Bulgaria: State Ownership Act amended and supplemented


Recently, amendments and supplements to the State Ownership Act [1] (the “SOA”) were introduced.

The main changes relate to:

Liquidation of co-owned state property

Prior consent of the executive director of the Agency for Privatisation and After Privatisation Control (the “Agency”) is required in the liquidation of property co-owned by the State and natural or legal entities in cases when the State sells its portion of the property and the tax evaluation of the State’s interest exceeds BGN 10,000 (app. EUR 5,000).

To obtain consent, the relevant district governor must send a draft order for termination of the co-ownership along with the whole case file to the executive director of the Agency for his approval.

This limitation does not apply to cases when the other party is a municipality.

Limitation of the participants in tender procedure

The SOA introduces new limitations on who is able to participate in tender procedures for the acquisition of privately owned state properties, providing that related parties may not be separate candidates or participants in the same tender procedure.

Under the SOA, related parties are: (i) parent or daughter entities, where one controls the other; (ii) sister entities whose activities are controlled by a third entity; (iii) entities which jointly control another one; and (iv) spouses, lineal relatives to any degree, collateral relatives up to the fourth degree of consanguinity, and relatives by marriage up to the fourth degree of affinity inclusive.

The main goal of this amendment is to protect competition and restrict bad faith reduction of the purchase price caused by conflicts of interest.

Limited cases for gratuitous transfer of privately owned state property

The State may only transfer privately owned state property to municipalities for free in cases where the property will be used by the municipality for: (i) the needs of its services; or (ii) the permanent fulfilment of the needs of the local community.

In addition, municipalities that receive privately owned state property for free may not: sale, swap, donate, contribute in-kind in the capital of legal entities or grant superficies or usufructo rights to the same, except for the cases when such transaction is required for the realisation of projects necessary for the permanent fulfilment of the needs of the local community and in consideration of the legislation and the rules for state aid or the special treatment of certain investors under the Investments Promotion Act. The district governor must monitor that this restriction is fulfilled and shall report to the Council of Ministers on an annual basis.

If the municipality fails to realise the project for which the gratuitous rights have been granted within five years, the municipality shall transfer the property back to the state.

More powers to district governor

District governors are now entitled to unilaterally terminate an agreement granting a gratuitous right to use over state owned property, if the property is used for purposes other than as provided in the SOA. The SOA also provides for sanctions in the amount of the market value of the suffered losses, as determined by a licensed appraiser.

District governors are also entitled to repeal a municipal ownership deed for a property that is state owned. The district governor’s order may be appealed following the provisions of the Administrative Procedural Code.

[1] State Gazette Issue No. 44 dated 21 May 1996, as amended and supplemented

If you would like more information, please contact Jenia Dimitrova and Denitsa Dudevska.