transformation for registration, deposits in the company his stocks his name shall be listed in the documents under para 1.

3. After the date of transformation every person may request in writing the listing of his name in the book of the stock holders or in the commercial register by presenting the stocks of a bearer possessed by him. Until that moment the person may not exercise the rights pursuant to the shares, stocks or membership acquired in exchange of the respective stocks of a bearer, and they shall not be counted in determining the necessary quorum and majority.

Declaring joinder and merger for registration

Article 263.

1. (amend., SG 58/03) 1) The managing body of each of the transforming companies shall declare for registration the joinder or merger in the court at the place of seat of the respective company. The declaration for registration shall be accompanied by the contract for transformation and the decisions of all companies participating in the transformation.

2. The managing body of the receiving or the newly incorporated company shall declare for registration the joinder or merger in the court at the place of seat of this company. Besides the documents under para 1 the declaration shall also be accompanied by:

1. proof of the legal status of each of the transforming companies;

2. officially certified copy of the corporate contract presented in court and/or statutes of each of the transforming companies;

3. copy of the corporate contract and/or the statutes of the receiving company containing all amendments and supplements, certified by the body representing the company, if such have been introduced in the transformation;

4. the adopted corporate contract and/or statutes of the newly incorporated company and the necessary documents for registration of the elected bodies;

5. proof that the transformation has been declared for registration according to para 1 for each of the transforming companies;

6. the reports of the inspectors;

7. the consents under Article 262p;

8. the list of the persons acquiring stocks, shares or membership of a newly incorporated or receiving company, the type of the membership, as well as data for existing pledges and distraint;

9. declaration by the depositary that the interim certificates or shares have been submitted, respectively proof that the circumstances under Article 262w, para 5 have been declared before the Central Depositary.

3. The declaring for registration of each of the transforming companies under para 1 may also be made by the managing body of the receiving or newly incorporated company.

4. The declaring for registration of personal companies shall be made by each of the partners entitled to management.

Declaring for registration of splitting and separation

Article 263a. (new, SG 58/03)

1. The managing body of each of the newly incorporated and/or receiving companies shall declare for registration of splitting or separation in the court at the place of the seat of the respective company. Attached to the declaration for registration shall be:

1. the contract or the plan for transformation and the decisions of all companies participating in the transformation;

2. copy of the corporate contract and/or statutes of the receiving company, containing all amendments and supplements, certified by the body representing the company, if such have been introduced at the time of transformation;

3. the adopted corporate contract and/or statutes of the newly incorporated company and the documents necessary for registration of its bodies.

2. The managing body of the transforming company shall declare for registration the splitting or separation in the court at the place of the seat of this company. Besides the documents under para 1 the following documents shall be attached to the declaration for all newly incorporated and/or receiving companies:

1. proof of the legal status of each of the receiving companies;

2. officially certified copy of the corporate contract presented in court and/or statutes of each of the receiving companies;

3. copy of the corporate contract and/or statutes of the transforming company which shall contain all amendments and supplements, certified by the body representing the company if such have been introduced at the time of transformation;

4. proof that the transformation has been declared for registration according to para 1 for each of the newly incorporated and/or receiving companies;

5. the reports of the inspectors;

6. the consents under Article 262p;

7. the list of the persons acquiring stocks, shares or membership of a newly incorporated or receiving company, the type of the membership, as well as data for existing pledges and distraint;

8. declaration by the depositary that the interim certificates or shares have been submitted, respectively proof that the circumstances under Article 262w, para 5 have been declared before the Central Depositary.

3. The declaring for registration for each of the newly incorporated and/or receiving companies under para 1 may also be made by the managing body of the transforming company.

4. The declaring for registration of personal companies shall be made by each of the partners entitled to management.

Term of declaring for registration

Article 263b. (new, SG 58/03)

1. The declaration under Article 236, para 2 and Article 236a, para 2 may not be made later than 8 months after the date by which the ratio of exchange has been determined by the contract or the plan for transformation. This term may not be extended or renewed.

2. In the cases where a law stipulates a prior permit of the transformation by a state body the declaration shall be filed within the period under para 1 and the permit shall be presented to the court after its issuance.

Registration of joinder and merger

Article 263c. (new, SG 58/03)

1. The registration of joinder or merger shall be carried out by the court at the place of the seat of the receiving or newly incorporated company not earlier than 14 days after declaring. The court shall register simultaneously amendment of the corporate contract or of the statutes, change of the capital and change of the persons managing and representing the receiving company, if such have been introduced at the time of transformation.

2. The court at the place of the seat of each of the transforming companies shall register the joinder or merger and shall write off the company on the grounds of the court decision under para 1 after having been sent ex officio or presented by the persons authorised to declare the registration.

3. The court at the place of the seat of each of the transforming companies shall also send ex officio a certified copy of the file of the commercial register of the written off company to the court at the place of seat of the receiving or newly incorporated company.

Registration of splitting and separation

Article 263d. (new, SG 58/03)

1. The registration of splitting or separation shall be carried out by the court at the place of the seat of the transforming company not earlier than 14 days after declaring. The court shall register simultaneously amendment of the corporate contract or of the statutes, change of the capital and change of the persons managing and representing the receiving company, if such have been introduced at the time of transformation. In splitting the transforming company shall be written off.

2. The court at the place of the seat of each of the receiving and/or of the newly incorporated companies shall register the splitting or separation, the new company, if such is being incorporated, as well as the remaining changes regarding the respective company on the grounds of the court decision under para 1, after being sent to him ex officio or presented by the persons authorised to declare the registration.

3. The court at the place of the seat of each of the transforming company shall send ex officio a certified copy of the file of the commercial register of the written off company to the court at the place of seat of the receiving or newly incorporated company.

Refusal to register the transformation

Article 263e. (new, SG 58/03)

1)The enacted decision to refuse the registration of the transformation shall be sent ex officio by the court under Article 263c, para 1 and Article 263d, para 1 to the court at the place of seat of each of the companies participating in the transformation.

Promulgation of the transformation

Article 263f. (new, SG 58/03)

1. Every court at the place of seat of a company participating in the transformation shall promulgate the registration made by it.

2. The announcement in the State Gazette shall also contain a notification to the creditors regarding their rights with respect of the transformation.

Date of transformation

Article 263g. (new, SG 58/03)

1. The transformation shall have effect from the day of registration of the joinder or merger made by the court at the place of the seat of the receiving or newly incorporated company, respectively from the day of registration of the splitting or separation by the court at the place of seat of the transforming company.

2. The contract or the plan for transformation may stipulate an earlier date from which the activities of the transforming companies shall be considered as performed for the account of the newly incorporated or receiving companies for the purposes of the accountancy. This date may not precede by more than 6 months the date of the contract or of the plan for transformation.

Concluding and opening balance

Article 263h. (new, SG 58/03)

1. Every transforming company which is being dissolved shall prepare a concluding balance by the date of transformation. A copy of the concluding balance shall be submitted to each of the receiving or newly incorporated companies.

2. Every newly incorporated company shall prepare an opening balance by the date of the transformation on the basis of the balance values of the assets and liabilities obtained through the transformation, or on the basis of their fair price.

3. Where the contract or the plan for transformation stipulates an earlier date according to Article 263g, para 2 concluding and opening balances shall be prepared by this date.

Effect of the transformation

Article 263i. (new, SG 58/03)

1. By the registration of the transformation under Article 263c, para 1, respectively Article 263d, para 1 the newly incorporated companies shall originate and the transforming companies shall be dissolved, except the transforming company in separation.

2. By the registration of the joinder or merger the rights and obligations of the transforming companies shall pass on to the receiving or newly incorporated company. The partners and stock holders of the transforming companies shall become partners or stock holders of the receiving or newly incorporated company.

3. By the registration of the splitting the rights and obligations of the transforming company shall pass on to each of the receiving and/or newly incorporated company correspondingly to the distribution stipulated by the contract or plan for transformation. If a right has not been distributed it shall pass on to all legal successors proportionally to the net value of the property belonging to them according to the contract or plan for transformation. The partners and the stock holders of the transforming company shall become partners or stock holders of one or more of the receiving or newly incorporated companies according to the provision of the contract or plan for transformation.

4. By the registration of the separation a part of the rights and obligations of the transforming company shall pass on to every receiving and/or newly incorporated company correspondingly to the distribution stipulated by the contract or plan for transformation. The partners and stock holders of the transforming company shall become partners or stock holders of one or more of the receiving or newly incorporated companies, and/or shall retain their membership of the transforming company according to the provisions of the contract or plan for transformation.

5. By the registration of separation of a single owner trade company the part of the rights and obligations of the transforming company, stipulated by the plan for transformation, shall pass on to the newly incorporated company. The transforming company shall become a single owner of the capital of the newly incorporated company.

6. When the property of a transforming company contains real right on a real estate or on a movable property the transactions through which they are subject to registration, the court decision under Article 263c, para 1 and Article 263d, para 1 shall be entered in the respective register. In splitting and separation the contract or the plan for transformation shall also be attached to the court decision.

7. In splitting and separation the found pending proceedings on cases shall continue with the person of the legal successor of the party according to the stipulated by the contract or plan for transformation. Where the transforming company is a defendant the court shall summon, ex officio, as parties all companies which shall be jointly and severally responsible according to Article 263k, para 1 and 2.

8. Permits, licences or concessions possessed by the transforming company, when it is dissolved, shall pass on to the receiving or newly incorporated company in cases of joinder or merger, and in case of splitting - to the company determined by the contract or plan for transformation, inasmuch as the law or the act for submission does not stipulate otherwise.

Protection of the creditors in joinder and merger

Article 263j. (new, SG 58/03)

1. The receiving or newly incorporated company shall manage independently the property passed on to them of each of the transforming companies for a period of 6 months. The period shall run individually for each of the transforming companies from the date of promulgation of the joinder or merger by the court at the place of its seat.

2. Within the period under para 1 each creditor of a company participating in the transformation, whose receivables have not been secured, and it has occurred before the date of transformation, may request execution or securing according to his rights. Should the request not be granted the creditor shall be entitled to preferential satisfaction of the rights having belonged to his debtor.

3. The members of the managing body of the receiving or newly incorporated company shall be responsible jointly and severally to the creditors for the individual management.

Protection of the creditors in splitting and separation

Article 263k. (new, SG 58/03)

1. For liabilities having occurred until the date of transformation all companies participating in the transformation, except the dissolved, shall be jointly and severally responsible. The liability of each company shall be up to the size of the obtained rights, except those of the company whose liability has been distributed by the contract or the plan for transformation.

2. Where, in separation a liability is not distributed all receiving and/or newly incorporated companies shall be jointly and severally responsible thereof. The paid to the creditor shall be born by them proportionally to the net value of the property belonging to them according to the contract or the plan for transformation.

3. In cases of splitting and separation, when a part of the property passes on to one or more existing companies the rules for individual management under Article 263j shall apply respectively for each of the receiving companies.

4. Where, in splitting through incorporation and separation through incorporation, the size of the capital of the transforming company has been larger than the total size of the capital of all newly incorporated companies the creditors having receivables originating before the date of transformation may request security up to the size of the difference of the capital. This shall also be true when some or all newly incorporated companies are personal.

Unlimited liability in transformation

Article 263l. (new, SG 58/03)

1. The unlimited liable partners of transforming companies shall continue their liability to the creditors for liabilities having originated until the date of transformation.

2. Where, in transformation, a person becomes unlimited liable partner of the receiving company he shall not be responsible for the liabilities of this company, having originated by the date of the transformation.

Prohibition of release from instalment obligations

Article 263m. (new, SG 58/03)

1. Partners or stock holders of a transforming or receiving company shall not be released from instalment obligation which they have not paid in full.

2. After the date of transformation the instalments shall be due to the receiving or newly incorporated company in cases of joinder or merger, and in splitting and separation - according to the provisions of the contract or plan for transformation.

Contesting the transformation

Article 263n. (new, SG 58/03)

1. Every partner or stock holder of a company participating in the transformation, as well as each of the companies participating in the transformation, may lay a claim in court regarding to Article 263c, para 1 and Article 263d, para 1 to establish that some of the following violations has been admitted in the transformation, regardless of where the violation has been found with the companies participating in the transformation:

1. a contract, draft contract, plan for transformation is missing or they are void;

2. the requirements of Article 262f, Article 262g, para 2, item 1, 2 and 8 and para 3, Article 262i, Article 262j, Article 262k, para 2 and 3, Article 262l - 262t and Article 262 v, para 1 have not been met;

3. the decision for transformation contradicts imperative provisions of the law or of the Art.s of association, respectively of the statutes of the company.

2. Non-equivalent ratio of exchange shall not be grounds for laying claim under para 1.

3. The claim under para 1 shall be laid before the date of transformation at the latest against all companies participating in the transformation, with exception of the newly incorporated. Every partner or stock holder may enter the proceedings and maintain the claim, even when the claimant gives it up or withdraws it.

4. Laying claim under para 1 shall stop the registration of the transformation. On the grounds of an enacted decision, which grants the claim, the court shall refuse the registration of the transformation.

5. The claim under para 1 shall be considered by the rules of chapter twelve "a" - "Summary proceedings" of the Civil Procedure Code, and Article 126e shall not apply.

6. Claim, pursuant to Article 74, may not be laid against the decision for transformation.

Voidability of a newly incorporated company

Article 263o. (new, SG 58/03)

1. It way be required, after the date of transformation, declaring voidability of the newly incorporated company as a result of the transformation, applying Article 70. The claim may be laid only by a partner or stock holder or by the newly incorporated company.

2. A partner or a stock holder may also request the declaring of voidability when the general meeting having taken the decision for transformation has not been convened by the order stipulated by the law or by the corporate contract or statutes and he has not attended.

3. The claim under para 1 may not be laid by a partner or a stock holder who has participated in proceedings on a claim for contesting the transformation and the claim has been rejected.

Owelty of exchange claim

Article 263p. (new, SG 58/03)

1. Every partner or stock holder, within three months from the date of transformation, may lay a claim in the district court for owelty of exchange if the ratio of exchange stipulated by the contract or the plan for transformation is not equivalent.

2. The claim under para 1 shall be laid against the receiving or newly incorporated company in joinder or merger. In splitting and separation the claim shall be laid against the company or companies where the partner or stock holder participates after the transformation.

Right of leaving

Article 263q. (new, SG 58/03)

1. A partner in a limited liability company or a stock holder whose legal status is changed after the transformation, and who has voted against the decision for transformation, may leave the company of which he has obtained shares or stocks. Termination of the participation shall be carried out by a notary certified notification to the company within three months from the date of transformation.

2. The partner who has left shall be entitled to the equivalence of the share or stocks possessed before the transformation of the company, according to the ration of exchange stipulated by the contract or the plan for transformation. The partner who has left may lay an owelty of exchange claim within three months from the notification under para 1.

3. The shares of the partner who has left shall be taken over by the remaining partners, shall be offered to a third person or the capital shall be reduced by them. The stocks of the stock holder who has left shall be taken over by the company and the rules for acquiring own stocks shall apply besides Article 187a, para 4.

Special rules for participation of only personal companies

Article 263r. (new, SG 58/03)

1. When all companies participating in the transformation are personal Article 262i - 262m shall not apply.

2. At a request of a partner with management right in one of the participating companies the district court at the place of its seat shall appoint an inspector who shall inspect all companies participating in the transformation. Article 262k and 262 l shall apply respectively in this case.

Section III.

Transformation through a change of the legal form Change of the legal form

Article 264. (amend., SG 58/03)

1. A trade company (transforming company) may be transformed through a change of the legal form by a transformation to a trade company of another kind (newly incorporated company). The newly incorporated company shall become a legal successor of the transforming company which shall be dissolved without liquidation.

2. New partners or stock holders may not be accepted simultaneously with the change of the legal form.

Plan for transformation

Article 264a. (new, SG 58/03)

1. In changing the legal form the managing body or the partners with management right in a personal company shall prepare a plan for transformation in writing with a notary certification of the signatures.

2. The plan for transformation shall contain at least the following:

1. legal form, the firm and seat of the newly incorporated company;

2. ratio of exchange of the stocks or shares determined by a concrete date;

3. the size of the monetary payments if such are provided for according to Article 261b, para 2, as well as term of the payment;

4. description of the shares, stocks or membership which every partner or stock holder will acquire of the newly incorporated company, as well as data for existing pledges and distraint;

5. the requirements regarding the distribution and submission of the stocks by the newly incorporated company;

6. the rights to be obtained by the stock holders with special rights and the holders of securities which are not stocks.

3. The plan for transformation shall also be accompanied by a new draft corporate contract or statutes of the newly incorporated company.

Submission of information

Article 264b. (new, SG 58/03)

1. The plan for transformation shall be presented in the court at the place of seat of the company. If the transforming company is a capital one the presented plan shall be promulgated in the State Gazette within a period not less than 30 days before the date of the general meeting for adopting a decision for transformation.

2. Submitted at the disposal of the partners and stock holders shall be:

1. the plan for transformation along with the new draft corporate contract or statutes of the newly incorporated company;

2. the accountancy balance by the last day of the month before the date of the plan for transformation, unless the last annual accountancy report regards the financial year which has ended less than 6 months before this date;

3. the data regarding the appointed inspector and the authorised depositary under Article 262w.

3. The materials under para 2 shall be submitted at the seat and the address of the capital trade companies within 30 days before the date of the general meeting. On request, a copy of the materials or abstracts from them shall be submitted to every partner or stock holder free of charge.

4. The period under para 3 may not be observed if all partners or stock holders have voted for the transformation.

Inspection

Article 264c. (new, SG 58/03)

1. Where the newly incorporated company is a capital one the plan for transformation shall be inspected by a special inspector appointed by the managing body or by the partners with management right.

2. The inspector shall prepare a report for the inspection to the partners or stock holders. The report shall contain an assessment of whether the ratio of exchange stipulated by the plan is adequate and reasonable, and shall indicate the data under Article 262l, para 2.

3. Applied for the inspector shall respectively be the rules of Article 262k, para 3 and 4 and Article 262l, para 3.

4. Besides in the cases of para 1 inspection of the transformation shall also be made at a request of a partner or stock holder or by a decision of a managing or control body of the company. Where the inspection is requested by a partner, stock holder or a control body the inspector shall be appointed by the district court at the place of seat of the company.

Decision for transformation

Article 264d. (new, SG 58/03)

1. The change of the legal form of the company shall be carried out by a decision for transformation according to Article 262o.

2. When, on change of the legal form, a partner in a limited liability company or a stock holder becomes unlimited liable partner Article 262p shall apply.

3. The decision for transformation shall approve or amend the plan for transformation. This decision shall also adopt the corporate contract and/or the statutes of the newly incorporated company and shall be elected bodies, by which the requirements for a form of the corporate contract or statutes shall be considered fulfilled.

Capital of the newly incorporated company

Article 264e.

1. If the newly incorporated company is a capital one the size of its capital may not be larger than the net value of the property of the transforming company. In this case the inspector shall carry out an inspection regarding the observance of this requirement.

2. The rules of Article 262t, para 2 and 3 shall apply respectively.

Additional rules for a joint-stock company and a company limited by shares

Article 264f.

1. Article 262x and Article 262v shall apply for the holders of stocks of a bearer and of special rights, which are not stocks of the transforming company.

2. Article 262w shall apply respectively for the transfer of stocks to the newly incorporated company.

Registration

Article 264g. (new, SG 58/03)

1. The change of the legal form shall be registered by the court at the place of seat of the transforming company not earlier than 14 days after its declaring.

2. The declaration for registration shall be filed by the managing body or by a partner with management right of the newly incorporated company and it shall be accompanied by:

1. the decision for transformation;

2. the consents under Article 264d, para 2;

3. the adopted corporate contract and/or statutes of the newly incorporated company and the documents necessary for registration of the elected bodies;

4. the report of the inspector if an inspection has been carried out;

5. the list of persons acquiring stocks, shares or membership of the newly incorporated company, as well as the kind of the membership;

6. declaration of the depositary that he has been presented with the interim certificates or shares, respectively proof, that the circumstances under Article 262w, para 5 have been declared to the Central Depositary.

3. The registration shall be promulgated in the State Gazette where the transforming or newly incorporated company is a capital one.

Effect of the registration

Article 264h. (new, SG 58/03)

1. The change of the legal form shall have effect after the entry has been made in the commercial register.

2. By registering the change of the legal form the transforming company shall be dissolved and the newly incorporated shall be established. The rights and obligations of the transforming company shall pass on entirely to the newly incorporated company.

3. The partners and stock holders of the transforming company shall become partners or stockholders in the newly incorporated.

4. When the property of the transforming company contains a real right on a real estate or chattel, the transactions with which are subject to registration, the court decision for registration of the change of the legal form shall be entered in the respective register.

5. Permits, licences or concessions possessed by the transforming company shall pass on to the newly incorporated company, inasmuch as a law or the act for submission does not stipulate otherwise.

6. Concluding and opening balance by the date of registration shall be prepared according to Article 263h, para 1 and 2.

Protection of the creditors

Article 264i. (new, SG 58/03)

1. Unlimited liable partners in the transforming company shall continue to be responsible before the creditors for liabilities having occurred after the change of the legal form. When one person becomes an unlimited liable partner in the newly incorporated company he shall not be responsible for liabilities having occurred before the change of the legal form.

2. Partners or stock holders of a newly incorporated company shall not be released from the liabilities for instalments which have not been paid in full.

3. When the transforming company is a capital one and the newly incorporated is personal or a company with a lesser size of the capital the creditors with receivables having occurred before the change of the legal form may request security up to the size of the difference of the capital.

Contesting the transformation

Article 264j. (new, SG 58/03)

1. Every partner or stock holder of the transforming company may lay a claim with the district court at the place of his seat in order to establish that some of the following violations have been admitted in the change of the legal form:

1. there is no plan for transformation or the plan is void;

2. the requirements of Article 264a, para 1 and para 2, item 1, 2 and 6, Article 264b - 264e and Article 262v, para 1 have not been fulfilled;

3. the decision for transformation contradicts imperative provisions of the law or of the Art.s of association, respectively of the statutes of the company.

2. Non-equivalent ratio of exchange shall not be grounds for laying claim under para 1.

3. The claim under para 1 shall be laid against the transforming company until the registration of the change of the legal form. Every partner or stock holder may enter the proceedings and maintain the claim even if the claimant abandons it or withdraws it.

4. The laying of the claim under para 1 shall stop the registration of the transformation. On the grounds of the enacted decision by which the claim is granted the court shall refuse registration of the transformation.

5. The claim under para 1 shall be considered by the rules of chapter twelve "a" of - "Summary proceedings" of the Civil Procedure Code, as Article 126e shall not apply.

6. Claim may not be laid pursuant to Article 74 against the decision for transformation.

Invalidity of the newly incorporated company

Article 264k. (new, SG 58/03)

After the registration of the change of the legal form a partner, stock holder or the newly incorporated company may request declaring of invalidity. Article 263p shall apply respectively.

Protection of partner and stock holder

Article 264l. (new, SG 58/03)

1. Every partner or stock holder, within three months from the registration of the change of the legal form, may lay a claim in with the district court an owelty of exchange claim against the company if the ratio of exchange adopted by the plan for transformation is not equivalent.

2. A partner in a limited liability company or a stock holder, whose legal status is changed after the change of the legal form, and who has voted against the decision for transformation may leave the newly incorporated company. Article 263q shall apply respectively.

Change of the legal form of a single owner company

Article 264m. (new, SG 58/03)

1. In a change of the legal form of a single owner trade company a plan for transformation shall not be prepared and there shall be no obligation to submit information. The appointed inspector shall only carry out inspection of the capital according to

Article 264e.

2. The single owner of the capital shall not have the rights under Article 264j, 264k and 264l.

Section IV.

Transformation through transfer of property to the single owner Transfer of property to the single owner

Article 265. (amend., SG 58/03)

1. The whole property of the single owner trade company (transforming company) may pass on to the single owner will it be an individual registered as sole entrepreneur. The transforming company shall be dissolved without liquidation.

2. Transformation under para 1 may not be carried out if shares or stocks of the transforming company are pledged or distrained.

3. The decision for transformation shall be taken by the single owner in writing, with a notary certification of the signature.

Registration

Article 265a. (new, SG 58/03)

1. The transfer of property to the single owner shall be registered by the court at the place of seat of the transforming company which shall be written off.

2. The court at the place of the seat of the sole entrepreneur shall register the transfer of the property on the grounds of the court decision under para 1, after receiving, ex officio, or having been presented by the sole entrepreneur.

3. The court under para 1 shall send ex officio a certified copy of the file in the commercial register of the written off company to the court at the place of seat of the sole entrepreneur.

4. The registration of transfer of property to the single owner shall be promulgated by the court at the place of the seat of the transforming company and by the court at the place of seat of the sole entrepreneur. The notice in the State Gazette shall also contain notification to the creditors regarding their rights under Article 265c.

Effect

Article 265b. (new, SG 58/03)

1. Transfer of property to the single owner shall have effect from the day of its registration by the court at the place of seat of the Transforming company.

2. By the registration all rights and obligations of the transforming company shall pass on to the sole entrepreneur.

3. When the property of the transforming company contains a real right on a real estate or chattel, the transactions with which are subject to registration, the court decision for registration of the transfer of property to the single owner shall be entered in the respective register.

4. Permits, licences or concessions possessed by the transforming company shall pass on to the sole entrepreneur, inasmuch as a law or the act for submission does not stipulate otherwise.

Protection of the creditors

Article 265c. (new, SG 58/03)

1. The sole entrepreneur shall manage individually the property of the transforming company having passed on to him for a period of 6 months. The term shall run individually for the creditors of the transforming company and of the sole entrepreneur from the date of promulgation by the respective court.

2. Within the period under para 1 every creditor of the transforming company and of the sole entrepreneur, whose receivables have not been secured, and which has occurred before the registration, may request execution or security according to his rights. If the request is not granted the creditor shall be entitled to preferential satisfaction of the rights having belonged to his debtor.

3. Until the expiration of the term of the individual management the sole entrepreneur may not request to be written off the court register.

Chapter seventeen.

LIQUIDATION

Commencement of Liquidation

Article 266

1. Liquidation shall be carried out after the dissolution of a company.

2. (New, SG No 83/1996) The term for completion of the liquidation shall be determined by the General Meeting of the limited liability company and the joint-stock company, and for other companies, by unanimous decision of the partners with unlimited liability. Such a term shall also be determined by the court in its decision for appointing liquidators. Where necessary, the term determined as above may be extended.

3. (Previous para 2 - SG, No 83 1996; amend., SG 84/00) The liquidators shall be registered in the commercial register with notary certified consents with their specimen signatures.

4. (Amended, SG No 83/1996) The Court of registration may, where important reasons exist, appoint or dismiss liquidators on application by the partners, or, respectively, by the stockholders which own at least one twentieth of the stock.

5. (New, SG No 83/1996) The remuneration of the liquidators shall be fixed by:

1. the General Meeting of the limited liability company or the joint-stock company;

2. the partners with unlimited liability in a company, unanimously;

3. the court, where the liquidators have been appointed by it.

6. (New, SG No 83/1996) The liquidators shall be liable for their activities related to the liquidation in the same way as the managers and the other executive bodies of companies.

Notice to Creditors Article 267

Upon declaring the dissolution of the company the liquidators must invite its creditors to make their claims. The notice shall be in writing and delivered to known creditors, and shall also be published.

Duties of Liquidators

Article 268

1. A liquidator shall be obliged to consummate pending transactions, to collect payments due, to convert the company's assets into cash and satisfy its creditors. A liquidator may not enter into new transactions unless so warranted for the purposes of liquidation.

2. A liquidator may, subject to the consent of the partners or, respectively, the stockholders, and the consent of the creditors, transfer to them particular items of the assets under liquidation, provided that this does not prejudice the rights of the remaining partners and creditors.

3. (New, SG, No 61 1993) The liquidators must inform the tax administration of the liquidation which has commenced.

Representation

Article 269

1. The liquidators shall represent the company and shall have the rights and obligations of its executive organ.

2. The liquidators may represent a company only jointly. A single liquidator may accept legal statements addressed to the company.

Opening Balance Sheet and Report

Article 270

1. The liquidators shall draw up a balance sheet as of the moment of dissolution of the company, and explanatory notes thereto. At the end of each year the liquidators shall close accounts and present a financial statement and annual report to the governing body.

2. The governing body shall resolve on approval of the opening balance sheet, the annual closing of accounts, and on holding the liquidators harmless.

Article 270a (New, SG No 83/1996; revoked SG 58/03)

Distribution of Assets Article 271

Upon satisfaction of the creditors, the remaining assets shall be distributed among the partners, or among the stockholders as the case may be.

Protection of Creditors

Article 272

1. (Amended, SG No 83/1996) The company's assets shall not be distributed before six months have passed from the date that the notice to the creditors was published.

2. Should a creditor duly notified not assert its claim, the sum owed to it shall be deposited in a bank account in its name.

3. Where a liability is disputed, assets shall not be distributed until the creditor concerned has been secured.

4. (New, SG No 83/1996) The managing body of the company may, upon satisfaction of the creditors, write off any bad amounts receivable of the company. Such decision shall be taken by simple majority.

Stopping and termination of proceedings for liquidation in opening bankruptcy proceedings Article 272a. (new, SG 84/00)

1. From the date of the decision for opening proceedings for bankruptcy the proceedings for liquidation of a company in liquidation shall be stopped. The proceedings for liquidation shall be terminated on the date of enactment of the decision under Article 630. By the decision for opening the proceedings for bankruptcy the court shall declare bankruptcy of the company-debtor under Article 630, para 2.

2. In the cases under para 1 the court for the bankruptcy shall be obliged to send an announcement to the court for the liquidation of the company on the same day.

Report and balance of the liquidator in case of termination of his activity

Article 272b. (new, SG 84/00)

1. In the cases of opened bankruptcy proceedings for a company in liquidation the liquidator shall work out and present to the bankruptcy court a balance by the date of the decision for opening the bankruptcy proceedings and a report on his activity under Article 270 within 7 days from termination of the liquidation proceedings.

2. The appointed assignee in bankruptcy, the debtor or creditor can make objection on the balance and the report under para 1 within 7 days from their presentation to the court.

3. Within 14 days the court shall rule on the objection by a definition which shall not be subject to appeal.

4. If, within the period under para 2, objection has not been received, it shall be considered that the report and the balance of the liquidator have been accepted.

5. While the liquidation proceedings are stopped the liquidator cannot carry out the activities stipulated by chapter seventeen.

Closing of Liquidation Proceedings

Article 273

1. (suppl., SG 84/00) When all liabilities have been settled and the remaining assets distributed, the liquidator shall apply for deletion of the company from the Commercial Register. The decision for deletion shall be promulgated in the State gazette when the constituting has been subject to promulagtion as well.

2. Should at some later time the need arise for further liquidation proceedings, the court shall, on application by the person concerned, appoint liquidators, either the previous or new ones.

Continuation of a Company after Dissolution

Article 274

1. (suppl., SG 58/03) When a company is dissolved due to expiration of the specified time period or upon a resolution of the competent company organs, they may decide to continue its activities, unless the distribution of assets has commenced. This provision shall also apply in dissolution of a limited liability company under Article 155, item 3, as well as of a joint-stock company under Article 252, para 1, item 6.

2. A resolution pursuant to paragraph 1 shall be passed:

1. in case of a joint stock company, by a majority of at least three quarters of the shares represented;

2. in case of another company, unanimously.

3. The liquidators shall file the resolution to continue the company for registration in the Commercial Register.

**Chapter eighteen. **

**COMMERCIAL GROUPS **

Section I.

**Consortium **

**Definition **

Article 275

A consortium is a contractual grouping of merchants for carrying out specified activities.

Applicable Provisions Article 276

The respective rules either for partnerships under civil law or for the company in the form of which a consortium has been organized shall apply to consortia.

Section II.

Holding Company Definition

Article 277

1. A holding company shall be a joint stock company, a partnership limited by shares or a limited liability company the purpose of which is to participate under any form in other companies or in their management, regardless of whether it carries on manufacturing or commercial activities of its own.

2. At least 25 percent of the capital stock of a holding company must be invested directly in subsidiary companies.

3. A subsidiary company is a company in which a holding company owns or controls, directly or indirectly, at least 25 per cent of the stocks or shares and is in a position to appoint, directly or indirectly, a majority of the directors.

Purposes

Article 278

1. The purposes for which a holding company is set up may be:

1. acquisition, management, valuation and sale of interest in Bulgarian or foreign companies;

2. acquisition, management and sale of bonds;

3. acquisition, valuation and sale of patents, assigning licences for the use of patents of companies in which the holding company owns an interest;

4. financing of companies in which the holding company owns an interest.

2. A holding company may not:

1. participate in a partnership which is not a legal person;

2. acquire licences which are not intended for use by the companies controlled by it;

3. acquire real property which is not required by its needs. The acquisition of stock in real estate companies is permitted.

Taxation of Holding Activities

Article 279

(Repealed, SG No 59/1996).

Credits Given by Holding Companies

Article 280

1. A holding company may extend loans only to companies in which it participates directly or which it controls.

2. The amount of the extended loans may not exceed ten times the capital stock of the holding company.

3. The amount of the deposits of subsidiary companies and enterprises in a holding company may not exceed three times the amount of the capital stock.

**Chapter nineteen. **

APPLICABLE LAW

**Law Applicable to Sole Entrepreneurs **

Article 281

The legal status of a sole entrepreneur shall be governed by the law of the country in which he is registered.

Law Applicable to Companies Article 282

1. The incorporation, transformation and dissolution of companies, the manner of their representation, as well as the rights and obligations of the partners shall be governed by the law of the country in which the respective company is registered.

2. If a company is registered in more than one country, the law of the country in which, according to the statutes, the company's place of management is situated shall apply.

3. For branches of companies, the law of registration of the branch shall apply.

Law Applicable to Agency

Article 283 (revoked – SG 19/03)

Chapter twenty .

ADMINISTRATIVE PENAL PROVISIONS

Violations and Fines

Article 284

1. (Amend., SG, No 103 1993; SG 84/00) A fine of 100 to 500 levs, shall be imposed on any person under an obligation pursuant to this Act which does not apply for registration within the prescribed time periods or does not present documents or signatures provided for in this Act.

2. If, after a fine has been imposed, the person under an obligation does not apply for registration or does not present the documents or signatures within the time period determined by the court, further fines pursuant to paragraph 1 shall be imposed upon such person until the acts are performed.

3. Fines pursuant to the previous paragraphs shall also be imposed upon officials who, when they are obliged to do so:

1. have not informed officially the respective district court of the occurrence of a circumstance which is subject to registration;

2. do not undertake the necessary action for registration.

4. (new, SG 84/00) A person who is liable under this law, but who does not indicate in his commercial correspondence the data under Article 13 shall be fined with 100 to 500 levs.

5. (prev. para 4 - SG 84/00) Fines shall be imposed by the district court. The court's resolution may be appealed with a particular appeal.

Article 285

1. (New, SG, No 103 1993) For non-performance of the obligation under Article 7, paragraph 3 a fine or, respectively, a financial sanction, equal to 50 levs shall be imposed on the merchant.

2. The statements for establishing the violations shall be drawn up by the mayors of communities, and the penal orders shall be issued by the mayors of municipalities or persons designated by them.

3. The establishment of the violations, the issuing, appeal and enforcement of the penal orders shall be done pursuant to the Administrative Violations and Sanctions Act.

Part three.

COMMERCIAL TRANSACTIONS

Chapter twenty one.

GENERAL

Section I.

General Provisions

Definition of Commercial Transaction

Article 286

1. A Commercial transaction shall be any transaction concluded by a merchant, related to the occupation exercised by him.

2. Commercial transactions shall also be the transactions under Article 1, paragraph 1, regardless of the capacity of the persons effecting them.

3. In case of doubt it shall be considered that transactions concluded by a merchant are related to his occupation.

Applicability of provisions on commercial transactions Article 287

The provisions on commercial transactions shall apply to both parties if the transaction is considered commercial for one of the parties and this Act does not provided otherwise.

Sources Article 288

The provisions of civil legislation shall apply to matters of commercial transactions not regulated by this Act, and where it is inadequate, the commercial customs shall apply. Where commercial customs vary, the customs of the place of performance shall apply.

Abuse of right Article 289

The exercising of a right arising from a commercial transaction shall be inadmissible if it is exercised with the sole intention of causing injury to the other party.

Section II.

Conclusion of commercial transaction Public invitation

Article 290

1. Catalogues, price-lists, tariffs and the like, as well as announcements though the mass media or otherwise addressed to an indefinite number of persons, shall be deemed to be an invitation to make an offer in accordance with them.

2. If the offer under paragraph 1 is not accepted without just cause the author of the invitation shall be held liable for the damages incurred by the offerer.

Public offer Article 291

An offer for entering into a transaction may also be addressed to an indefinite number of persons, including through the mass media. It should contain both the total quantity offered and the time limit for accepting the offer. In this case the offerer shall be bound until the quantity is exhausted within the specified time limit.

Silence equal to acceptance

Article 292

1. An offer to a merchant with whom the offerer has lasting commercial relations shall be considered accepted if not immediately rejected.

2. In the event of rejection of the offer under paragraph 1, the merchant shall be bound to safeguard whatever has been sent to him at the expense of the offerer, unless he has been secured for the costs or the safeguarding does not cause him unusual inconvenience.

Form

Article 293

1. To be valid a commercial transactions shall require a written or other form only in the cases provided for by a law.

2. A statement on execution, performance or termination of a commercial transaction shall be null and void unless made in the form established by a law or by the parties.

3. A party may not refer to nullity should its behaviour imply that it has not contested the validity of the statement.

4. The written form shall be deemed met if the statement has been technically recorded in a way that permits it to be reproduced.

5. In the event of statements made by telefax or telex, the written form shall be deemed met if the books and documents documenting the operation of these apparatuses rule out incorrect reproduction of the statement.

6. Where a specific form has been provided for the conclusion of a commercial transaction, this form shall also be required for any amendments to the transaction.

Interest

Article 294

1. Interest shall be due between merchants unless otherwise agreed.

2. Interest on interest shall be due only if so agreed.

Permission or approval by a state authority

Article 295

1. Where the validity of a commercial transaction requires permission or approval by a state authority, the transaction becomes valid when permission is granted.

2. The party who has undertaken to request permission or approval must make immediately the necessary reasonable efforts and bear the costs related with that, and must inform the other party of the result.

Confirmation by third party

Article 296

1. In the event a transaction has been concluded subject to confirmation by a third party, it shall become valid upon confirmation.

2. The party who is responsible for obtaining the confirmation must inform immediately the other party of the result.

3. Where within three months following the conclusion of a transaction the other party has not been informed of the result, it may decline to proceed with the transaction, unless another time period has been agreed upon.

Financial duress Article 297

A commercial transaction concluded between merchants may not be voided on grounds of financial duress or due to manifestly unfavourable terms.

Commercial transactions under general terms Article 298

1. A merchant may specify in advance general terms for transactions concluded by him. They shall become binding upon the other party should it:

1. declare in writing their acceptance;

2. be a merchant and has known or been obliged to know them and has failed to object to them immediately.

2. If a written form has been provided for the validity of a transaction, the general terms established by the merchant shall be binding upon the other party only if submitted to it upon execution of the transaction.

3. In the event of conflict between what was agreed upon by the parties and the general terms, the terms agreed upon shall govern.

Determination of provisions by third parties Article 299

1. Where the parties have agreed that a third party shall determine particular provisions, such provisions shall become binding upon the parties only if the third party has determined them in accordance with the objective of the contract, the remainder of its contents and commercial custom.

2. Should the third party fail to make the determination or makes it in a manner inconsistent with paragraph 1, either party may petition the court to make the determination.

Supplementing of the contract by the court Article 300

Where the parties agree to supplement the contract upon the occurrence of certain circumstances, and should they fail to reach agreement in the event of such occurrence, either party may petition the court to do so. When rendering its decision the court shall take in consideration the objective of the contract, the remainder of its contents and commercial custom.

Actions without authority for representation Article 301

Where a person acts on behalf of a merchant without authority for representation, it shall be deemed that the merchant confirms such actions provided he has not objected immediately after learning of them.

Section III.

Performance

Due care

Article 302

A debtor in a transaction which is commercial with respect to him, shall exercise the care of a good husband.

Term Article 303

Where a contract does not specify a term for performance of an obligation, provided the nature of the transaction or the commercial custom do not require otherwise, the performance may be requested and may be made at any time during working hours at the place of performance.

Joint and several obligations Article 304

Persons who undertake a joint obligation upon conclusion of a commercial transaction shall be considered joint and several debtors, unless it follows otherwise from the transaction.

Non-cash payment Article 305

Where payment is effected by debiting and crediting bank accounts, it shall be deemed completed at the time of crediting the account of the creditor.

Section IV.

Non-performance

Force Majeure

Article 306

1. A debtor in a commercial transaction shall not be liable for failure to perform due to force majeure. Where the debtor was already in default, he may not invoke force majeure.

2. A force majeure shall be an unforeseen or unavoidable event of an extraordinary nature which has occurred after the conclusion of the contract.

3. A debtor who cannot perform due to force majeure shall notify the other party in writing within a reasonable time about the nature of the force majeure, and its potential consequences for the contract. In case of failure to notify, compensation shall be due for the damages resulting from such failure.

4. The performance of obligations and the related counter-obligations shall be suspended for the duration of the force majeure.

5. Should the duration of the force majeure be such that the creditor loses its interest in the performance, he shall be entitled to terminate the contract. The debtor shall also have the same right.

Business frustration Article 307

A court may, upon request by one of the parties, modify or terminate the contract entirely or in part, in the event of the occurrence of such circumstances which the parties could not and were not obliged to foresee, and should the preservation of the contract be contrary to fairness and good faith.

Earnest money

Article 308

1. Where upon the conclusion of a contract one of the parties has given or promised something in case it backs out, it may renounce the contract if its performance has not commenced. The party which backs out shall be bound to pay earnest money, and if it has given such earnest money upon conclusion of the contract, the party shall forfeit it.

2. When the contract is performed, the earnest money shall be paid back or set off. It shall also be paid back in the event of termination of the contract by mutual agreement.

Liquidated damages Article 309

The liquidated damages due under a commercial transaction concluded between merchants may not be reduced on grounds of excessive amounts.

**Section V. **

**Commercial security Commercial pledge **

Article 310

1. A contract for commercial pledge which secures rights ensuing from a commercial transaction shall be considered concluded in the event of:

1. pledge of movable items and bearer securities - upon their delivery to the creditor or to another person on his account;

2. pledge of securities to order - by endorsement for security and delivery to the creditor.

2. Entitled to a pledge by operation of law shall be creditors in the cases provided for in this Act.

3. In the event of transfer of a secured receivable the pledge shall be considered transferred upon delivery of the pledged object, unless the transferor has agreed to hold it as another person within the meaning of paragraph 1, item 1.

Satisfaction of the pledgee creditor

Article 311

1. Where the pledge contract has been concluded in writing with a valid date and the parties have agreed that, should the debtor be in delay, the satisfaction from the pledge may be effected without court intervention, the creditor shall be entitled to sell on his own the pledged item or securities, if they have a market or stock exchange price. The creditor shall be bound to immediately notify the pledgor of the sale and to pay him the remainder of the price obtained.

2. Creditors under Article 310, paragraph 2, shall also be entitled to the rights under paragraph 1.

Pledge without surrender of possession Article 312

The pledgor may keep the pledged item in his possession in the cases and in compliance with the procedure specified by a law.

Pledge over perishables Article 313

If the pledged item is perishable, the creditor may sell it, provided the item has a market or commodity exchange price, and deposit the amount with a bank as his security. The creditor must notify the pledgor immediately of the sale.

Set-off of yield from pledged item

Article 314

Where the pledged item produces yield, the pledge contract may provide for the right of the creditor to collect such yield on account of the debt.

Commercial lien

Article 315

1. A merchant shall be entitled to a lien for his due claim from another merchant, under a transaction concluded between them, on the movables and securities of the debtor received by that merchant in a lawful manner. Such right shall exist as long as the merchant has in his possession the movables and the securities.

2. The lien shall also exist where:

1. the ownership of the items has passed to the creditor, but he must transfer it back;

2. the ownership of the items has been transferred to a third party with regard to the debtor to the creditor, but he should transfer it back to the debtor.

3. The lien shall also have effect against the third parties to the extent objections the creditor may have against the claim of the debtor for delivery of the item may be raised against them.

4. The lien shall cease to exist if the debtor has ordered otherwise prior to the delivery of the item, or if the creditor has undertaken to act in respect of the item in a specific manner.

5. The lien may also be exercised for sums receivable which have not become due:

1. if the debtor has entered bankruptcy proceedings;

2. if a compulsory execution undertaken against the debtor has failed.

6. The lien shall be retained, if the debtor has ordered otherwise prior to the delivery of the item or if the creditor has undertaken to act in respect of the item in a specified manner, provided the circumstances under paragraph 5 have come to the knowledge of the creditor after the delivery of the item.

Section VI.

TRANSFER OF RIGHTS

Transfer of order negotiable instruments

Article 316

1. An instruction issued to order and addressed to a merchant for payment of money, delivery of securities or other fungible goods, and which does not set the performance as subject to counter performance, may be transferred by endorsement. This shall also apply to documents for obligations issued to order by a merchant for items as above, if the performance thereof is not conditioned upon counter performance.

2. Transferred by endorsement may also be bills of lading, consignment notes, warehouse warrants, notes for marine loans and transport insurance policies, provided they have been issued to order.

Effect of the endorsement

Article 317

1. All rights embodied in the endorsed negotiable instruments are assigned through endorsement.

2. The debtor shall be bound to perform only against presentation of the negotiable instrument, with mark thereon indicating that the obligation for which it has been issued has been paid.

3. The provisions for bills of exchange shall apply mutatis mutandis to the form of the endorsement, the identification of the possessor and the verification of identification, as well as to the obligation of the possessor to deliver the negotiable instrument.

Chapter twenty two.

COMMERCIAL SALE

Section I.

General Definition

Article 318

1. A commercial sale shall be a sale which constitutes a commercial transaction pursuant to the provisions of this Act.

2. A sale the subject of which is an item for personal consumption and where the buyer is a natural person, shall not be a commercial sale.

Term for delivery

Article 319 (New, SG, No 83 1996)

Where no term has been agreed for delivery of the goods, the buyer may demand delivery within a reasonable term.

Obligation for notification

Article 320 (New, SG, No 83 1996)

Where it has been agreed that the goods will be accepted at the warehouse of the seller, the parties shall determine within what time limits and in what manner the seller must notify the buyer that the goods are ready for delivery. Where that has not been determined, the notification shall be at least three days prior to the date of delivery, and should the parties be situated in different localities -- at least five days before that date.

Documents pertaining to the goods Article 321 (New, SG, No 83 1996)

Upon request of the buyer the seller shall be obliged to issue an invoice, and also other documents as agreed between the parties.

Service

Article 322 (New, SG, No 83 1996)

The seller shall be obliged to provide the necessary service according to the commercial practice,

unless otherwise agreed.

Compensation

Article 323 (New, SG, No 83 1996)

Should the sale be avoided and within an appropriate period of time after the avoidance the buyer has purchased replacement goods, or the seller has re-sold the goods, the party seeking compensation may receive the difference between the sale price and the price of the replacement transaction, as well as compensation.

Inspection of the goods

Article 324 (New, SG, No 83 1996)

The buyer shall inspect the goods in the course of time as necessary in view of the circumstances, and where the goods fail to meet the requirements, he shall immediately notify the seller. If the buyer fails to do so, the goods shall be considered approved as complying to the requirements, except for hidden defects.

Obligation for keeping

Article 325 (New, SG, No 83 1996)

1. In the event of refusal to accept goods forwarded from another place, the buyer shall be obliged to keep them with the care of good merchant for the time period usually needed by the buyer to give his instructions. Should the seller be in delay, the buyer may deliver the goods for keeping to a third party, notifying the seller thereof.

2. Should the goods be perishable, or where their keeping is related to considerable costs and inconveniences, the buyer may sell them on account of the seller.

3. Where no instructions have been given pursuant to paragraph 1, the buyer shall be liable only for intentional acts or gross negligence.

Determination of price

Article 326

1. The price shall be determined by the parties upon conclusion of the contract.

2. Where the price has not been determined and there is no agreement as to how to determine it, it shall be considered that the parties have agreed to the price usually paid upon conclusion of sale of the same type of goods under similar circumstances.

3. Where the price is calculated on the basis of weight of the goods, the tare shall be deducted. This rule shall also apply where substances other than the goods are used for the purpose of preservation of goods.

Time of payment

Article 327

1. The buyer shall be obliged to pay the price upon delivery of the goods or of the documents entitling him to receive the goods, unless otherwise agreed.

2. If the seller has undertaken to forward the goods, he shall be entitled to demand that this happens only against payment of the price or presentation of evidence for payment thereof.

Delay of receipt Article 328

1. Where the buyer is in delay of receipt of goods, the seller may:

1. deliver the goods for safekeeping;

2. sell the goods at market prices or at a public auction, after notification to the buyer thereof, informing him of the time and place of the sale or auction;

3. in the case of perishable goods to sell them without prior notice.

2. The delivery for safekeeping and the sales under paragraph 1 shall be on the account and risk of buyer.

Section II.

Special rules for some sales Transit sale

Article 329

1. The parties may agree that the seller deliver the goods to a third party indicated by the buyer.

2. The seller shall be obliged to notify the buyer of the forwarding of the goods to the third party, sending him also copies of the documents accompanying the goods.

3. The price may be paid by the third party.

Distribution of costs pertaining to delivery of goods

Article 330

1. Where the goods have to be forwarded to a place other than the place of delivery, the costs pertaining to forwarding and transportation shall be on account of the buyer.

2. It shall be assumed that the seller has undertaken the costs of loading and transportation, if delivery has been agreed franco a specific point other than the point of delivery.

3. The costs pertaining to forwarding and transportation, as well as the distribution of other costs related to the performance of the contract, may be determined by reference to general terms elaborated by international and other institutions.

Sale with additional specification Article 331 (New, SG, No 83 1996)

The parties may agree on a term during which the buyer shall specify the object of sale. In case of delay of the buyer, the seller may either do so or avoid the contract.

Sale with periodic performance Article 332 (New, SG, No 83 1996)

In the case of a sale with periodic performance where the parties have agreed that seller may perform in advance, what has been given in excess during the preceding period shall be deducted from what is due.

Sale with buy-back clause

Article 333 (New, SG, No 83 1996)

A sale with a buy-back clause must be in writing and with a fixed term for exercising the right of buy-back. The right of buy-back shall lapse upon expiration of the term.

Sale with advance payment of the price Article 334 (New, SG, No 83 1996)

The agreement for advance payment of the price must be in writing. If the seller fails to deliver the goods, he shall owe interest from the date of receipt of the price. In such a case the price paid shall be considered earnest money.

Installment sale

Article 335 (New, SG, No 83 1996)

1. An installment sale shall be valid if executed in writing.

2. The failure to pay installments not exceeding one-fifth of the price of the goods, shall not be a reason for cancellation of the contract.

3. If the sale is avoided due to the buyer's failure to perform, the seller may also claim compensation.

Sale by assignment of negotiable instruments Article 336 (New, SG. No 83 1996)

In the case of sale of goods by assignment of a negotiable instrument the seller shall be relieved from the obligation to deliver the goods, by assigning the negotiable instrument to the buyer. The buyer shall be bound to pay the price immediately and at the point of delivery of the documents, unless otherwise agreed.

Section III.

Sale at public auction with open bidding Publicity

Article 337 (New, SG, No 83 1996)

The seller shall provide publicity of the auction terms by announcement in at least one daily.

Binding force of proposal

Article 338 (New, SG, No 83 1996)

A participant in the auction shall be bound by his proposal in compliance with the terms of the auction.

Assignment of the goods

Article 339 (New, SG, No 83 1996)

The person who conducts the bidding shall assign the goods to the bidder who has offered the highest price. The sale shall be considered concluded by assignment of the goods.

Payment

Article 340 (New, SG, No 83 1996)

The buyer shall be bound to pay the price immediately, unless otherwise provided by the terms of the auction. The seller may cancel the contract if the buyer fails to fulfill this obligation.

Nullification of sale

Article 341 (New, SG, No 83 1996)

An auction sale concluded as a result of acts contrary to the law or good morals may de declared null and void upon the request of any interested party, within ten days following the assignment. In the case of an action for payment of the price, the buyer may demand nullification of the sale by means of an objection.

Chapter twenty three.

LEASING CONTRACT

Definition

Article 342 (New, SG, No 83 1996)

1. Under a leasing contract the lessor undertakes to provide an item for use against payment.

2. Under a financial leasing contract the lessor undertakes to obtain an item from a third party under terms specified by the lessee, and to provide that item to the lessee for use against payment.

3. The lessee may acquire the item during the term of the contract or after the expiration thereof.

Risk

Article 343 (New, SG, No 83 1996)

In the case of a financial lease the risk of accidental destruction or damages to the Article shall be on the account of the lessee.

Obligations of lessor

Article 344 (New, SG, No 83 1996)

1. The lessor shall undertake the obligations of lessor pursuant to Article 230 of the Obligations and Contracts Act.

2. The lessor under a financial lease shall be bound to transfer its rights in respect of the third party concurrently with the transfer of title of the item.

Obligations of the lessee

Article 345 (New, SG, No 83 1996)

1. The lessee shall undertake the obligations of lessee pursuant to articles 232 and 233, paragraph 2, of the Obligations and Contracts Act, as well as the obligation to return the item upon expiration of the term of the contract.

2. The costs pertaining to maintenance of the item shall be on the account of the lessee.

Sub-leasing

Article 346 (New, SG, No 83 1996)

The lessee may give the item to be used by another party with the consent of the lessor.

Reference

Article 347 (New, SG, No 83 1996)

1. The rules of this Chapter shall also apply mutatis mutandis to leasing of an enterprise.

2. The rules relevsnt to lease contracts shall apply mutatis mutandis to leasing contracts with the exception of Article 229, paragraphs 1 and 3, Article 231, paragraphs 1 and 2, Article 233, paragraph 1, Article 235, Article 236, paragraph 1, articles 237, 238 and 239 of the Obligations and Contracts Act.

Chapter twenty four.

COMMISSION MERCHANT CONTRACT

Definition

Article 348 (New, SG, No 83 1996)

1. Under a commission merchant contract the commission merchant shall undertake, for a commission, to perform on his own behalf and on the account of the principal one or more transactions.

2. The provisions on the contract of mandate shall apply mutatis mutandis to the relationship between the principal and the commission merchant, unless otherwise provided in this Chapter.

Effect