Archive for the ‘Insight’ Category

ECJ interprets financial collateral on bank accounts

Wednesday, June 7th, 2017

In November 2016 the European Court of Justice (ECJ) issued a preliminary ruling on the interpretation of the Financial Collateral Arrangements Directive (the FCA Directive).

In that ruling (which is the first ECJ ruling on the FCA Directive) the ECJ held inter alia that the requirement under the FCA Directive that the collateral must be “in the possession” or “under the control” of the collateral taker means that the collateral taker must have not only practical control over the account, but also the right to prevent the withdrawal of cash by the collateral provider in so far as is necessary to guarantee the relevant obligations.

What that means for lenders who want to take a financial collateral over a bank account is that the lenders should have a contractual right (enforceable also against the bank where the account is held) to limit withdrawal of funds from the account, if such withdrawal is contrary to the contractual restrictions in the financial collateral agreement. The account bank should also agree not to allow withdrawals without consent of the collateral taker. Without this there is a significant risk that the financial collateral will be void or unenforceable.

In addition the ECJ ruling makes it clear that, although the financial collateral is generally “insolvency-safe” (i.e. the ability of the collateral taker to enforce the financial collateral by withdrawing cash from the account despite the commencement of insolvency proceedings in respect of the collateral provider) it does not protect any cash that was transferred to the account after the commencement of the insolvency proceedings of the collateral provider. So the financial collateral applies only to the cash which was in the account prior to the commencement of the insolvency proceedings of the collateral provider (and at the latest on the day of commencement of the insolvency proceedings if the collateral taker was not aware and could not have been aware of such commencement).

Further the ECJ ruling confirms that the obligations secured by the collateral may consist of or include future obligations, including obligations arising under a master agreement or similar arrangement or obligations of a specified class or kind arising from time to time.

What this means for borrowers is that when they give financial collateral for a debt they should make sure that the financial collateral secures also any potential future refinancing of the debt. This would save them the costs of creating new financial collateral over the same assets for a refinancing of the original debt.

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Bulgaria’s exclusion of certain bank deposits from the deposits guarantee breaches an EU Directive

Friday, February 24th, 2017

In this article BOYANOV & Co. presents a critical analysis of Bulgarian legislation governing bank deposits guarantee excluding from the guarantee deposits solely because they had a higher interest rate than the standard one provided by the bank.

The article was written by Damian Simeonov, Partner and Co-Head of BOYANOV & Co.’s Banking and Finance Practice Group.

Download the full text of the article

Pledge enforcement now requires an insurance, which makes it more costly

Friday, February 17th, 2017

One of the amendments brought at the end of 2016 to the regime of ”special pledges” (i.e. commercial pledges where the pledged assets remains in the possession of the pledger) is the new requirement for insurance.

In particular, a creditor secured by a special pledge enforcing the pledge must, among other things, appoint a “depository”. The depository must be a lawyer or an auditor (prior to the amendments the depository had to be an accountant).

In short, the role of the depository is to prepare a list of the creditors secured by a pledge over the same property and their ranking, receive the cash proceeds from the enforcement of the pledge and distribute such cash proceeds among the secured creditors based on the list. The depository does not carry out the enforcement sale. The later is carried out by the secured creditor.

A new requirement that did not exist prior to the end of 2016 is that the depository must have insurance covering any damages he can cause with his activity at an amount not less than the enforced amount.

This new requirement for insurance raises few concerns:

First, the amendment law did not provide for any transitional period before this new requirement enters into force. Hence, it entered into force almost immediately at the end of last year. Insurers in Bulgaria have not yet prepared themselves to issue these new types of insurance policies. The law is not clear whether a specific insurance policy is required for each specific pledge enforcement or whether for example a general professional indemnity insurance policy would suffice. So, at present no lawyer or auditor has yet such a special insurance cover and unless the general professional indemnity insurances of lawyers or auditors are also deemed to suffice for the purposes of the law there is no one who can currently take on the role of a depository in pledge enforcement.

Second, prior to the amendments the special pledge was appealing to both creditors and debtors because it was relatively inexpensive to create and enforce (in case of private enforcement). The amendment introduced in practice a new enforcement cost as depositories would pass on the cost of obtaining this new special insurance cover to the secured creditor who will in turn pass on the cost to the pledger. Since the cost of obtaining such special insurance cover will depend on the amount of the insurance coverage, which in turn will depend on the amount for which the pledge enforcement is made, the cost of the insurance is likely to be material. This means that one of the main benefits of the special pledge – that enforcing it was relatively inexpensive, is now gone.

Given that the role of the depository is quite limited – to prepare a list of the creditors secured by a special pledge over the same property and their ranking (if more than one) based on public records, to receive the cash proceeds from the pledge enforcement and distribute them among the creditors in the list and that the list prepared by the depository is subject to judicial control (i.e. if a creditor is not content with the list he is entitled to appeal it in court), the potential damages that a depository might cause seem quite limited in practice to merit such an insurance.

In conclusion, from a general public interest point of view, on balance the overall disadvantages of the new requirement for insurance overweigh the benefit of it.

Amendments to the Regime of Pledges in Bulgaria Effective 30 December 2016 – are creditors in a better position now?

Monday, January 9th, 2017

In this article BOYANOV & Co. provides a brief overview of some of the recently adopted material amendments to the Bulgarian Special Pledges Act and the new risks related to their practical application. Please find below the Memorandum outlining the amendments, prepared by Mr. Damian Simeonov, Partner and Head of Banking and Finance, Mrs. Ralitsa Nedkova and Mr. Georgi Drenski, Senior Associates at BOYANOV & Co.

Download Memo

Parallel Import and IP Rights Protection in Bulgaria

Tuesday, October 18th, 2016

BOYANOV & Co. contributed to the CEE Legal Matters magazine www.ceelegalmatters.com with an Expert review on IP rights protection in Bulgaria in cases of parallel import – import of non-counterfeit branded goods in a particular jurisdiction without the consent of the trademark owner.

The Expert review was contributed by Kina Chuturkova, Partner and Head of the Litigation Practice Group of BOYANOV & Co. and Stela Sabeva, Senior Associate and Co-Head of the IP Department (Trademarks) at the firm. The article explains clearly the legal concepts of parallel import and exhaustion of IP rights, the current situation of IP rights protection according to the Bulgarian and EU legislation, and takes a strong position on legal means to prevent unauthorised parallel imports in Bulgaria.

CEE Legal Matters is a print and online publication for and about lawyers interested and working in emerging legal markets of Central and Eastern Europe, featuring news, interviews, analysis, opinions, and special reports and other subjects of interest to lawyers in the region.

To download the article, please visit: http://www.ceelegalmatters.com/index.php/briefings/5071-parallel-reality-for-parallel-import-in-bulgaria

Proposed Amendments to the Bulgarian Commerce Act

Monday, October 10th, 2016

BOYANOV & Co. made a presentation on the proposed amendments to Bulgarian Commerce Act introducing, amongst others, new restructuring proceedings implementing principles of the European Commission Recommendation on a new approach to business failure and insolvency at a CEE Finance & Debt Capital Markets Workshop, organized by Freshfields Bruckhaus Deringer in Vienna on 6 – 7 October 2016.

The CEE Finance Workshop session was focused on legal update on the Corporate and Bank Restructuring in the CEE region.

The presentation, prepared by Mr. Damian Simeonov, Partner and Head of Banking and Finance, and Mr. Georgi Drenski, Senior Associate at BOYANOV & Co., offered a summary of the proposed amendments to the Commerce Act to be adopted soon by the Bulgarian Parliament.

Download Proposed Amendments to the Bulgarian Commerce Act 2016

Mergers and Acquisitions, Global Legal Insights

Tuesday, April 12th, 2016

BOYANOV & Co. contributed to the fifth edition of Global Legal Insights – Mergers & Acquisitions, published by Global Legal Group Ltd, London on 31 March 2016.

The chapter on Bulgaria has been written by Mr. Yordan Naydenov, Partner and Head of Corporate and M&A at BOYANOV & Co. and Dr. Nikolay Kolev, Senior Associate at the firm.

The chapter provides a comprehensive insight into the realities of M&A in Bulgaria, highlighting regulatory fields, M&A market trends, significant transactions and industry sectors, developments.

Download Chapter

Guide on Age Discrimination in Europe

Friday, February 5th, 2016

BOYANOV & Co. contributed to the reference guide regarding age discrimination in Europe, published by Lewis Silkin in association with Ius Laboris, the international alliance of employment law specialists at www.agediscrimination.info, the main resource of information on age discrimination issues in the UK and internationally.

The guide sets out the basic principles of age discrimination laws in 22 European jurisdictions providing a reference sheet for each country with an overview of the structures of the applicable legislation.

The summary of age discrimination legislation in Bulgaria, written by Mr. Radoslav Alexandrov, Senior Associate at BOYANOV & Co., offers an extensive analysis of current legislation and the specifics of anti-discrimination protection in Bulgaria.

To access the age discrimination guide on Bulgaria, please visit: http://www.agediscrimination.info/international/Pages/Bulgaria.aspx

Employment & Labour Law, Global Legal Insights

Monday, January 11th, 2016

BOYANOV & Co. is among the contributing firms to the fourth edition of Global Legal Insights – Employment & Labour Law, published by Global Legal Group Ltd in December 2015.

The latest Employment & Labour Law book covers key topics including labour markets trends, legislative changes, recent court decisions, case law affecting employers’ decision-making over dismissals and redundancies, and likely or impending reforms in 27 jurisdictions.

The Bulgarian chapter was contributed by Mr. Radoslav Alexandrov, Senior Associate at BOYANOV & Co., who presents a comprehensive overview of the legislative framework, analysis of the most recent developments in the labour market as well as amendments in employment legislation. 

Download Bulgarian Chapter

SEE Legal has issued its third edition of The Southeast Europe Energy Handbook 2015

Monday, October 26th, 2015

The Southeast Europe Energy Handbook 2015 is a product of the Energy-Infrastructure Practice Group of SEE Legal (the South East Europe Legal Group). It highlights the major aspects in the energy sector, such as market structures, licensing, price regulations, access to the grid, etc., and provides all the legislative updates which took place over the past year in the SEE region.

The Bulgarian chapter, contributed by Alexander Chatalbashev (Head of Energy and Natural Resources) and Angel Angelov (Senior Associate), provides an insight on all the important aspects in the Bulgarian energy sector. The chapter serves its main purpose to raise readers’ attention as to the Bulgarian energy legislation and assists in identifying the issues that might influence investment and business development decisions in the country.

Download The Southeast Europe Energy Handbook 2015