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Criminal responsibility for undeclared insolvency

Many of our clients are having difficulties with comprehending one of the controversial norms of the Bulgarian Penal Code. Today, we will try to explain it in simple words, so the majority of the readers will be able to understand what it is all about.

The insolvency trap in the Bulgarian Penal Code

Let’s see first what is the norm saying. We have translated it in English, Italian and Russian below:

Bulgarian language - penal code

(1) Търговец, който изпадне в неплатежоспособност и в 30-дневен срок от спиране на плащанията не заяви това пред съда, се наказва с лишаване от свобода до три години или с глоба до пет хиляди лева.

(2) С наказанието по ал. 1 се наказват и лицата, които управляват и представляват търговското дружество или кооперация, ако в 30-дневен срок от спиране на плащанията не са поискали от съда да открие производство по несъстоятелност.

Чл. 227б, ал, 1 и 2 от Наказателния кодекс
English language - flag

(1) A trader who becomes insolvent and fails to declare this to the court within 30 days of the suspension of payments shall be liable to imprisonment for up to three years or a fine of up to five thousand leva.

(2) With the penalty under par. 1 shall also be imposed on the persons who manage and represent the commercial company or cooperative if they have not requested the court to open bankruptcy proceedings within 30 days of the suspension of payments.

Article 227b (1,2) of the Penal Code
Italian language - flag

(1) Il commerciante che diventa insolvente e non lo dichiara al tribunale entro 30 giorni dalla sospensione dei pagamenti è punito con la reclusione fino a tre anni o con una multa fino a cinquemila leva.

(2) Con la sanzione di cui al par. 1 è prevista anche per le persone che gestiscono e rappresentano la società commerciale o cooperativa se non hanno richiesto al tribunale l’apertura della procedura fallimentare entro 30 giorni dalla sospensione dei pagamenti.

Articolo 227b, paragrafi 1 e 2, del Codice penale.
Russian language - flag

(1) Торговец, который становится неплатежеспособным и не заявляет об этом в суд в течение 30 дней с момента приостановки платежей, наказывается лишением свободы на срок до трех лет или штрафом в размере до пяти тысяч левов.

(2) Наказание по пп. 1 налагается также на лиц, управляющих и представляющих коммерческую компанию или кооператив, если они не обратились в суд с заявлением об открытии производства по делу о банкротстве в течение 30 дней с момента приостановления платежей.

Статья 227б (1,2) Уголовного кодекса

The norm explained in (very) simple terms

So what does the Penal code actually say? The idea of the norm is to protect the creditors of a company or of a trader in general. The law requires from the Bulgarian companies and traders to declare insolvency within 30 days of the moment when they can’t meet their financial obligations.

In other words, if a Bulgarian company (or trader, may be private individual as well) can not pay its debts, it has to declare insolvency in the court within 30 days. Failing to do so will impose criminal responsibility for the managers of the company or for the trader – private person.

Is the norm harsh? It definitely is. We believe this norm should be amended or even withdrawn by the Bulgarian deputies. At the moment however, there are many victims of this norm, serving time in Bulgarian jails.

Please do not hesitate to contact us if you have any questions or if you want to protect yourself from falling victim of the insolvency trap.

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