LAW FOR GUARANTEEING RECEIVABLES OF EMPLOYEES ON BANKRUPTCY OF THE EMPLOYER (BULGARIA)

Prom. SG. 37/4 May 2004, amend. SG. 104/27 Dec 2005, amend. SG. 105/29 Dec 2005, amend. SG. 30/11 Apr 2006, amend. SG. 34/25 Apr 2006, amend. SG. 48/13 Jun 2006, amend. SG. 105/22 Dec 2006, amend. SG. 12/13 Feb 2009, amend. SG. 32/28 Apr 2009, amend. SG. 18/1 Mar 2011

Chapter one.
GENERAL PROVISIONS

Art. 1. This law settles:

1. the terms giving rise to the right of the employees to guaranteed receivables ensuing from legal terms of employment on bankruptcy of the employer;

2. the creation, functioning and activity of fund "Guaranteed receivables of the employees" on bankruptcy of the employer;

3. the order of payment of the guaranteed receivables of the employees ensuing from the legal terms of employment on bankruptcy of the employer.

Art. 2. This law shall apply for all individuals and corporate bodies hiring persons under legal terms of employment and regarding whom bankruptcy proceedings may be instituted by the order of the Commercial Law or by the order of special laws.

Art. 3. Guaranteed receivables of the employees according to this law are assessed and unrequited:

1. labour remuneration due under individual and team employment contracts;

2. monetary indemnifications due by the employer by virtue of a normative act.

Art. 4. (1) (amend. - SG 48/06, in force from 01.07.2006) Right to guaranteed receivables under this law shall have the employees who are or were in labour relationship with the employer under art. 2 regardless of its term and the duration of the working time, and which legal relationship:

1. (amend. - SG 18/11) has not been terminated as of the date of entering into the trade register of the decision under art. 6;

2. (amend. – SG 18/11) has been terminated during the last three months before the date of entering into the trade register of the decision under art. 6.

(2) The persons under para 1 may enjoy right under this law on condition that the employer has carried out an activity at least 6 months before the initial date of the insolvency, respectively excessive indebtedness indicated in the decision under art. 6.

Art. 5. Not paying the due instalments under this law by the employer shall not deprive the entitled employees of the guaranteed receivables.

Art. 6. (amend. - SG 34/06, in force from 01.10.2006; amend. - SG 48/06, in force from 01.07.2006; amend. – SG 18/11) The right to guaranteed receivables of the employees under art. 4, para 1 shall occur on the date of entering into the trade register of the court decision for:

1. instituting bankruptcy proceedings;

2. instituting bankruptcy proceedings with simultaneous declaring of bankruptcy;

3. (amend. – SG 18/11) instituting bankruptcy proceedings, issuing a decree for termination of the activity of the undertaking, declaring of the debtor in bankruptcy and suspension of the proceedings because of insufficiency of the assets for covering the expenses for the proceedings.

Art. 7. The guaranteed size of the receivables, ensuing from employment legal terms of relations, shall not be paid to employees who, by the moment of the initial date of the insolvency, respectively of the excessive indebtedness, indicated in the decision under art. 6:

1. have been partners in the trade company;

2. have been members of the bodies of management and control of the entrepreneur;

3. are spouses and relatives on direct line of the entrepreneur – individual, or of the persons under item 1 and 2.

Chapter two.
FUND "GUARANTEED RECEIVABLES OF THE EMPLOYEES"

Section I.
Creation, Structure and Management

Art. 8. For payment of the receivables of the employees under this law established at the National Insurance Institute shall be a specialised fund "Guaranteed receivables of the employees", called hereinafter "the Fund".

Art. 9. Bodies of management of the Fund are:

1. supervisory board;

2. director.

Art. 10. (1) The supervisory board shall consist of eight members:

1. four representatives of the nationally represented organisations of the employers;

2. two representatives of the nationally represented organisations of the employees;

3. one representative each of the Ministry of Labour and Social Policy and of the Ministry of Finance.

(2) The representatives of the organisations of the employers and of the employees shall be determined by their management bodies on national level, and the representatives of the Ministry of Labour and Social Policy and of the Ministry of Finance - by the respective ministers.

(3) In case that the organisations of the employers or of the employees do not reach an agreement between themselves for the distribution of the seats in the supervisory board under para 1, item 1 and 2 within 3o days from the enactment of the law or after the expiration of the mandate of the supervisory board the Minister of Labour and Social Policy shall organise a lot between them within the mandate of the representatives of the individual organisations.

(4) The supervisory board shall elect a chairman from among its members.

(5) The supervisory board shall have a three-year mandate.

(6) The supervisory board shall be convened for sittings by the chairman or at a request of one fourth of its members. The first sitting shall be convened by the representative of the Minister of Labour and Social Policy.

(7) The sittings of the supervisory board shall be considered regular if they are attended by two thirds of its members. The decisions shall be taken if more than half of the total number of the members of the supervisory board have voted for them.

(8) The director of the Fund shall participate in the sittings of the supervisory board with advisory power.

Art. 11. The supervisory board shall:

1. approve the basic trends and the plan for providing resources of the Fund;

2. exercise control over the activity of the director of the Fund;

3. approve the draft annual budget and accept the report for the fulfilment of the budget of the Fund;

4. adopt regulation for its activity and approve the regulation for the activity of the fund;

5. approve the list of the banks servicing the Fund, determined by the order of art. 29 of the Code for Social Insurance;

6. make proposal to the governor of the National Insurance Institute for appointment and release of the director of the Fund and determine his remuneration;

7. adopt decisions for writing off uncollectible receivables upon conclusion of the proceedings for liquidation of an employer.

Art. 12. (1) The director of the Fund shall be appointed for a period of 4 years.

(2) The director may be released before the expiration of the term for which he has been appointed at a proposal of the supervisory board of the Fund.

(3) The director shall:

1. carry out the operative management and administer the resources of the Fund;

2. put forward for approval by the supervisory board:

a) the draft budget of the Fund;

b) the report for the fulfilment of the budget of the Fund;

c) the draft regulation for the organisation and activity of the Fund;

d) the list of the banks to service the Fund, determined by the order of art. 29 of the Code for the Social Insurance;

3. propose to the supervisory board writing off of uncollectible receivables upon conclusion of the bankruptcy proceedings for an employer.

Art. 13. (amend. - SG 104/05, in force from 01.01.2006) The administrative, technical, accountancy, legal and informational servicing of the Fund shall be carried out by the National Insurance Institute.

Section II.
Financing of the Fund

Art. 14. The revenue of the Fund shall be raised from:

1. obligatory monthly instalments for the account of the employers;

2. proceeds from accession to the rights of creditors satisfied by the Fund within the frames of the court proceedings for bankruptcy;

3. sums reimbursed by the employer for receivables under art. 3 paid by the Fund and for insurance instalments made for the account of the employer;

4. revenue from investment of temporarily free monetary resources of the Fund;

5. donations, temporary financial and gratuitous aid;

6. interest and fines;

7. other sources.

Art. 15. (1) The resources of the Fund shall be spent for:

1. payment of the guaranteed receivables under art. 3;

2. insurance instalments for the state public insurance, the additional obligatory pension insurance and the health insurance;

3. support of the activity of the Fund in a size established by the supervisory board, but not more than 0.3 percent of the annual revenue of the Fund.

4. (new - SG 104/05, in force from 01.01.2006) expenses for the activity under Art. 13, determined by the Law of the Budget of the State Social Insurance for the relevant year.

Art. 16. Temporarily free resources of the Fund may be invested only in:

1. securities, issued or guaranteed by the government – not less than 65 percent of the temporarily free resources;

2. municipal bonds – not more than 10 percent of the temporarily free resources;

3. deposits in the banks determined by the order of art. 29 of the Code for the Social Insurance – not more than 25 percent of the temporarily free resources.

Art. 17. (1) The resources of the Fund shall not be included in the resources of the other funds of the state public insurance and shall be spent only according to their purpose pursuant to this law.

(2) The assets and liabilities of the Fund may not be united with the assets and liabilities of other funds.

(3) Loans may not be granted from the resources of the Fund.

(4) The Fund may not issue debt.

Art. 18. For temporary shortage of resources in the Fund for covering urgent payments may be used short-term, interest-free loans from the republican budget by a permit of the Minister of Finance at a proposal of the supervisory board of the Fund and/or from funds with social orientation up to the size of their reserves, by an order of the Minister of Finance and the Minister of Labour and Social Policy, at a proposal of the supervisory board of the Fund.

Art. 19. (1) The annual chart of account of the Fund shall be adopted by the Law for the budget of the state social insurance for the respective year as an appendix to it.

(2) If the Law for the budget of the state public insurance for the respective year is not adopted by the National Assembly by the beginning of the budget year the revenue shall be raised and the expenditure shall be made according to the current normative provision, and for support of the activity of the Fund shall be spent monthly up to one twelfth part of the expenses provided for by the chart of account for the preceding year.

Section III.
Kind and Size of the Instalments

Art. 20. (1) The employers shall be obliged to pay the obligatory monthly instalments in the Fund for their employees working under employment legal terms, with exception of the persons under art. 7, item 1 – 3 while they have the respective quality.

(2) (amend. - SG 105/05, in force from 01.01.2006) The employers shall be obliged to declare once before the respective territorial directorate of the National Revenue Agency names of the employees having the qualities under art. 7, item 1 – 3 in concluding the employment contract with them or by the moment of occurrence of a change of the respective quality.

(3) (suppl. - SG 105/06, in force from 01.01.2007; amend. – SG 18/11) The installments in the Fund shall be due on the received, including on the determined and unpaid, gross labour remuneration or on the non-determined monthly remunerations, but over no more than the maximal monthly size of the insurance income determined by the Law for the budget of the state public insurance, and shall be entirely for the account of the employers.

(4) (new - SG 105/05, in force from 01.01.2006; suppl. - SG 105/06, in force from 01.01.2007; amend. – SG 18/11) The instalments into the fund "Guaranteed receivables of the workers and employees" shall be deposed simultaneously with the payment of the due remuneration or a share of it. Where the remunerations are determined but not paid, or where they are not determined, the installments shall be deposited before the end of the month, following the month in which the labor took place.

(5) (prev. text of Para 4. - SG 105/05, in force from 01.01.2006 The instalment for the Fund shall be for the account of the employer and shall be determined annually by the Law for the budget of the state public insurance, but it may not be more than 0.5 percent of the remuneration under para 3.

(6) (prev. text of Para 5. - SG 105/05, in force from 01.01.2006) The instalment for the Fund shall be made in individual accounts in the banks determined by the order of art. 29 of the Code for the Social Insurance.

(7) (prev. text of Para 6. - SG 105/05, in force from 01.01.2006) The instalments in the Fund shall be recognised as expenditure for the activity for the purposes of taxation.

Art. 21. (1) (amend. - SG 105/05, in force from 01.01.2006)The control over the payment of the instalments to the Fund shall be executed by the bodies of the National Revenue Agency. The control over the payment of the guaranteed receivables shall be exercised by the control bodies of the National Insurance Institute.

(2) (amend. - SG 105/05, in force from 01.01.2006)The due, but not paid instalments, shall be collected under the procedure of the Tax-insurance Procedure Code and the rules for finding and collection of the obligatory insurance instalments shall be applied.

(3) (revoked – SG 105/05, in force from 01.01.2006)

(4) The receivables of the Fund for unpaid instalments shall be collected along with the interest under art. 113 of the Code for the Social Insurance.

(6) Instalments paid unreasonably to the Fund may be claimed within three years from the date on which they have been paid.

Chapter three.
SIZE OF THE GUARANTEED RECEIVABLES

Art. 22. (1) The guaranteed receivables of the employees under art. 4, para 1, item 1 shall be of the size of:

1. (amend. - SG 48/06, in force from 01.07.2006; amend. – SG 18/11) the last three assessed but not paid monthly labour remunerations and monetary indemnifications for the last 6 calendar months preceding the month when the decision under art. 6 is registered, but monthly no more than the maximal size, determined for these cases, of the guaranteed receivables, if the employee has had employment legal terms of relation with the same employer for a period not less than three months;

2. (amend. – SG 18/11) the assessed but not paid labour remuneration and monetary indemnifications, but not more than one minimal salary established for the country by the date of registration of the decision under art. 6, if by this date the employee has had employment legal terms of relations with the same employer for a period less than three months.

(2) (amend. – SG 18/11) The maximal size of the guaranteed receivables under para 1, item 1 shall be determined annually by the Law for the budget of the state public insurance and it may not be less than two and a half minimal salaries established for the country by the date of entering of the decision into the trade register.

Art. 23. (1) (amend. - SG 48/06, in force from 01.07.2006; amend. – SG 18/11) The guaranteed receivables of the employees under art. 4, para 1, item 2 shall have the size of the last three calculated but not paid monthly labour remunerations and monetary indemnifications during the last 6 calendar months before the month of termination of the legal terms of employment, but monthly no more than the maximal size, determined for these cases, of the guaranteed receivables, if they have had legal terms of employment with the same employer for a period no less than three months.

(2) (amend. – SG 18/11) The maximal size of the guaranteed receivables under para 1 shall be determined annually by the Law for the budget of the state public insurance and it may not be less than two and a half minimal salaries determined for the country by the date of entering of the decision under art. 6 into the trade register.

(3) When the receivables of the employees under art. 4, para 1, item 2 are only for assessed but not paid monetary indemnification for the account of the employer, due by virtue of a normative act or a team employment contract, the guaranteed receivable shall be of size of the unpaid indemnifications, but not more than the four-fold size of the minimal salary established for the country by the date of termination of the legal terms of employment, if they have had legal terms of employment with the same employer for a period longer than three months.

(4) (amend. - SG 34/06, in force from 01.10.2006; amend. – SG 18/11) When the employee under art. 4, para 1, item 2 has had legal terms of employment with the same employer for a period less than three months the guaranteed receivable shall have the size of the assessed but not paid labour remuneration and monetary indemnifications, but not more than one minimal salary established for the country by the date of registration of the decision under art. 6.

Art. 24. (1) (amend. - SG 105/05, in force from 01.01.2006) Along with the payment of the guaranteed receivables under art. 3, item 1 paid shall also be the due insurance instalments for the state public insurance, the additional obligatory pension insurance and the health insurance.

(2) The insurance instalments shall be calculated on the size of the guaranteed receivables under art. 22 and 23 for labour remuneration.

(3) The insurance instalments shall be distribution between the fund and the employee in the ratio under art. 6, para 3 of the Code for the Social Insurance.

Chapter four.
PROCEDURE OF PAYMENT OF THE GUARANTEED RECEIVABLES (IN FORCE FROM 01.01.2005)

Art. 25. (amend. - SG 34/06, in force from 01.10.2006; suppl. - SG 48/06, in force from 01.07.2006; amend. – SG 18/11) The guaranteed receivables under this law shall be granted on the basis of an application-declaration in a form, filed by the employee to the territorial division of the National Insurance Institute at the seat of the employer within 30 days from the date of registration of the decision under art. 6 or from the date of notifying the employees by the Bulgarian employer of the fact that bankruptcy proceedings according to the order of the legislation of the other country was instituted.

Art. 26. (1) The guaranteed receivable shall be paid to the entitled employee on the basis of an issued order by the director of the Fund.

(2) The order under para 1 shall be sent within three days to the territorial division of the National Insurance Institute and to the entitled employee.

(3) Where the terms of this law are not present the director of the Fund shall refuse the payment of the guaranteed receivable by an order which shall be sent within three days to the employee.

(4) (amend. - SG 30/06, in force from 12.07.2006) The order under para 1 or 3 shall be appealed by the order of the Administrative procedure code within 14 days from its receipt before the administrative court at the seat of the territorial division of the National Insurance Institute. The complaint shall be filed by the employee through the director of the Fund who, within seven days, shall be obliged to send it along with the file to the court.

(5) (amend. - SG 30/06, in force from 12.07.2006, and with regards to the replacement of the word "the district" by "the administrative" - in force from 01.03.2007) The decisions of the administrative court shall be subject to cassation appeal by the order of the Administrative procedure code.

(6) (amend. - SG 30/06, in force from 12.07.2006) The complaint against the order under para 1 or 3 shall be considered by the respective administrative court within two months from its receipt and by the Supreme Administrative Court – within one month from its filing.

(7) The proceedings on cases for reimbursement of unpaid guaranteed receivables of employees from the Fund shall be free of charge.

Art. 27. (1) (prev. text of Art. 27. - SG 105/05, in force from 01.01.2006; amend. – SG 18/11) The territorial divisions of the National Insurance Institute shall pay the guaranteed receivables to the eligible persons within 7 days from receipt of the order of the director of the Fund and transfer of the sums by the Fund to the nominated by them personal payment or saving perpetual bank accounts.

(2) (new - SG 105/05, in force from 01.01.2006) Simultaneously with the payment of the guaranteed receivable, the respective territorial unit of the National Insurance Institute shall transfer the due insurance instalments for the state public insurance, additional obligatory pension insurance, health insurance, the tax on the incomes and the distraints.

Art. 28. (1) As a result of the payment of guaranteed receivables of the employees by resources of the Fund in its favour shall occur a right of claim against the employer or the bankruptcy estate for reimbursement of the unpaid resources.

(2) In connection with the reimbursement of paid guaranteed receivables of employees the receivables of the Fund shall enjoy the same legal protection stipulated by the Commercial Law for receivables for labour remuneration.

(3) (amend. - SG 105/05, in force from 01.01.2006; amend. – SG 12/09, in force from 01.05.2009; amend. – SG 18/11) In the bankruptcy proceedings, in connection with the paid guaranteed receivables of employees, the Fund shall be represented by the governor of the National Revenue Agency.

Art. 29. The order and the way of informing the employees, as well as of granting and payment of the guaranteed receivables, shall be settled by an ordinance of the Council of Ministers.

Art. 30. The part of the assessed, but not paid labour remuneration, which is not guaranteed by the Fund, shall remain due for the employee and may be claimed in the bankruptcy proceedings.

Chapter five.
ADMINISTRATIVE PENAL LIABILITY

Art. 31. (amend. – SG 18/11) An employer or an official who does not fulfil his obligation under this law or under the normative acts for its implementation shall be punished by a fine of 100 to 2000 levs for each individual case.

Art. 32. (1) (suppl. - SG 105/05, in force from 01.01.2006) The violations under art. 31 shall be established by acts drawn up by the control bodies of the National Insurance Institute or by the revenue bodies of the National Revenue Agency in accordance to their powers.

(2) (suppl. - SG 105/05, in force from 01.01.2006) The penal provisions shall be issued by the head of the territorial division of the National Insurance Institute or by an official authorised by him or by the revenue bodies of the National Revenue Agency in accordance to their powers.

(3) The establishing of violations, the issuance, the appeal and the execution of the penal provisions shall be carried out by the order of the Law for the administrative offences and sanctions.

Additional provisions

§ 1. (new - SG 48/06, in force from the date of entering into force of the Treaty of Accession of the Republic of Bulgaria to the European Union) (1) Right of guaranteed receivables under the conditions, the order and the amounts determined by this law shall have also the employees hired under labor relationships in enterprise – Bulgarian employer, which carries out economic activity on the territory of the Republic of Bulgaria and represents separate part of another enterprise carrying out economic activity on the territory of another European Union member state or other state of the European Economic Area, provided that under the order of the legislation of this state the enterprise is in bankruptcy and this concerns its separate part in the Republic of Bulgaria.

(2) In the cases referred to in para 1 it shall be considered that the enterprise is in bankruptcy, provided that instituting collective procedure based on the insolvency of the employer as it is provided in the respective legal, subordinate and administrative provisions of the member state was requested, including partial or full seizure of the employer’s assets, determining of liquidator or a person carrying out similar functions, and the respective competent body:

1. has decided to institute to the proceedings, or

2. has established that the enterprise or the employer’s activity have been completely terminated and its available assets are insufficient to justify instituting of the procedure.

(3) In the cases under para 1 the right for guaranteeing receivables shall emerge from the date of declaring the bankruptcy in the sense of para 2.

(4) The obligation of the Bulgarian employer to notify the employees under the order of art. 29 shall emerge from the date on which the fact referred to in para 2 has become known to him.

Transitional and concluding provisions

§ 2. (prev. text of § 01 - SG 48/06, in force from 01.07.2006) Fund "Guaranteed receivables of employees" shall not guarantee the receivables of the employees having occurred before January 1, 2005.

§ 3. (prev. text of § 02 - SG 48/06, in force from 01.07.2006) The Council of Ministers shall adopt the ordinance under art. 29 by January 1, 2005.

§ 4. (prev. text of § 03 - SG 48/06, in force from 01.07.2006) The provisions of art. 20, of Chapter Three "Size of the guaranteed receivables" (art. 22 – 24) and Chapter Four "Procedure of payment of the guaranteed receivables" (art. 25-30) shall enter into force on January 1, 2005.

§ 5. (prev. text of § 04 - SG 48/06, in force from 01.07.2006) The implementation of the law is assigned to the Council of Ministers.

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The law was passed by the 39th National Assembly on April 21, 2004 and was affixed with the official seal of the National Assembly.

Transitional and concluding provisions
TO THE LAW OF THE BYDGET OF THE STATE SOCIAL INSURANCE FOR YEAR 2006

(PROM. – SG 104/05, IN FORCE FROM 01.01.2006)

§ 9. The law shall enter in force from 1st of January 2006, except:

1. paragraph 3, item 11, which shall enter in force from 1st of January 2007;

2. paragraph 3, items 1, 3, 4, 6, 9, 10, 12, 13 and 15 and § 4, which shall enter in force from the day of the promulgation of the law in the State Gazette.

Transitional and concluding provisions
TO THE TAX-INSURANCE PROCEDURE CODE

(PROM. – SG 105/05, IN FORCE FROM 01.01.2006)

§ 88. The code shall enter in force from the 1st of January 2006, except Art. 179, Para 3, Art. 183, Para 9, § 10, item 1, letter "e" and item 4, letter "c", § 11, item 1, letter "b" and § 14, item 12 of the transitional and concluding provisions which shall enter in force from the day of promulgation of the code in the State Gazette.

Transitional and concluding provisions
TO THE ADMINISTRATIVE PROCEDURE CODE

(PROM. – SG 30/06, IN FORCE FROM 12.07.2006)

§ 142. The code shall enter into force three months after its promulgation in State Gazette, with the exception of:

1. division three, § 2, item 1 and § 2, item 2 – with regards to the repeal of chapter third, section II "Appeal by court order", § 9, item 1 and 2, § 15 and § 44, item 1 and 2, § 51, item 1, § 53, item 1, § 61, item 1, § 66, item 3, § 76, items 1 – 3, § 78, § 79, § 83, item 1, § 84, item 1 and 2, § 89, items 1 - 4§ 101, item 1, § 102, item 1, § 107, § 117, items 1 and 2, § 125, § 128, items 1 and 2, § 132, item 2 and § 136, item 1, as well as § 34, § 35, item 2, § 43, item 2, § 62, item 1, § 66, items 2 and 4, § 97, item 2 and § 125, item 1 – with regard to the replacement of the word "the regional" with the "administrative" and the replacement of the word "the Sofia City Court" with "the Administrative court - Sofia", which shall enter into force from the 1st of May 2007;

2. paragraph 120, which shall enter into force from the 1st of January 2007;

3. paragraph 3, which shall enter into force from the day of the promulgation of the code in State Gazette.

Transitional and concluding provisions
TO THE LAW OF THE COMMERCIAL REGISTER

(PROM. – SG 34/06, IN FORCE FROM 01.10.2006)

§ 56. This law shall enter into force from the 1st of October, with the exception of § 2 and § 3, which shall enter into force from the day of the promulgation of the law in State Gazette.

Transitional and concluding provisions
TO THE LAW ON AMENDMENT AND SUPPLEMENTING OF THE LABOUR CODE

(PROM. – SG 48/06, IN FORCE FROM 01.07.2006)

§ 48. The law shall enter into force from 1 July 2006 except § 47, item 6 which shall enter into force from the date of entering into force of the Treaty of Accession of the Republic of Bulgaria to the European Union.

Transitional and concluding provisions
TO THE LAW FOR AMENDMENT AND SUPPLEMENTATION OF THE CODE OF TAX INSURANCE PROCEDURE

(PROM. – SG 12/09, IN FORCE FROM 01.05.2009; SUPPL. – SG 32/09)

§ 68. This Law shall enter into force from May 1, 2009 except for § 65, 66 and 67, which shall enter into force from the date of its promulgation in the State Gazette and § 2 - 10, § 12, items 1 and 2 - regarding para 3, § 13 - 22, § 24 - 35, § 36, paras 1 - 4, § 37 - 51, § 52, items 1 - 3, т. 4, letter "a", item 7, letter "f" - regarding para 10 and 11, т. 8, letter "a", items. 9 and 12 and § 53 - 64, which shall enter into force from January 1, 2010.