24.10.2023

THE STATE WILL PROVIDE LEGAL AND BUSINESS CONSULTANTS TO COMPANIES AT RISK OF BANKRUPTCY

Early warning tools for the likelihood of bankruptcy will be available to traders. They will be provided to them by the Agency for Small and Medium Enterprises, according to a draft regulation that has been published for public discussion (see here).

The tools provided for in it are:

• free online system for self-assessment of enterprises in case of probability of bankruptcy;
• provision of general guidelines and advice to enterprises regarding the possibilities for establishing the probability of bankruptcy and for taking relevant preventive measures;
• provision of specialized consulting services in the field of business management, accounting, finance and law by consultants - external experts with acquired professional qualifications and legal capacity in the relevant field;
• organizing and conducting training and support programs for entrepreneurs, aimed at effective use of early warning tools and opportunities for preventive restructuring of the enterprise.

The online system for self-assessment of enterprises in case of probability of bankruptcy will provide an algorithm for calculating indicators of the financial condition of the enterprise, as well as other relevant information about liabilities, receivables and the way of business management, and will provide a brief report with the results of the assessment and general recommendations for action.

Access to it will be voluntary, free of charge and in accordance with the requirements for confidentiality and protection of the processed information. The data that is necessary to calculate the financial indicators of the enterprise will not be recorded and controlled by the Agency for small and medium-sized enterprises.

As for the general guidance and advice that businesses may receive, it will be provided to them free of charge by agency staff or by external contractors.

For specialized consulting services, the draft regulation stipulates that they are provided by consultants who are external experts - "investment consultants, accountants, lawyers, trustees or other specialists with an acquired educational and qualification degree of bachelor, master or doctorate in the field of business management, accounting , finance and law, possessing at least 8 years of experience in the acquired specialty, and in cases where it is required by law and acquired legal capacity".

They will enter in a special list. Consulting services are not intended to be free, and the regulation states that exactly how a company will be able to receive this type of assistance will be made clear by practical instructions from the director of the Agency for Small and Medium Enterprises.

As is known, there is no warning system in Bulgaria to support debtors, and early warning systems are developed only by banks for the purposes of credit risk management.

According to data from the National Statistical Institute, between 39,000 and 50,000 enterprises cease their activities every year. "The looming trend of an increase in the number of businesses going out of business is a sign of a deepening problem that goes beyond the natural demographics of businesses. The provision of an early warning system in case of the danger of enterprises falling into a difficult situation is one of the factors that can influence the negative trend", state the Ministers of Economy and Industry and Innovation and Growth.