BULGARIA Law and Practice Contributed by: Yordan Naydenov, Mihail Vishanin and Hristian Gueorguiev, Boyanov & Co.
more, the directors could be required in such context to give some representations and war - ranties, including against compensation. During the acquisition process, they are to continue managing the company in the ordinary course of business and with the diligence and loyalty to the target company and its shareholders as required by the law. In public M&A transactions, upon receipt of the tender offer and until publi - cation of the results of the tender offer, or until closing of the said offer, as the case may be, the management body of the target company may not perform any acts, save for seeking a competitive tender offer, that aim at frustration of the acceptance of the tender offer or inflic - tion of material difficulties or material additional expenses on the bidder, such as issue of shares or conclusion of transactions, which would result in a significant change in the property of the tar - get company, unless said acts are performed with the prior approval of the General Meeting of the offeree company. 8.2 Special or Ad Hoc Committees It is not common in Bulgaria for the Boards to establish special or ad hoc committees in busi - ness combinations or in case of a conflict of interest. Conflicted members of the Board must at all times timely and exhaustively disclose any direct or indirect conflict of interest, refrain from voting or even participating in the meeting. 8.3 Business Judgement Rule A concept similar to the “business judgement rule” is introduced in the Bulgarian criminal law – the concept of justified business risk. Thus a director or manager shall not be prosecuted if his/her actions were aimed at achieving a sub - stantially positive result or to prevent the occur - rence of considerable damages, provided those actions were not in breach of an explicit legal prohibition, complied with modern scientific and
technical achievements and experience, and did not endanger the life and health of another, and provided the director or manager did everything within his/her capacity to avert the occurrence of harmful consequences. In deciding wheth - er the risk was justified, the court must take into consideration the correlation between the expected positive result and the eventual nega - tive consequences, as well as the probability of their occurrence. This concept aims at protect - ing the directors from criminal prosecution and to encourage them to use reasonable business judgement. Directors in Bulgaria may have a more active and important role in the case of a tender offer where they are expected to issue a reasoned opinion on certain aspects of the tender offer and have the right to seek a com - petitive tender offer. In those cases, they will be expected to exercise their reasonable business judgement on the basis of proper information and following the required procedures. 8.4 Independent Outside Advice The directors in a business combination may seek advice from outside consultants relating to the performance of their duties towards the shareholders and the target company. Quite often, in deals involving private equity funds as buyers, for example, the directors are offered continuation of their directorship, various incen - tive schemes, participation in the target/acquirer, etc, so in those cases it is quite typical to see them using lawyers, employment and tax advis - ers. 8.5 Conflicts of Interest The law provides for obligations for the directors to avoid or mitigate conflict of interest situations. As a rule, should a conflict occur, the director is required to report it to the Board and is prohib - ited from participating in further deliberations or
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