Commercial Legal And Institutional Reform (CLIR) - Economic Growth

COMMERCIAL LEGAL AND INSTITUTIONAL REFORM
Diagnostic Assessment Report for the Republic of Bulgaria March 2002
core. The delays in court registration and issue of certificates have become a rule
rather than an exception.
b. The court practice developed during the last 10 years turned “safeguard
procedures” into an administrative claim procedure, where absurd cases of
petitioners readily disputing with the court are constantly observed. We also see
that due to the territorial registration requirements, there now exist 28 different
non-harmonized standards/procedures, one for each of the 28 district courts in
respect to documentation, formalities, terms for issue of decisions and certificates,
etc. This leads frequent rejections for registration petitions, followed by appeals in
the Appellate Courts and in the Supreme Court of Cassation where it may take
years before the petitioner receives a final registration (of a new director for
instance).
c. Court practice has developed a highly formalistic and bureaucratic activity.
Refusals/rejections are often based on inconsistency with the practice of this
district court of how a document should look like (or missing “key/code”
words/sentence in a board decision or protocol). We even note in some cases “odd
situations”, an example of which would be a case where the magistrate physically
tallies the shares of 3000 shareholders represented at a general assembly, where
the majority shareholder is present with 90% of the votes at hand. In the latter
case, the magistrate “found” 2 shares missing during a vote, and refused to
register the decision, delaying the entire process at untold cost.
d. As a consequence of the inconsistencies noted above, the environment in and
around courts has become highly susceptible to corruption practices. It is a
“public” secret that a whole industry geared around “facilitation” of registrations
exists.
7.1.4. Our understanding is that the whole system of company registration has to
be seriously reconsidered and simplified. There is no doubt that the court should
be relieved from these duties and registration is transformed into a pure
administrative procedure held in a centralized agency - Commercial Registrar (at
the Ministry of Justice). This Agency may have only limited competencies as
administrative authority for the purposes of registration of traders and issue of
official certificates for incorporation, governing bodies of companies, registered
capital, and partners. Pre-approved forms for registration must be also introduced.
In such case there is no need for all the personnel in this Agency to have legal
background.
7.1.5. The whole bookkeeping process should stay within the company. A
possible solution could be for companies to hire “corporate” attorney for these
purposes. For joint stock companies (especially public companies) the new
regime could mandate an obligation to appoint a Secretary (in-house individual or
a law firm) to maintain and/or check board decisions, protocols of general
assembly of shareholders, book of shareholders, etc. The set of documents
Booz Allen Hamilton
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