BULGARIA Law and Practice Contributed by: Nikolay Zisov, Svetlina Kortenska, Deyan Terziev and Teodora Peycheva, BOYANOV & Co
termination of mandate, the information which has come to their knowledge when it could affect the activities and development of the company. 11.2 Special or Ad Hoc Committees The Bulgarian law does not impose an obligation to establish special or ad hoc committees in the context of mergers, acquisitions, or other busi- ness combinations, but it is permitted for boards to constitute such committees when deemed beneficial to the interests of sound corporate governance. These committees may be insti- tuted as a best practice measure or pursuant to internal governance policies. Although their formation is relatively uncommon, companies could nonetheless create ad hoc committees to conduct independent evaluations of business combinations, particularly where potential con- flicts of interest risk compromising the objectivity of the board’s decision-making process. 11.3 Board’s Role As described in 11.1 Principal Directors’ Duties , the Bulgarian law provides that members of the board (with either a one-tier or two-tier structure) should perform their duties with the care of a good merchant, meaning also that each member of the board should act in the best interests of the company and its shareholders, an obliga- tion that could also be required in the process of active involvement in M&A negotiations. Practically, these responsibilities could gen- erally extend to providing shareholders with a well-considered recommendation regarding the proposed transaction. In making this recom- mendation, the board is expected to exercise due diligence, conduct a thorough analysis, and base its opinion on an informed assessment of the company’s long-term interests and the trans- action’s fairness.
The concept of shareholder litigation challeng- ing the board’s decision to recommend an M&A transaction is uncommon in Bulgaria. However, shareholders may still challenge a board’s deci- sions, particularly in high-profile or contentious transactions, on the grounds that directors failed to act in the company’s best interests. Bulgarian law requires board members to dis- close conflicts and refrain from decision-making where a personal interest exists. Assessing the management and disclosure of conflicts is cru- cial for buyers to avoid subsequent shareholder claims based on such issues. 11.4 Independent Outside Advice When referring to a takeover or a business com- bination in Bulgaria, usually independent advice is sought in relation to legal and financial exper- tise, to ensure that the transaction complies with Bulgarian law and serves the best interests of shareholders. The financial advice provided in the process of an M&A transaction often includes assessment of the transaction’s financial structure, pricing, and in some cases the fairness and competitive- ness of the offer, etc. Providing a fairness opinion is not legally required under Bulgarian law, and therefore it is relatively uncommon in Bulgaria, but could be prepared for specific M&A transactions. This opinion assesses whether the transaction’s terms are financially fair to the company’s shareholders. Fairness opinions serve as a safeguard, offering directors an objective assessment to justify their decisions to shareholders. Other common independent outside advice which is obtained in the process of business combinations in Bulgaria relates to legal due
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