If you take out a loan, you would be expected to provide some form of security. It is becoming more and more common for businesses to pledge their own on-going concern in the form of the so-called special pledge.
A typical feature of this type of pledge is that you do not need to deliver the object of the pledge to the creditor. Instead, you keep using and benefitting from the object of the pledge. It’s a pledge typically agreed between commercial companies. This is also a condition for its validity – it can only be established by a merchant or craftsman, individual carrying out agricultural activity or hotel owner.
The on-going concern constitutes a range of rights, obligations and factual relations. The pledge encompasses not only the company (the on-going concern) but also everything that the company entails, including machines, patents, trade marks, real estate, movable property (cars, equipment), shares in other commercial companies, receivables, etc. You can transfer some of these assets without selling the whole enterprise. If the creditor wants to prevent a sale of these assets (for instance real estate), the asset should be registered at the Bulgarian Property Register).
The pledge should be established by conclusion of a written contract with a notarized certificate of the parties’ signatures. When the company is a limited liability company or a joint stock company, the general assembly of the shareholders should take a decision for the establishment of a special pledge by a ¾ majority. Then following conclusion, the pledge should be registered at the Central Special Pledge Register in Bulgaria and at the Bulgarian Commercial Register. Registration at the letter makes the pledge effective and the registration at the former has an informative effect.
The existence of a pledge means that you cannot transfer the on-going concern without the consent of your pledge creditor.
If you pay the credit, the pledge should be terminated. In that regard, you have to demand deletion of the registration at the Commercial Register. You can perform this yourself or with the help of a lawyer. The deletion application should be accompanied by the written consent of the creditor, a document evidencing the manner in which the obligation has been performed and a declaration for truthfulness of the declared circumstances.
Registration has a 5-year duration. If the creditor does not renew the pledge within this time limit or does not commence enforcement, you can request an ex officio deletion of the pledge without the need to provide consent of the creditor. The deletion application is reviewed by an officer who can accept or reject the application. In case of rejection, you can appeal before the Justice Minister.