Bulgaria has transposed the EU Directive on Preventive Restructuring Frameworks (Directive 2019/1023) into national law, creating new opportunities for distressed companies to restructure before entering formal insolvency proceedings.
Key Features of the Framework
- Early warning tools: New mechanisms to detect financial difficulties at an early stage, including debtor self-assessment tools
- Moratorium on enforcement: Companies can obtain a stay of individual enforcement actions for up to 4 months (extendable to 12 months) while negotiating with creditors
- Cross-class cram-down: Courts can confirm a restructuring plan even if not all classes of creditors approve, subject to fairness safeguards
- Protection of new financing: New money provided during restructuring receives priority status in subsequent insolvency proceedings
Who Can Use It?
The framework is available to all enterprises that are in financial difficulties but are not yet insolvent. The debtor must demonstrate that there is a reasonable prospect of preventing insolvency and ensuring the viability of the business.
Impact on Creditors
Creditors should be aware that the new framework shifts the balance toward debtor-friendly restructuring. However, adequate safeguards protect creditor rights, including the “best interest of creditors” test and absolute priority rule exceptions.
Our Insolvency & Restructuring team advises both debtors and creditors on preventive restructuring plans, court-supervised proceedings, and cross-border insolvency matters.