BULGARIA Law and Practice Contributed by: Yordan Naydenov, Mihail Vishanin and Hristian Gueorguiev, Boyanov & Co.
Outside the security measures which represent col - laterals in the strict sense of that concept (such as bank guarantees or pledges) and which are listed in the law, the parties may negotiate other provisions which provide certain security to one of the parties as to the safeguarding of its interest. Examples of such provisions are exclusivity clauses, standstill obliga - tions, break-up fees and non-solicitation provisions. The target, if in the form of a joint-stock company, is prohibited from providing collateral to a third party for the purposes of obtaining financing for the acquisition of the target’s shares. 6.8 Additional Governance Rights If the shares in a company are held by at least two shareholders, additional governance rights may be negotiated in a shareholder agreement. Such rights may include the right to appoint a certain number of Board members (including members with certain functions, eg, CFO, COO, etc). The additional govern - ance rights may comprise certain minimum quorum and majority requirements (including veto rights) in the Boards and the General Meeting, which are higher than the requirements under the law. Most of those additional rights, in order to be enforceable, must be replicated in the company’s by-laws (articles of asso - ciation, deed of incorporation, statutes). However, not all additional governance rights may be replicated in the company’s by-laws, in which case only contrac - tual remedies, such as liquidated damages, may be used to make them enforceable towards the counter - party to the shareholder agreement. 6.9 Voting by Proxy Voting by proxy in a General Meeting is allowed. The power of attorney must be issued in writing. The mem - bers of the Boards cannot represent a shareholder, except in a General Meeting of a public company where the shareholder has expressly stated how such shareholder wishes to vote on each item on the agen - da. In addition to being issued in writing, the power of attorney for voting in the General Meeting of a public company must be express, be given in view of a spe - cific meeting and have the contents provided by the law. Reauthorisation of a third person with the rights granted, as well as non-compliance with the manda - tory requirements, would make the power of attorney null and void. The public company may pose addi -
tional formal requirements to the authorisation, such as notarisation of the signatures under the power of attorney. The public company must provide a template of the written power of attorney on paper or electroni - cally, where applicable, together with the materials for the General Meeting. A person willing to represent a shareholder/shareholders holding more than 5% of the voting rights in a public company must publish an offer in a central newspaper and send the offer to each shareholder to whom it is addressed. The offer must have content predetermined by law. 6.10 Squeeze-Out Mechanisms Bulgarian law allows a squeeze-out right to any per - son that acquires, whether directly, through related parties or indirectly, more 95% of the votes in the General Meeting of a public company as a result of a tender offer. In such case, such person has the right, within three months of the end of the tender offer, to purchase the voting shares from the remain - ing shareholders that did not accept the tender offer. The proposed squeeze-out must be approved by the Financial Supervision Commission. Special rights to initiate a delisting process are granted to any person that acquires, whether directly, through related par - ties or indirectly, more than 90% of the votes in the General Meeting of a public company. Such person has the right to register a tender offer for purchase of the shares held by the rest of the shareholders. If such person fails to register a tender offer within 14 days after the acquisition of 90% of the votes in the General Meeting, such person is obligated to notify the shareholders, the regulated market and the Finan - cial Supervision Commission of such person’s inten - tion to register a tender offer at least three months in advance. Depending on the results of the tender offer, the offeror may proceed either directly to the delisting of the company or convene a general meeting of the shareholders to vote on the delisting where the offeror will be allowed to use only the voting rights of the shares acquired through the last tender offer. 6.11 Irrevocable Commitments In Bulgaria, in practice, irrevocable commitments to tender or vote are seldom obtained from principal shareholders in a company. However, there are sound legal and corporate strategy arguments for obtaining such commitments.
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