COVID 19 – CRISIS MANAGEMENT POLICIES IN CENTRAL EUROPE BULGARIA- No. 2

COVID-19 update regarding Bulgaria – 26 March 2020

The State of Emergency Measures Law is now in force

On 23 March 2020 the Bulgarian Parliament approved after the law regulating the state of emergency measures concerning the COVID-19 health crisis. The deliberations of the bill were notable for at least one reason – the first version of the law voted by the Parliament on 20 March required that all consumer prices are fixed for the duration of the state of emergency at their average for the last three months, the penalty for non-compliance being a fine of 5% of the turnover of the company; after a backlash during the weekend, the President exercised his veto and send the bill back for another consideration. Subsequently, the Parliament revoked the controversial provision, but added another, equally concerning – suspension of all penalties and consequences (e.g. liquidated damages, rescission of contract, etc.) related to any contractual default of individuals for the duration of the state of emergency. The provision, initially envisaged to prevent default on bank loans and leasing agreements, allegedly has been adopted as a general waiver instead, by negligence. No veto followed, the text became law on 23 March 2020 causing serious concern among merchants and service providers fearing mass defaults without the option of any recourse.

The main provisions of the law concerning companies and entrepreneurs are the following:

  • Suspension of all terms in the pending court, arbitration, administrative and enforcement proceeding – except for criminal court proceedings.
  • Termination of enforcement proceedings such as public sales or repossession. No enforcement related measures against individuals such as injunctions on bank accounts, on salaries and pensions can be imposed for the duration of the state of emergency.
  • Notary certifications are to be limited to urgent matters; notaries on duty are to be designated for every region.
  • Certain filing and payment obligations related to corporate and personal income tax are postponed until 30 June.
  • Employers may impose paid and/or unpaid leave as well as home office or working hours modification on the employees.
  • For certain economic sectors, the state will finance a part of the wage in attempt to motivate employers to suspend their operations, entirely or in part, instead of laying off their employees. The measure is regarded as insufficient by employers as the basis for calculation is 60% on the amount of the wage paid in January 2020, on which the employer is to pay social security charges; after deduction of all charges for the employer the effective amount of the state support is approx. 20%.

The law is effective as of 13 March 2020, the start of the state of emergency, except for certain provisions such as the termination of enforcement procedures, which enter into force as of the date of promulgation, 23 March. The law will cease to apply automatically when the state of emergency is revoked.

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