The Bulgarian Supreme Court of Cassation resolved statutory interpretation case on suspension of registration proceedings

The Supreme Court of Cassation has found a court practice to be controversial and has thus initiated a statutory interpretation case on ‘Circumstances a court must examine and take into consideration while hearing claims in proceedings under article 536(1) of the Civil Procedure Code (CPC), in conjunction with article 19 of the Commercial Register and Register of Non-profit Legal Entities Act’. The issue raised has a direct bearing on the suspension of registration proceedings pertinent to the entry of changes in circumstances affecting commercial companies in the Commercial Register.

One perspective is that every claim filed should serve as grounds for suspending the entry of new or changed circumstances into the Commercial Register. This view, however, leads to practical issues in that inadmissible claims slow down and disrupt the operation of commercial companies – e.g., a claim filed by a member of a corporate management body seeking reversal of a decision of the general meeting of shareholders or partners of a company. It is indisputable in legal practice that proceedings over such a claim must be terminated since no member of a management body has an interest in challenging such a decision – but it may take months or even years before such termination takes effect, during which time the business entity’s account in the Commercial Register is, for all intents and purposes, closed to lawful new entries. It is for that reason that an alternative point of view exists in case law: namely that, when a claim is manifestly inadmissible, there is no reason to suspend registration proceedings. This, however, implies that the court of law hearing a case that seeks such suspension should pass judgment on a case outside of its own docket. While both views have their merits, they also create practical problems. Suspending registration proceedings for every claim enables members of corporate management bodies to cause harm to their own companies by blocking entries into their accounts without having the legal right to file a claim. However, having powers of discretion to decide whether the right to file a claim is valid or not allows, on one hand, two different courts to rule on the same matter, often passing conflicting judgments, while on the other, this gives too much leeway to the court hearing the case about suspension of registration proceedings. An ongoing conflict of opinions in court practice is already a fact, with the Supreme Court of Cassation needing to strike a balance between the two points of view and the risks involved in their unconditional acceptance; however, it may turn out that this will also necessitate changes in the relevant legislation.