Welcome Note of Ondřej Peterka

In the year 2000, my partners and I launched the PETERKA & PARTNERS law firm in Prague, Czech Republic. Over time we developed an ambitious idea - to create an integrated regional law firm, which at first seemed almost impossible. However, after years of dedication and hard work, we became a strong alternative to the global giants and local law firms active in the CEE region through their networks or best friends.

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Update on support measures for businesses in Bulgaria in light of Covid-19

GRANTS AND FINANCE FOR BUSINESSES

Although the "60/40" employment measure seems to be the most discussed support instrument for businesses in Bulgaria these days, there are several other support measures available to micro-, small- and medium-sized enterprises1 (‘SMEs’) which deserve attention. Therefore, and since we have already touched upon the 60/40 scheme as support for the preservation of jobs in Bulgaria, we will briefly address the main aspects of some of the other support measures available for SMEs. 


UNSECURED WORKING CAPITAL LOANS FOR SMEs

SMEs registered in Bulgaria and experiencing the negative economic impact of the Covid-19 outbreak could apply for an unsecured working capital facility of up to BGN 300,000 (approximately EUR 153,388). Companies can receive up to a 36-month grace period for repayment of both the principal and interest of such facilities.

This applies to all sectors. The loans will be given by certain commercial banks on the basis of a guarantee provided by the state-owned Bulgarian Development Bank.

Companies must meet certain criteria to be entitled to this support measure. For instance, companies must be able to evidence a drop in revenues in Q1 of 2020 compared to Q1 of 2019 and must have outstanding receivables from clients or payments due to suppliers after 1 March 2020.

The deadline for application is 31 December 2020.


OTHER WORKING CAPITAL FACILITIES AND LONG-TERM INVESTMENT CREDIT LINES FOR SMEs

Small- and medium-sized enterprises operating in various sectors could apply for financing of up to BGN 3.6 million (approximately EUR 1.8 million). This financing is to be used mainly for working capital needs but long-term investment credit lines are available as well. The maximum duration of the loan is 10 years.

In addition, companies experiencing temporary liquidity problems could receive a zero-interest loan for the period of the crisis if they preserve the employment level.

Such financing will be given by certain commercial banks on the basis of a guarantee by the Fund Manager of Financial instruments in Bulgaria (‘Fund of Funds’). The list of these banks should be made available till the end of May 2020.

Details of the conditions and forms of the application are not yet clear.


FINANCING FOR SMALL STAR-UPS

Among others, small start-ups with short or almost no business history (currently, that have issued up to three annual financial statements) could apply for financing of up to BGN 50,000 (approximately EUR 25,565). Such financing could be given in the form of long-term investment and working capital loans for up to 10 years. The interest rates of these loans are reasonably below the market rates. The companies could receive up to a 24-month grace period and lower security requirements. In certain cases, these could even be unsecured loans.

This support measure is already available. Interested companies may apply through three particular financial intermediaries announced by the Fund of Funds.


EQUITY INVESTMENTS IN START-UPS AND INNOVATIVE BUSINESSES

Start-ups and rapidly growing companies active in, among others, bio- and nanotechnologies, robotics, information technologies, digitalization, and which have a high added value and the potential to support a fast economy recovery after the crisis could receive financing in the average amount of BGN 800,000 (approximately EUR 409,036) in the form of equity investment (i.e., the investor will acquire part of the company).

Such financing could be granted through the four venture capital funds in which the Fund of Funds is a main investor. Conditions for applying depend on, among others, the stage of development of the company and the amount of the investment requested. For these purposes, start-ups and innovative businesses must inter alia prepare presentations of their businesses, teams and their potential for growth.


GRANTS FOR MICRO- AND SMALL-SIZED ENTERPRISES

In the pipeline there is also a grant measure aiming to support micro- and small-sized enterprises in Bulgaria in overcoming the economic impact of the Covid-19 pandemic. This measure will be channelled through the Operational Programme “Innovation and Competitiveness”. The final conditions of the grant are expected to be disclosed around 30 April 2020.

Nevertheless, according to the conditions and forms of the support initially disclosed, it seems that Bulgarian micro- and small-sized enterprises registered prior to 1 January 2019 as per the Bulgarian Commercial Act or Cooperatives Act could receive a grant in the range of BGN 3,000 (approximately EUR 1,534) to BGN 10,000 (approximately EUR 5,113) but not more than 10% of the company’s net turnover for 2019. The deadline for application (i.e., filing of a project proposal) is 30 May 2020.

Branches of foreign legal entities are not entitled to receive this grant. Further, certain sectors are excluded as well, e.g., agriculture, and food and beverage manufacturing.

Companies must meet certain criteria to be entitled to this support measure. For instance, companies must have carried out business in 2018 and 2019 and must have a drop in revenues of 20% or more in the month preceding the month of application compared to the average monthly revenue in 2019.

Companies must use this support to cover certain expenses/costs which, among others, are actually started or completed by the company after 13 March 2020 and are reflected in the company’s accounting documentation. Although it is not completely clear from the wording of the conditions of the grant, according to recent unofficial clarifications from the government, it seems that companies may use this support even for the payment of rent.


1 Under Bulgarian law:
• Micro-sized companies are companies with (i) an average number of staff of fewer than 10 and (ii) an annual turnover not exceeding BGN 3.9 million (approximately EUR 1.994 million) and/or whose asset value does not exceed BGN 3.9 million (approx. EUR 1.994 million);
• Small-sized companies are companies with (i) an average number of staff of fewer than 50 and (ii) an annual turnover not exceeding BGN 19.5 million (approximately EUR 9.970 million) and/or whose asset value does not exceed BGN 19.5 million (approximately EUR 9.970 million); and
• Medium-sized companies are companies with (i) an average number of staff of fewer than 250 and (ii) an annual turnover not exceeding BGN 97.5 million (approximately EUR 49.850 million) and/or whose asset value does not exceed BGN 84 million (approximately EUR 42.948 million).



For any further information and assistance with respect to the above and any other Covid-19 related legal matters, please do not hesitate to contact us at covidhelpdesk@peterkapartners.com.

This document reflects the status as of April 28, 2020. This document is for informational purposes only and may not be considered a legal opinion or advice.

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