Change of the Legal Form
Article 264
(Amended, SG No. 58/2003)
(1) A company (transforming company) may transform by change of the legal form, thus converting into a company of another type (newly established company). The newly established company shall become the legal successor of the transforming company, which shall be terminated without liquidation.
(2) Simultaneously with the change of the legal form, no new partners or shareholders may be accepted.
Transformation Plan
Article 264a
(New, SG No. 58/2003)
(1) In case of a change of the legal form, the governing body or the partners with management rights in a personal company shall draw up a transformation plan in writing with notarization of the signatures.
(2) The transformation plan must include at least the following:
1. (supplemented, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) the legal form, the trade name, the standard identification code and the registered address of the newly established company;
2. the exchange ratio of the shares or interest stakes as determined as of a specific date;
3. the amount of cash payments, if any are provided for according to Article 261b, paragraph 2, and a time limit for paying them in;
4. a description of the interest stakes, the shares or membership which each partner or shareholder acquires in the newly established company, and data concerning any existing pledges and attachments
5. the conditions concerning the distribution and hand-over of the shares in the newly established company;
6. the rights which shareholders with special rights and holders of securities which are not shares obtain.
(3) The transformation plan shall enclose also a draft for a new membership agreement or articles of incorporation of the newly established company.
Provision of Information
Article 264b
(New, SG No. 58/2003)
(1) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The transformation plan shall be submitted for recordation in the Commercial register. If the transforming company is an equity one, the submitted plan shall be recorded not later than 30 days prior to the date of the general meeting on taking the decision to transform.
(2) The following shall be made available to the partners and the shareholders:
1. The transformation plan together with the draft for a new membership agreement or articles of incorporation of the newly established company;
2. the balance sheet as of the last of the month preceding the date of the transformation plan, unless the most recent annual financial statements refer to a financial year ended less than 6 months prior to that date;
3. data concerning the appointed examiner and the authorized depository under Article 262x.
(3) The papers referred to in paragraph 2 shall be made available at the seat and address of equity companies within 30 days prior to the date of the general meeting. On request, a copy of the papers or summaries of these shall be made available to each partner or shareholder free of charge.
(4) The time period referred to in paragraph 3 does not need to be observed if all partners or shareholders have voted for the transformation.
Examination of the Transformation
Article 264c
(New, SG No. 58/2003)
(1) Where the newly established company is an equity one, the transformation plan shall be reviewed by an examiner specially appointed by the governing body or by the partners with management rights.
(2) The examiner shall produce a report from the examination to the partners or the shareholders. The report must include an assessment of whether the exchange ratio envisaged in the plan is adequate and reasonable and must indicate the data referred to in Article 262m, paragraph 2.
(3) With respect to the examiner, the rules of Article 262l, paragraphs 3 and 4 and Article 262m, paragraph 3 shall apply, respectively.
(4) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) Except for cases under paragraph 1, An examination of the transformation shall be done also upon the request of a partner or shareholder or under a decision of a governing or control authority of the company. Where the examination has been requested by a partner, a shareholder or a control authority, the examiner shall be appointed by the registrar with the Recordation Agency.
Decision to Transform
Article 264d
(New, SG No. 58/2003)
(1) The change in the legal form of the company shall be made under a decision to transform according to Article 262p.
(2) Where in case of a change of the legal form, a partner in a limited liability company or a shareholder becomes an unlimited liability partner, Article 262q shall apply.
(3) Under the decision to transform, the transformation plan shall be approved or amended. Under this decision, the membership agreement and/or articles of incorporation of the newly established company shall be adopted and the bodies elected, and thus the requirements as to the form of the membership agreement or articles of incorporation shall be considered met.
Capital of the Newly Established Company
Article 264e
(New, SG No. 58/2003)
(1) Where the newly established company is an equity one, the amount of its capital may not be larger than the net worth of the property of the transforming company. In this case, the examiner shall conduct an examination as to compliance with this requirement.
(2) The rules of Article 262u, paragraphs 2 and 3 shall apply, respectively.
Additional Rules in Case of a Joint-Stock Company and
a Company Limited by Shares
Article 264f
(New, SG No. 58/2003)
(1) With respect to holders of bearer's shares and of special rights which are not shares in the transforming company, Article 262y and Article 262w shall apply, respectively.
(2) With respect to the handing over of shares in the newly established company, Article 262x shall apply, respectively.
Registration
Article 264g
(New, SG No. 58/2003)
(1) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The change of the legal form shall be subject to recordation in the Commercial Register not earlier than 14 days from the date of the filing.
(2) The application for registration shall be filed by the governing body or by a partner with management rights in the newly established company, and the following shall be attached to it:
1. the decision to transform;
2. the expressions of consent referred to in Article 264d, paragraph 2;
3. the adopted membership agreement and/or articles of incorporation of the newly established company and the documents necessary for the registration of the bodies elected;
4. the examiner's report, if an examination has been made;
5. the list of the persons acquiring shares, interest stakes or membership in the newly established company, and the type of membership;
6. the depository's certification stating that it has been handed over the temporary certificates or the shares, or the proof that the circumstances referred to in Article 262x, paragraph 5 have been declared before the Central Depository, as the case may be.
(3) (Repealed, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
Registration Effect
Article 264h
(New, SG No. 58/2003)
(1) A change of the legal form shall take effect as from the registration in the commercial register.
(2) With the registration of the change of the legal form, the transforming company shall be terminated and the newly established one shall arise. The rights and the obligations of the transforming company shall be transferred in their entirety onto the newly established company.
(3) The partners and the shareholders in the transforming company shall become partners or shareholders in the newly established one.
(4) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) Where the property of a transforming company includes a property right of a real property or a movable asset transactions with which are subject to registration, the certificate of recordation of the change of the legal form shall be submitted for recordation in the respective register.
(5) Any permits, licenses or concessions held by the transforming company shall transfer onto the newly established company to the extent that a law or the action of award does not provide otherwise.
(6) As of the date of registration, a closing and an opening balance sheet shall be drawn up according to Article 263h, paragraphs 1 and 2.
Protection of Creditors
Article 264i
(New, SG No. 58/2003)
(1) Unlimited liability partners in the transforming company shall remain liable before the creditors for obligations that have arisen prior to the date of the change of the legal form. Where a person becomes an unlimited liability partner in the newly established company, such person shall not be liable for the obligations that have arisen prior to the date of the change of the legal form.
(2) Partners or shareholders in the transforming company shall not be held free of the obligation concerning contributions which have not been paid in full.
(3) Where the transforming company is an equity one, and the newly established company is a personal one or a company with a smaller amount of the capital, creditors holding claims that have arisen prior to the change of the legal form may request securitization up to the amount of the difference in the capital.
Contending the Transformation
Article 264k
(New, SG No. 58/2003)
(1) Any partner or shareholder in the transforming company may lodge a claim with the regional court in the jurisdiction of which its seat is located in order to establish that in the change of the legal form any of the following violations have occurred:
1. a transformation plan is lacking or the plan is null and void;
2. failure to meet the requirements of Article 264а, paragraph 1 and paragraph 2, subparagraphs 1, 2 and 6, Articles 264b - 264e and Article 262w, paragraph 1;
3. the decision to transform contradicts prescriptive provisions of the law or the founding agreement, or the articles of incorporation of the company, as the case may be.
(2) A non-equivalent exchange ratio is not grounds for filing a claim pursuant to paragraph 1.
(3) The claim referred to in paragraph 1 shall be lodged against the transforming company not later than before the registration of the change of the legal form. Any partner or shareholder may step into the proceedings and sustain the claim, even if the claimant should give it up or withdraw it.
(4) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The filing of the claim as per paragraph (1) shall result in suspension of the recordation of transformation. Recordation of the transformation shall be denied by force of the effective court decision sustaining the claim.
(5) (Amended, SG No. 59/2007) The claim under paragraph 1 shall be considered according to the rules set out in chapter Thirty-Two Proceedings on Commercial Disputes of the Code of Civil Procedure.
(6) The decision to transform may not be attacked by lodging a claim under Article 74.
Nullity of the Newly Established Company
Article 264l
(New, SG No. 58/2003, amended - SG No. 66/2005)
After the change of the legal form has been registered, a partner or a shareholder may request that it be declared null and void. Article 263p shall apply, respectively.
Protection of a Partner or a Shareholder
Article 264m
(New, SG No. 58/2003)
(1) Any partner or shareholder may, within three months following the date of the registration of the change of the legal form, lodge a claim for cash settlement with the regional court, if the exchange ratio adopted under the transformation plan is not equivalent.
(2) A partner in a limited liability company or a shareholder whose legal status is changing after the change of the legal form and which has voted against the decision to transform may leave the newly established company. Article 263r shall apply, accordingly.
Change of the Legal Form of a Sole-Owner Company
Article 264n
(New, SG No. 58/2003)
(1) Where a change of the legal form of a sole-owner company is being effected, no transformation plan needs to be drawn up and there is no obligation to provide information. The appointed examiner shall conduct only an examination of the capital as referred to in Article 264e.
(2) The sole owner of the capital shall not have the rights referred to in Articles 264k, 264l and 264m.
Section IV
Transformation by Transfer of Property onto the Sole Owner

Transfer of Property onto the Sole Owner
Article 265
(1) (Amended, SG No. 58/2003) The entire property of a sole-owner company (transforming company) may transfer onto the sole owner if he is a natural person and has been registered as a sole proprietor. The transforming company shall be terminated without liquidation.
(2) No transformation under paragraph 1 may be effected if the interest stakes or shares in the transforming company have been pledged or placed under an attachment.
(3) The decision to transform shall be taken by the sole owner in writing with notarization of the signature.
Registration
Article 265a
(New, SG, No. 58/2003)
(1) (Amended, SG, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The transfer of property to the single proprietor shall be recorded in the Commercial Register both in that single proprietor's file and in the file of the transforming company which is deleted.
(2) (Repealed, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
(3) (Repealed, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
(4) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) From the moment of recordation the creditors shall be deemed to have been notified of their rights under Art. 265b.
Effect
Article 265b
(New, SG, No. 58/2003)
(1) (Amended, SG, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The transfer of property to the single proprietor shall take effect from the moment of recordation thereof in the Commercial Register, in the file of the transforming company.
(2) With the registration, all rights and obligations of the transforming company shall transfer onto the sole proprietor.
(3) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) Where the property of a transforming company includes a property right of a real property or a movable asset transactions with which are subject to registration, the certificate of recordation of the transfer of property to the single proprietor shall be submitted for recordation in the respective register.
(4) Any permits, licenses or concessions held by the transforming company shall transfer onto the sole proprietor, to the extent that a law or the action of award does not provide otherwise.
Protection of Creditors
Article 265c
(New, SG, No. 58/2003)
(1) (Amended and supplemented, SG, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The single proprietor shall manage separately the property of the transforming company transferred to said proprietor's name for a period of 6 months from the moment of recordation of the transformation
(2) Within the time limit referred to in paragraph 1, any creditor of the transforming company and of the sole proprietor whose claim has not been secured and has arisen prior to the registration may request execution or securitization, in accordance with its rights. If the request is not satisfied, the creditor shall be entitled to privileged satisfaction from the rights which used to belong to its debtor.
(3) While the time period for separate management is running, the sole proprietor may not request to be removed from the commercial register.

Section V

(New, SG No. 104/2007)
Transformation Involving Companies from Member States of European Union or from Another Contracting Party to Agreement on the European Economic Area

Applicability
Article 265d
(New, SG No. 104/2007)
(1) Transformation according to the procedure established by this Section shall be effected only through merger by acquisition and merger by the formation of a new corporation, where at least one of the companies involved in the transformation has its registered office in another Member State of the European Union or in a Contracting Party to the Agreement on the European Economic Area, and is of a type specified in Article 1 of the First Council Directive (68/151/EEC) on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards equivalent throughout the Community, and the corporations having their registered offices in the Republic of Bulgaria, which are involved in the transformation, are equity corporations, with the exception of the open-end type.
(2) Transformation under Paragraph (1) may not be effected where any of the companies involved in the transformation has its registered office outside the European Union or the law of the Member State governing any of the companies involved in the transformation does not admit such transformation.
(3) Transformation under Paragraph (1) may not be effected where a transforming corporation, which has its registered office in the Republic of Bulgaria, owns land, and the newly formed or acquiring company has its registered office outside the Republic of Bulgaria. This prohibition shall apply conforming to the conditions ensuing from the accession of the Republic of Bulgaria to the European Union.
(4) The rules of this Section shall apply in respect of a corporation involved in the transformation which has its registered office in the Republic of Bulgaria, and where the acquiring or the newly formed corporation has its registered office in the Republic of Bulgaria, the said rules shall furthermore apply regarding the applying for recordation, the recordation and the effect of the recordation. Article 261b shall apply as well.
Common Transformation Plan
Article 265e
(New, SG No. 104/2007)
(1) Before adoption of a resolution on transformation, the acquiring and/or transforming corporations involved therein shall draw up a common transformation plan.
(2) The common transformation plan shall be drawn up in writing and shall be signed for the corporations involved in the transformation, which have their registered offices in the Republic of Bulgaria, by the persons representing the corporation.
(3) The common transformation plan shall regulate the manner in which the transformation is to be effected. The said plan must include, as a minimum:
1. the legal form, the business name and the registered office of each of the transforming corporations, of the acquiring corporation upon merger by acquisition, as well as of the newly formed corporation upon merger by the formation of a new corporation;
2. the exchange ratio of the shares or participating interests as determined at a specific date;
3. the amount of cash payments, if any have been provided for according to Article 261b (2), as well as the time limit for effecting such payments;
4. a description of the participating interests or shares which each partner or shareholder is to acquire in the newly formed or acquiring corporation, including the envisaged increase of capital of the acquiring corporation, if any such increase is required in order to effect the transformation, as well as the conditions regarding the allotment and delivery of shares in the newly formed or in the acquiring corporation;
5. the moment from which the participation in the newly formed or acquiring corporation will entitle the holders to share in the profit, as well as any special conditions affecting this entitlement;
6. the moment from which any steps of the transforming corporations will be treated for accounting purposes as being performed for the account of the newly formed or acquiring corporation;
7. the rights which the newly formed or acquiring corporation confers on shareholders enjoying special rights and on holders of negotiable securities other than shares;
8. any special advantage granted to the examiners referred to in Article 265h or to the members of the management and controlling bodies of the corporations involved in the transformation;
9. the impact of the transformation on employment;
10. the procedure by which arrangements for involvement of factory and office workers in the management of the newly formed or acquiring corporation are determined, if such involvement is possible;
11. information on the evaluation of the property passing to the newly formed or acquiring corporation.
(4) The following shall constitute an integral part of the common transformation plan:
1. the draft of a Memorandum or Articles of Association of the newly formed corporation upon merger by the formation of a new corporation or, respectively, the clauses amending and supplementing the Memorandum or Articles of Association of the acquiring corporation upon merger by acquisition;
2. the annual financial statements and the activity report and/or the balance sheet of the transforming corporations and of the acquiring corporation, on the basis of which the transformation plan has been drawn up.
Management Body's Report
Article 265f
(New, SG No. 104/2007)
The management body of each of the transforming corporations and of the acquiring corporation shall draw up a written report on the transformation. The said report shall explain in detail and shall justify the legal and economic aspects of the common transformation agreement, and particularly concerning the exchange ratio, as well as concerning the implications of the transformation for the position of partners and shareholders, creditors, and factory and office workers.
Submission of Plan and Report to Commercial Register
Article 265g
(New, SG No. 104/2007)
(1) The common transformation plan and the report of the management body of each transforming and/or acquiring corporation which has its registered office in the Republic of Bulgaria shall be submitted to the Commercial Register. Publication shall be effected simultaneously on the files of each transforming corporation and/or of the acquiring corporation not less than a month before the date of the General Meeting for adoption of the resolution on transformation.
(2) Together with the acts referred to in Paragraph (1), a list containing the business name, the registered office, the address and the register in which each transforming and/or acquiring corporation is recorded shall be published in the Commercial Register. The said list shall furthermore contain an indication, for each of the corporations, regarding the rules applicable to protection of its creditors and minority shareholders, as well as the address at which complete information on those arrangements may be obtained.
(3) Within the time limit referred to in Paragraph (1), the report of the management body shall be made available to the factory and office workers' representatives under Article 7a of the Labour Code, and where there are no such representatives, to the factory and office workers themselves. Any opinions received from the factory and office workers' representatives shall be enclosed with the report.
Examination of Transformation
Article 265h
(New, SG No. 104/2007)
(1) The common transformation plan shall be examined by an examiner for each transforming or acquiring corporation which has its registered office in the Republic of Bulgaria, who shall be expressly appointed by the management body of the relevant corporation.
(2) At the joint request of all transforming and acquiring corporations, the registrar with the Registry Agency may appoint a single examiner for all transforming and acquiring corporations, including those which have their registered offices in another Member State.
(3) Article 262k (3) shall apply to the examiner appointed under Paragraphs (1) and (2).
(4) The examiner, appointed under Paragraph (1) and (2) or appointed in accordance with the law of another Member State in which a transforming or an acquiring company has its registered office, shall enjoy the rights under Article 262k (4) and shall incur liability under Article 262l (3).
(5) An examination of the transformation shall not be conducted if all partners or shareholders in the transforming corporations and in the acquiring corporation have so agreed in writing.
Examiner's Report
Article 265i
(New, SG No. 104/2007)
(1) Article 262l (1) and (2) shall apply to the report of the examiner appointed under Article 265h (1) and (2).
(2) Where the newly formed corporation upon merger by the formation of a new corporation has its registered office in the Republic of Bulgaria or where the capital of the acquiring corporation, which has its registered office in the Republic of Bulgaria, is increased upon merger by acquisition, the examiner shall furthermore prepare a report regarding the examination of the capital. Article 262t (1) and (2) shall apply, mutatis mutandis.
(3) The report of the examiner, as well as the report of the management body, shall be made available at the registered office and at the address of the relevant transforming and/or acquiring corporation which has its registered office in the Republic of Bulgaria not later than one month prior to the date of the General Meeting. On request, a copy of the materials or abstracts thereof shall be made available to each partner or shareholder free of charge.
Resolution on Transformation
Article 265j
(New, SG No. 104/2007)
(1) After familiarizing itself with the reports referred to in Articles 265f and 265I, the General Meeting of each transforming and acquiring corporation separately shall adopt a resolution on transformation, whereby the common transformation plan shall be approved.
(2) The resolution on transformation of a transforming or acquiring corporation which has its registered office in the Republic of Bulgaria shall be adopted according to Article 262o (2), (3) and (4).
(3) Where a member of a limited liability company or a shareholder in a corporation which has its registered office in the Republic of Bulgaria becomes a general partner in the acquiring or newly formed corporation, Article 262p shall apply as well.
Certification of Legal Conformity of Transformation
Article 265k
(New, SG No. 104/2007)
Where the acquiring or the newly formed company has its registered office in another Member State, the management body of each transforming corporation which has its registered office in the Republic of Bulgaria shall request from the Commercial Register the issuing of a certificate of the legal conformity of the transformation in respect of that company. The resolution on transformation, the expressions of consent under Article 265j (3), the report of the examiner and evidence that the resolution has been adopted in conformity with all requirements of the law, as well as a declaration that the company does not own land according to the prohibition under Article 265d (3), shall be enclosed with the request.
Recordation of Transformation
Article 265l
(New, SG No. 104/2007)
(1) The management body of the newly formed or acquiring corporation which has its registered office in the Republic of Bulgaria shall apply for recordation of the merger by acquisition or merger by the formation of a new corporation in the Commercial Register. The common transformation plan and the resolutions of all corporations involved in the transformation, as well as the certificates referred to in Article 10 of Directive 2005/56/EC of the European Parliament and of the Council on cross-border mergers of limited liability companies, in respect of the transforming companies which have their registered offices in another Member State, shall be enclosed with the application for recordation. Article 263 (2) shall apply, mutatis mutandis.
(2) The recordation of a merger by acquisition or a merger by the formation of a new company shall be effected on the file of the acquiring or, respectively, newly formed corporation which has its registered office in the Republic of Bulgaria, as well as on the files of the transforming corporations which have their registered offices in the Republic of Bulgaria, not earlier than fourteen days after the applying if:
1. the transforming companies which have their registered offices in other Member States have submitted certificates according to Article 10 of Directive 2005/56/EC;
2. the corporations involved in the transformation, which have their registered offices in the Republic of Bulgaria, have complied with the requirements of this Section and with the requirements of the law regarding the adoption of the resolution on transformation;
3. the transforming corporation and the acquiring corporation have approved a common transformation plan; and
4. the requirements of the Bulgarian law regarding the acquiring or the newly formed corporation have been complied with.
(3) Any revisions of the Memorandum or Articles of Association, any alteration of the capital or a change in the persons who manage and represent the acquiring corporation, if any such changes have been made upon the transformation, shall be recorded simultaneously with the merger by acquisition.
Expungement of Transforming Corporations
Article 265m
(New, SG No. 104/2007)
Where the newly formed or the acquiring company has its registered office in another Member States, the transforming corporations which have their registered offices in the Republic of Bulgaria shall be expunged in the Commercial Register on the basis of a notification from the register of the Member State in which the acquiring or newly formed company is recorded, to the effect that the transformation has been recorded.
Effect of Transformation
Article 265n
(New, SG No. 104/2007)
(1) The transformation referred to in Article 265l shall have effect as from the moment of recordation in the Commercial Register, and the transformation upon which the acquiring or the newly formed company has its registered office in another Member State shall have effect according to the law of that other State.
(2) Upon recordation, the newly formed corporation shall be formed and the transforming corporations shall be dissolved, with the rights and obligations of the transforming corporations passing to the acquiring or newly formed corporation. The partners and the shareholders in the transforming corporations shall become partners or shareholders in the acquiring or in the newly formed corporation.
(3) Where the property of a transforming corporation which has its registered office in the Republic of Bulgaria includes a right in rem to a corporeal immovable, a movable thing or another right the transactions in which are subject to recordation in a special register, the certificate of recordation in the Commercial Register and, respectively, the notification of recordation under Article 265m from the register of the Member State, shall be submitted for recordation in the relevant register.
(4) Any permits, licences or concessions held by the transforming corporation shall pass to the acquiring or newly formed corporation, to the extent that a law or the act of conferment does not provide otherwise.
Contest of Transformation and Protection of Creditors
Article 265o
(New, SG No. 104/2007)
(1) An action under Article 74 may not be brought against the resolution on transformation of a corporation which has its registered office in the Republic of Bulgaria. Declaration of nullity under Article 263o may not be moved for the corporation newly formed upon merger by the formation of a new corporation which has its registered office in the Republic of Bulgaria.
(2) Transformation under this Section may not be declared null. Transformation may be contested by the persons and according to the procedure established by Article 263n, where the requirements of this Section have not been complied with. A non-equivalent exchange ratio shall be no cause for bringing an action.
(3) Where the acquiring or newly formed company has its registered office in another Member State, the action shall be brought at the latest until the issuing of a certificate under Article 265k. The bringing of the action shall stay the issuing of a certificate. On the basis of an effective judgment granting the action, issuing of a certificate shall be refused.
(4) Where the acquiring or newly formed corporation has its registered office in the Republic of Bulgaria, the action shall be brought at the latest until recordation of the transformation. The bringing of the action shall stay the recordation of the transformation. On the basis of an effective judgment granting the action, recordation of the transformation shall be refused.
Special Rules
Article 265p
(New, SG No. 104/2007)
Where the acquiring corporation is a sole owner of the capital of all transforming corporations, the transformation shall take place on the basis of a decision of the sole owner. Items 2 to 5 of Article 265e (3), Article 265h and Article 265I and sentence two of Article 265n (2) shall not apply.
Participation of Factory and Office Workers
Article 265q
(New, SG No. 104/2007)
(1) Where one of the transforming corporations, the acquiring or the newly formed corporation has its registered office in the Republic of Bulgaria, Articles 12 to 15, Article 16 (1) and (2), Items 4 and 5 of Article 16 (3) (in such case, the minimum number covered shall be one-third instead of 25 per cent of the total number of factory and office workers), Articles 17, 18, 19, 29 and 30 of the Act on Information and Consultation of Factory and Office Workers in Community-Scale Undertakings, Groups of Undertakings and European Companies shall apply, mutatis mutandis, to the participation of the factory and office workers in the transformation, with the acquiring or newly created corporation under this Section being treated as a European Company.
(2) Where the acquiring or newly formed corporation has its registered office in the Republic of Bulgaria, the management bodies of the transforming corporations and of the acquiring corporation may choose, without any prior negotiation, to be directly subject to the standard rules under Articles 16 and 17 of the Act on Information and Consultation of Factory and Office Workers in Community-Scale Undertakings, Groups of Undertakings and European Companies. Where the acquiring or newly formed company has its registered office in another Member State, the said bodies may choose to be directly subject to the standard rules adopted in the legislation of the said Member State in accordance with Council Directive 2001/86/EC supplementing the Statute for a European company with regard to the involvement of employees.
(3) Where the acquiring or the newly formed corporation has its registered office in the Republic of Bulgaria and one of the transforming corporations has applied rules for participation of the factory and office workers within the meaning given by Item 20 of § 1 of the Supplementary Provisions of the Act on Information and Consultation of Factory and Office Workers in Community-Scale Undertakings, Groups of Undertakings and European Companies, the acquiring or newly formed corporation shall be obligated to ensure the exercise of the rights arising from the said rules. This rule shall furthermore apply upon a subsequent transformation according to the procedure established by this Chapter or by Council Regulation (EC) No 2157/2001 on the Statute for a European Company (SE), but for not more than three years after the date referred to in Article 265n (1).
CHAPTER SEVENTEEN
LIQUIDATION

Commencement of Liquidation
Article 266
(1) Liquidation shall be carried out after the dissolution of a company.
(2) (New, SG No. 83/1996, amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The term for completion of the liquidation shall be determined by the General Meeting of the limited liability company and the joint-stock company, and for other companies, by unanimous decision of the partners with unlimited liability. Such a term shall also be determined by the registrar of the Recordation Agency, where the latter appoints liquidators. Where necessary, the term determined as above may be extended.
(3) (Previous paragraph 2, SG, No. 83/1996; amended SG, No. 84/2000; supplemented SG, No. 66/2005; amended SG, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The liquidators shall be registered in the commercial register with notarized consents with their specimen signatures.
(4) (Renumbered from Paragraph 3, amended, SG No 83/1996; amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The court in the jurisdiction of which the affected company is located may, where important reasons exist, appoint or dismiss liquidators on application by the partners, or, respectively, by the shareholders which own at least one twentieth of the stock.
(5) (New, SG No. 83/1996) The remuneration of the liquidators shall be fixed by:
1. the General Meeting of the limited liability company or the joint-stock company;
2. the partners with unlimited liability in a company, unanimously;
3. the court, where the liquidators have been appointed by it.
4. (new, SG, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) the registrar with the Recordation Agency, where the liquidators are appointed by him/her.
(6) (New, SG No. 83/1996) The liquidators shall be liable for their activities related to the liquidation in the same way as the managers and the other executive bodies of companies.
Notice to Creditors
Article 267
(Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to
becoming effective, SG No. 80/2006)
Upon declaring the dissolution of the company the liquidators must invite its creditors to make their claims. The notice shall be forwarded in writing to known creditors, and shall also be posted in the Commercial Register.
Duties of Liquidators
Article 268
(1) A liquidator shall be obliged to consummate pending transactions, to collect payments due, to convert the company's assets into cash and satisfy its creditors. A liquidator may not enter into new transactions unless so warranted for the purposes of liquidation.
(2) A liquidator may, subject to the consent of the partners or, respectively, the shareholders, and the consent of the creditors, transfer to them particular items of the assets under liquidation, provided that this does not prejudice the rights of the remaining partners and creditors.
(3) (New, SG No. 61/1993, amended, SG No. 105/2005) The liquidators must inform the National Revenue Agency of the liquidation which has commenced.
Representation
Article 269
(1) The liquidators shall represent the company and shall have the rights and obligations of its executive organ.
(2) The liquidators may represent a company only jointly. A single liquidator may accept legal statements addressed to the company.
Opening Balance Sheet and Report
Article 270
(1) (Amended, SG No. 105/2006) The liquidators shall draw up a balance sheet as of the moment of dissolution of the company, and explanatory notes thereto. At the end of each year the liquidators shall close accounts and present an annual financial statement and annual activity report to the governing body.
(2) The governing body shall resolve on approval of the opening balance sheet, the annual closing of accounts, and on holding the liquidators harmless.
Merger of a company in liquidation
Article 270a
(New SG No 83/1996, repealed, SG No. 58/2003)
Distribution of Assets
Article 271
Upon satisfaction of the creditors, the remaining assets shall be distributed among the partners, or among the shareholders as the case may be.
Protection of Creditors
Article 272
(1) (Amended, SG, No. 83/1996; amended and supplemented, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) The company's assets shall not be distributed before six months have passed from the date that the notice to the creditors was posted in the commercial Register.
(2) Should a creditor duly notified not assert its claim, the sum owed to it shall be deposited in a bank account in its name.
(3) Where a liability is disputed, assets shall not be distributed until the creditor concerned has been secured.
(4) (New, SG No. 83/1996) The managing body of the company may, upon satisfaction of the creditors, write off any bad amounts receivable of the company. Such decision shall be taken by simple majority.
Suspension and Termination of Liquidation Proceedings
with Instituting Bankruptcy Proceedings
Article 272a
(New, SG, No. 84/2000)
(1) (Supplemented, SG, No. 38/2006) The liquidation proceedings against a company in liquidation shall be suspended from the date of the ruling on instituting bankruptcy proceedings. The liquidation proceedings shall be terminated on the date of entry into force of the ruling referred to in article 630. With the ruling on instituting bankruptcy proceedings, the court shall declare the debtor-company in bankruptcy according to article 632, paragraph 1.
(2) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) In cases as per paragraph (1), the court of jurisdiction over bankruptcy shall be obligated to forward a transcript of the judgment on institution of bankruptcy proceedings for recordation in the Commercial Register.
Liquidator's Report and Balance Sheet upon Termination
of the Liquidator's Activity
Article 272b
(New, SG, No. 84/2000)
(1) In the cases when bankruptcy proceedings have been instituted for a company in liquidation, the liquidator shall prepare and submit to the court of jurisdiction over the bankruptcy a balance sheet as of the date of the ruling on instituting bankruptcy proceedings and a report on his activity according to article 270 within seven days of the suspension of the liquidation proceedings.
(2) The appointed trustee in bankruptcy, the debtor or a creditor may raise objections to the balance sheet and the report within seven days of their submission to the court.
(3) Within fourteen days The court shall issue a ruling on the objections, which will be final and not subject to appeal.
(4) Should no objection be raised in the period referred to in paragraph 2, the liquidator's report and balance sheet will be considered accepted.
(5) While the liquidation proceedings are suspended, the liquidator shall not carry out the actions provided in Chapter Seventeen.
Closing of Liquidation Proceedings
Article 273
(1) (Supplemented, SG, No. 84/2000, amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) When all liabilities have been settled and the remaining assets distributed, the liquidator shall apply for deletion of the company from the Commercial Register.
(2) (Amended, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) Should at some later time the need arise for further liquidation proceedings, the court shall, on application by the person concerned, appoint liquidators, either the previous or new ones.
Continuation of a Company after Dissolution
Article 274
(1) (Supplemented, SG No. 58/2003) When a company is dissolved due to expiration of the specified time period or upon a resolution of the competent company organs, they may decide to continue its activities, unless the distribution of assets has commenced. This provision shall apply also in case of a termination of a limited liability company pursuant to Article 155, item (3), and of a joint-stock company pursuant to Article 252, paragraph (1) subparagraph (6).
(2) A resolution pursuant to para 1 shall be passed:
1. in case of a joint-stock company, by a majority of at least three quarters of the shares represented;
2. in case of another company, unanimously.
(3) The liquidators shall file the resolution to continue the company for registration in the Commercial Register.
CHAPTER EIGHTEEN
(Heading amended, SG No. 104/2007)
COMBINATIONS
Section I
Consortium

Definition
Article 275
A consortium is a contractual grouping of merchants for carrying out specified activities.
Applicable Provisions
Article 276
The respective rules either for partnerships under civil law or for the company in the form of which a consortium has been organized shall apply to consortia.
Section II
Holding Company

Definition
Article 277
(1) A holding company shall be a joint-stock company, a partnership limited by shares or a limited liability company the purpose of which is to participate under any form in other companies or in their management, regardless of whether it carries on manufacturing or commercial activities of its own.
(2) At least 25 percent of the capital stock of a holding company must be invested directly in subsidiary companies.
(3) A subsidiary company is a company in which a holding company owns or controls, directly or indirectly, at least 25 per cent of the stocks or shares and is in a position to appoint, directly or indirectly, a majority of the directors.
Purposes
Article 278
(1) The purposes for which a holding company is set up may be:
1. acquisition, management, valuation and sale of interest in Bulgarian or foreign companies;
2. acquisition, management and sale of debentures;
3. acquisition, valuation and sale of patents, assigning licences for the use of patents of companies in which the holding company owns an interest;
4. financing of companies in which the holding company owns an interest.
(2) A holding company may not:
1. participate in a partnership which is not a legal person;
2. acquire licences which are not intended for use by the companies controlled by it;
3. acquire real property which is not required by its needs. The acquisition of stock in real estate companies is permitted.
Taxation of Holding Activities
Article 279
(Repealed, SG No. 59/1996)
Credits Given by Holding Companies
Article 280
(1) A holding company may extend loans only to companies in which it participates directly or which it controls.
(2) The amount of the extended loans may not exceed ten times the capital stock of the holding company.
(3) The amount of the deposits of subsidiary companies and enterprises in a holding company may not exceed three times the amount of the capital stock.
Section III
(New, SG No. 104/2007)
European Economic Interest Grouping

Legal Status
Article 280a
(New, SG No. 104/2007)
(1) A European Economic Interest Grouping, within the meaning given by Council Regulation (EEC) No 2137/85 on the European Economic Interest Grouping (EEIG), hereinafter referred to as "Regulation (EEC) No 2137/85", which has its registered office in the Republic of Bulgaria, shall be a legal person and shall be formed as from the day of its recordation in the Commercial Register. The members in the Republic of Bulgaria of European Economic Interest Groupings, which have a registered office in another State, shall also be recorded in the Commercial Register.
(2) Article 70 shall apply, mutatis mutandis, to a European Economic Interest Grouping recorded in the Republic of Bulgaria.
(3) The members of the Grouping recorded in the Republic of Bulgaria shall be liable for the obligations of the Grouping according to the rules applicable to a general partnership, unless otherwise provided for in Regulation (EEC) No 2137/85.
(4) The registered office of the Grouping may not be transferred to another State where the Grouping owns land in the Republic of Bulgaria. This prohibition shall apply conforming to the conditions ensuing from the accession of the Republic of Bulgaria to the European Union.
Dissolution
Article 280b
(New, SG No. 104/2007)
(1) A European Economic Interest Grouping may be dissolved on the grounds provided for in Article 32 of Regulation (EEC) No 2137/85 by the district court exercising jurisdiction over its registered office. The Grouping may alternatively be dissolved by the court and on an action brought by a public prosecutor, where the said Grouping acts in violation of public order in the Republic of Bulgaria.
(2) Bankruptcy proceedings according to Part Four may be instituted in respect of a European Economic Interest Grouping, but Article 610 shall not apply to the members of any such Grouping.
(3) Where a member of a Grouping which has its registered office in the Republic of Bulgaria has gone into liquidation or is declared bankrupt, the participation of the said member in the Grouping shall be dissolved by the liquidator or, respectively, by the trustee in bankruptcy.
CHAPTER NINETEEN
(New, SG No. 104/2007)
EUROPEAN COMPANY

Incorporation
Article 281
(Repealed, SG No. 42/2005, new, SG No. 104/2007)
(1) A European Company, within the meaning given by Council Regulation (EC) No 2157/2001 on the Statute for a European company (SE), hereinafter referred to as "Regulation (EC) No 2157/2001", which has its registered office in the Republic of Bulgaria, shall be incorporated through merger by the formation of a new corporation or transformation of a joint-stock company, which has its registered office in the Republic of Bulgaria, into a European Company and shall be recorded in the Commercial Register.
(2) The registered office of a European Company referred to in Paragraph (1) shall be the nucleated settlement where the management of the activity thereof is located.
(3) A European Company, which has its registered office in another Member State, may not be incorporated through merger by the formation of a new corporation where a transforming corporation, which has its registered office in the Republic of Bulgaria, owns land. A European Company, which has its registered office in the Republic of Bulgaria and which owns land, may not transfer its registered office to another Member State. This prohibition shall apply conforming to the conditions ensuing from the accession of the Republic of Bulgaria to the European Union.
Independent Expert
Article 282
(Repealed, SG No. 42/2005, new, SG No. 104/2007)
(1) Where one corporation which has its registered office in the Republic of Bulgaria participates in the incorporation of a European Company through merger by the formation of a new corporation, the registrar with the Registry Agency shall appoint an independent expert under Article 22, paragraph 1 and Article 32, paragraph 4 of Regulation (EC) No 2157/2001.
(2) Upon transformation of a joint-stock company, which has its registered office in the Republic of Bulgaria, into a European Company or of a European Company, which has its registered office in the Republic of Bulgaria, into a joint-stock company, the registrar with the Registry Agency shall appoint an independent expert under Article 37, paragraph 6 and Article 66, paragraph 5 of Regulation (EC) No 2157/2001.
(3) Article 262k (3) shall apply as well in the cases referred to in Paragraphs (1) and (2).
Dissolution
Article 283
(Repealed, SG No. 19/2003, new, SG No. 104/2007)
A European Company shall be dissolved by a judgment of the court exercising jurisdiction over the registered office thereof on a motion by the public prosecutor if the Company no longer complies with the requirements of Article 7 of Regulation (EC) No 2157/2001. The Company shall be dissolved solely if the position is not regularized within a specified period, which the court shall lay down, by a ruling.
CHAPTER TWENTY
ADMINISTRATIVE PENAL PROVISIONS

Violations and Fines
Article 284
(1) (Amended, SG No. 103/1993, supplemented, SG No. 84/2000, repealed, No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
(2) (Repealed, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
(3) (Repealed, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006) .
(4) (New, SG No. 84/2000; supplemented, SG No. 38/2006, effective 1.07.2007 - amended, in relation to becoming effective, SG No. 80/2006, supplemented, SG No. 104/2007) A fine of BGN 100 to BGN 500 shall be imposed upon any person who fails to indicate the particulars covered under Article 13 in his business correspondence and Internet site, if available, if he is under an obligation to do so pursuant to this Act. The same sanction shall also be imposed on any person who fails to indicate the particulars covered under Article 25 of Regulation (EEC) No 2137/85.
(5) (Renumbered from Paragraph 4, SG No 84/2000) Fines shall be imposed by the district court. The court's resolution may be appealed with a separate appeal.
Article 285
(1) (New, SG, No. 103/1993) For non-performance of the obligation under Article 7, para 3 a fine or, respectively, a financial sanction, equal to BGN 50 shall be imposed on the merchant.
(2) The statements for establishing the violations shall be drawn up by the mayors of communities, and the penal orders shall be issued by the mayors of municipalities or persons designated by them.
(3) The establishment of the violations, the issuing, appeal and enforcement of the penal orders shall be done pursuant to the Administrative Violations and Sanctions Act.
PART THREE
COMMERCIAL TRANSACTIONS

(New, SG No. 83/1996)
CHAPTER TWENTY-ONE
GENERAL
Section I
General Provisions

Definition of Commercial Transaction
Article 286
(1) A Commercial transaction shall be any transaction concluded by a merchant, related to the occupation exercised by him.
(2) Commercial transactions shall also be the transactions under Article 1, para 1, regardless of the capacity of the persons effecting them.
(3) In case of doubt it shall be considered that transactions concluded by a merchant are related to his occupation.
Applicability of provisions on commercial transactions
Article 287
The provisions on commercial transactions shall apply to both parties if the transaction is considered commercial for one of the parties and this Act does not provided otherwise.
Sources
Article 288
The provisions of civil legislation shall apply to matters of commercial transactions not regulated by this Act, and where it is inadequate, the commercial customs shall apply. Where commercial customs vary, the customs of the place of performance shall apply.
Abuse of right
Article 289
The exercising of a right arising from a commercial transaction shall be inadmissible if it is exercised with the sole intention of causing injury to the other party.
Section II
Conclusion of commercial transaction

Public invitation
Article 290
(1) Catalogues, price-lists, tariffs and the like, as well as announcements though the mass media or otherwise addressed to an indefinite number of persons, shall be deemed to be an invitation to make an offer in accordance with them.
(2) If the offer under para 1 is not accepted without just cause the author of the invitation shall be held liable for the damages incurred by the offerer.
Public offer
Article 291
An offer for entering into a transaction may also be addressed to an indefinite number of persons, including through the mass media. It should contain both the total quantity offered and the time limit for accepting the offer. In this case the offerer shall be bound until the quantity is exhausted within the specified time limit.
Silence equal to acceptance
Article 292
(1) An offer to a merchant with whom the offerer has lasting commercial relations shall be considered accepted if not immediately rejected.
(2) In the event of rejection of the offer under para 1, the merchant shall be bound to safeguard whatever has been sent to him at the expense of the offerer, unless he has been secured for the costs or the safeguarding does not cause him unusual inconvenience.
Form
Article 293
(1) To be valid a commercial transactions shall require a written or other form only in the cases provided for by a law.
(2) A statement on execution, performance or termination of a commercial transaction shall be null and void unless made in the form established by a law or by the parties.
(3) A party may not refer to nullity should its behaviour imply that it has not contested the validity of the statement.
(4) The written form shall be deemed met if the statement has been technically recorded in a way that permits it to be reproduced.
(5) In the event of statements made by telefax or telex, the written form shall be deemed met if the books and documents documenting the operation of these apparatuses rule out incorrect reproduction of the statement.
(6) Where a specific form has been provided for the conclusion of a commercial transaction, this form shall also be required for any amendments to the transaction.
Interest
Article 294
(1) Interest shall be due between merchants unless otherwise agreed.
(2) Interest on interest shall be due only if so agreed.
Permission or approval by a state authority
Article 295
(1) Where the validity of a commercial transaction requires permission or approval by a state authority, the transaction becomes valid when permission is granted.
(2) The party who has undertaken to request permission or approval must make immediately the necessary reasonable efforts and bear the costs related with that, and must inform the other party of the result.
Confirmation by third party
Article 296
(1) In the event a transaction has been concluded subject to confirmation by a third party, it shall become valid upon confirmation.
(2) The party who is responsible for obtaining the confirmation must inform immediately the other party of the result.
(3) Where within three months following the conclusion of a transaction the other party has not been informed of the result, it may decline to proceed with the transaction, unless another time period has been agreed upon.
Financial duress
Article 297
A commercial transaction concluded between merchants may not be voided on grounds of financial duress or due to manifestly unfavourable terms.
Commercial transactions under general terms
Article 298
(1) A merchant may specify in advance general terms for transactions concluded by him. They shall become binding upon the other party should it:
1. declare in writing their acceptance;
2. be a merchant and has known or been obliged to know them and has failed to object to them immediately.
(2) If a written form has been provided for the validity of a transaction, the general terms established by the merchant shall be binding upon the other party only if submitted to it upon execution of the transaction.
(3) In the event of conflict between what was agreed upon by the parties and the general terms, the terms agreed upon shall govern.
Determination of provisions by third parties
Article 299
(1) Where the parties have agreed that a third party shall determine particular provisions, such provisions shall become binding upon the parties only if the third party has determined them in accordance with the objective of the contract, the remainder of its contents and commercial custom.
(2) Should the third party fail to make the determination or makes it in a manner inconsistent with para 1, either party may petition the court to make the determination.
Supplementing of the contract by the court
Article 300
Where the parties agree to supplement the contract upon the occurrence of certain circumstances, and should they fail to reach agreement in the event of such occurrence, either party may petition the court to do so. When rendering its decision the court shall take in consideration the objective of the contract, the remainder of its contents and commercial custom.
Actions without authority for representation
Article 301
Where a person acts on behalf of a merchant without authority for representation, it shall be deemed that the merchant confirms such actions provided he has not objected immediately after learning of them.
Section III
Execution

Due Care Requirement
Article 302
A debtor in a transaction which is commercial with respect to him, shall exercise the care of a good husband.
Term
Article 303
Where a contract does not specify a term for performance of an obligation, provided the nature of the transaction or the commercial custom do not require otherwise, the performance may be requested and may be made at any time during working hours at the place of performance.
Joint and several obligations
Article 304
Persons who undertake a joint obligation upon conclusion of a commercial transaction shall be considered joint and several debtors, unless it follows otherwise from the transaction.
Non-cash payment
Article 305
(Amended, SG No. 31/2005)
Where payment is effected through debiting and/or crediting bank accounts, any such payment shall be deemed to be perfected at the moment of crediting the obligee's account or by means of payment of the amount of the obligation to the creditor in cash available.
Section IV
Non-performance

Force majeure
Article 306
(1) A debtor in a commercial transaction shall not be liable for failure to perform due to force majeure. Where the debtor was already in default, he may not invoke force majeure.
(2) A force majeure shall be an unforeseen or unavoidable event of an extraordinary nature which has occurred after the conclusion of the contract.
(3) A debtor who cannot perform due to force majeure shall notify the other party in writing within a reasonable time about the nature of the force majeure, and its potential consequences for the contract. In case of failure to notify, compensation shall be due for the damages resulting from such failure.
(4) The performance of obligations and the related counter-obligations shall be suspended for the duration of the force majeure.
(5) Should the duration of the force majeure be such that the creditor loses its interest in the performance, he shall be entitled to terminate the contract. The debtor shall also have the same right.
Business frustration
Article 307
A court may, upon request by one of the parties, modify or terminate the contract entirely or in part, in the event of the occurrence of such circumstances which the parties could not and were not obliged to foresee, and should the preservation of the contract be contrary to fairness and good faith.
Earnest money
Article 308
(1) Where upon the conclusion of a contract one of the parties has given or promised something in case it backs out, it may renounce the contract if its performance has not commenced. The party which backs out shall be bound to pay earnest money, and if it has given such earnest money upon conclusion of the contract, the party shall forfeit it.
(2) When the contract is performed, the earnest money shall be paid back or set off. It shall also be paid back in the event of termination of the contract by mutual agreement.
Liquidated damages
Article 309
The liquidated damages due under a commercial transaction concluded between merchants may not be reduced on grounds of excessive amounts.
Section V
Commercial security

Commercial pledge
Article 310
(1) A contract for commercial pledge which secures rights ensuing from a commercial transaction shall be considered concluded in the event of:
1. pledge of movable items and bearer securities - upon their delivery to the creditor or to another person on his account;
2. pledge of securities to order - by endorsement for security and delivery to the creditor.
(2) Entitled to a pledge by operation of law shall be creditors in the cases provided for in this Act.
(3) In the event of transfer of a secured claim the pledge shall be considered transferred upon delivery of the pledged object, unless the transferor has agreed to hold it as another person within the meaning of para 1, Item 1.
Satisfaction of the mortgage creditor
Article 311
(1) Where the pledge contract has been concluded in writing with a valid date and the parties have agreed that, should the debtor be in delay, the satisfaction from the pledge may be effected without court intervention, the creditor shall be entitled to sell on his own the pledged item or securities, if they have a market or stock exchange price. The creditor shall be bound to immediately notify the pledgor of the sale and to pay him the remainder of the price obtained.
(2) Creditors under Article 310, para 2, shall also be entitled to the rights under para 1.
Pledge without surrender of possession
Article 312
The pledgor may keep the pledged item in his possession in the cases and in compliance with the procedure specified by a law.
Pledge over perishables
Article 313
If the pledged item is perishable, the creditor may sell it, provided the item has a market or commodity exchange price, and deposit the amount with a bank as his security. The creditor must notify the pledgor immediately of the sale.
Set-off of yield from pledged item
Article 314
Where the pledged item produces yield, the pledge contract may provide for the right of the creditor to collect such yield on account of the debt.
Commercial lien
Article 315
(1) A merchant shall be entitled to a lien for his due claim from another merchant, under a transaction concluded between them, on the movables and securities of the debtor received by that merchant in a lawful manner. Such right shall exist as long as the merchant has in his possession the movables and the securities.
(2) The lien shall also exist where:
1. the ownership of the items has passed to the creditor, but he must transfer it back;
2. the ownership of the items has been transferred to a third party with regard to the debtor to the creditor, but he should transfer it back to the debtor.
(3) The lien shall also have effect against the third parties to the extent objections the creditor may have against the claim of the debtor for delivery of the item may be raised against them.
(4) The lien shall cease to exist if the debtor has ordered otherwise prior to the delivery of the item, or if the creditor has undertaken to act in respect of the item in a specific manner.
(5) The lien may also be exercised for sums receivable which have not become due:
1. if the debtor has entered bankruptcy proceedings;
2. if a compulsory execution undertaken against the debtor has failed.
(6) The lien shall be retained, if the debtor has ordered otherwise prior to the delivery of the item or if the creditor has undertaken to act in respect of the item in a specified manner, provided the circumstances under para 5 have come to the knowledge of the creditor after the delivery of the item.
Section VI
Transfer of rights

Transfer of order negotiable instruments
Article 316
(1) An instruction issued to order and addressed to a merchant for payment of money, delivery of securities or other fungible goods, and which does not set the performance as subject to counter performance, may be transferred by endorsement. This shall also apply to documents for obligations issued to order by a merchant for items as above, if the performance thereof is not conditioned upon counter performance.
(2) Transferred by endorsement may also be bills of lading, consignment notes, warehouse warrants, notes for marine loans and transport insurance policies, provided they have been issued to order.
Effect of the endorsement
Article 317
(1) All rights embodied in the endorsed negotiable instruments are assigned through endorsement.
(2) The debtor shall be bound to perform only against presentation of the negotiable instrument, with mark thereon indicating that the obligation for which it has been issued has been paid.
(3) The provisions for bills of exchange shall apply mutatis mutandis to the form of the endorsement, the identification of the possessor and the verification of identification, as well as to the obligation of the possessor to deliver the negotiable instrument.
CHAPTER TWENTY-TWO
COMMERCIAL SALE
Section I
General Provisions

Definition
Article 318
(1) A commercial sale shall be a sale which constitutes a commercial transaction pursuant to the provisions of this Act.
(2) A sale the subject of which is an item for personal consumption and where the buyer is a natural person, shall not be a commercial sale.
Term for delivery
Article 319
Where no term has been agreed for delivery of the goods, the buyer may demand delivery within a reasonable term.
Obligation for notification
Article 320
Where it has been agreed that the goods will be accepted at the warehouse of the seller, the parties shall determine within what time limits and in what manner the seller must notify the buyer that the goods are ready for delivery. Where that has not been determined, the notification shall be at least three days prior to the date of delivery, and should the parties be situated in different localities - at least five days before that date.
Documents pertaining to the goods
Article 321
Upon request of the buyer the seller shall be obliged to issue an invoice, and also other documents as agreed between the parties.
Service
Article 322
The seller shall be obliged to provide the necessary service according to the commercial practice, unless otherwise agreed.
Indemnity
Article 323
Should the sale be avoided and within an appropriate period of time after the avoidance the buyer has purchased replacement goods, or the seller has re-sold the goods, the party seeking compensation may receive the difference between the sale price and the price of the replacement transaction, as well as compensation.
Inspection of the goods
Article 324
The buyer shall inspect the goods in the course of time as necessary in view of the circumstances, and where the goods fail to meet the requirements, he shall immediately notify the seller. If the buyer fails to do so, the goods shall be considered approved as complying to the requirements, except for hidden defects.
Obligation for keeping
Article 325
(1) In the event of refusal to accept goods forwarded from another place, the buyer shall be obliged to keep them with the care of good merchant for the time period usually needed by the buyer to give his instructions. Should the seller be in delay, the buyer may deliver the goods for keeping to a third party, notifying the seller thereof.
(2) Should the goods be perishable, or where their keeping is related to considerable costs and inconveniences, the buyer may sell them on account of the seller.
(3) Where no instructions have been given pursuant to para 1, the buyer shall be liable only for intentional acts or gross negligence.
Determination of price
Article 326
(1) The price shall be determined by the parties upon conclusion of the contract.
(2) Where the price has not been determined and there is no agreement as to how to determine it, it shall be considered that the parties have agreed to the price usually paid upon conclusion of sale of the same type of goods under similar circumstances.
(3) Where the price is calculated on the basis of weight of the goods, the tare shall be deducted. This rule shall also apply where substances other than the goods are used for the purpose of preservation of goods.
Time of payment
Article 327
(1) The buyer shall be obliged to pay the price upon delivery of the goods or of the documents entitling him to receive the goods, unless otherwise agreed.
(2) If the seller has undertaken to forward the goods, he shall be entitled to demand that this happens only against payment of the price or presentation of evidence for payment thereof.
Delay of receipt
Article 328
(1) Where the buyer is in delay of receipt of goods, the seller may:
1. deliver the goods for safekeeping;
2. sell the goods at market prices or at a public auction, after notification to the buyer thereof, informing him of the time and place of the sale or auction;
3. in the case of perishable goods to sell them without prior notice.
(2) The delivery for safekeeping and the sales under para 1 shall be on the account and risk of buyer.
Section II
Special rules for some sales

Transit sale
Article 329
(1) The parties may agree that the seller deliver the goods to a third party indicated by the buyer.
(2) The seller shall be obliged to notify the buyer of the forwarding of the goods to the third party, sending him also copies of the documents accompanying the goods.
(3) The price may be paid by the third party.
Distribution of costs pertaining to delivery of goods
Article 330
(1) Where the goods have to be forwarded to a place other than the place of delivery, the costs pertaining to forwarding and transportation shall be on account of the buyer.
(2) It shall be assumed that the seller has undertaken the costs of loading and transportation, if delivery has been agreed franco a specific point other than the point of delivery.
(3) The costs pertaining to forwarding and transportation, as well as the distribution of other costs related to the performance of the contract, may be determined by reference to general terms elaborated by international and other institutions.
Sale with additional specification
Article 331
The parties may agree on a term during which the buyer shall specify the object of sale. In case of delay of the buyer, the seller may either do so or avoid the contract.
Sale with periodic performance
Article 332
In the case of a sale with periodic performance where the parties have agreed that seller may perform in advance, what has been given in excess during the preceding period shall be deducted from what is due.
Sale with buy-back clause
Article 333
A sale with a buy-back clause must be in writing and with a fixed term for exercising the right of buy-back. The right of buy-back shall lapse upon expiration of the term.
Sale with advance payment of the price
Article 334
The agreement for advance payment of the price must be in writing. If the seller fails to deliver the goods, he shall owe interest from the date of receipt of the price. In such a case the price paid shall be considered earnest money.
Instalment sale
Article 335
(1) An instalment sale shall be valid if executed in writing.
(2) The failure to pay instalments not exceeding one-fifth of the price of the goods, shall not be a reason for cancellation of the contract.
(3) If the sale is avoided due to the buyer's failure to perform, the seller may also claim compensation.
Sale by assignment of negotiable instruments
Article 336
In the case of sale of goods by assignment of a negotiable instrument the seller shall be relieved from the obligation to deliver the goods, by assigning the negotiable instrument to the buyer. The buyer shall be bound to pay the price immediately and at the point of delivery of the documents, unless otherwise agreed.
Section III
Sale at public auction with open bidding

Publicity
Article 337
The seller shall provide publicity of the auction terms by announcement in at least one daily.
Binding force of proposal
Article 338
A participant in the auction shall be bound by his proposal in compliance with the terms of the auction.
Assignment of the goods
Article 339
The person who conducts the bidding shall assign the goods to the bidder who has offered the highest price. The sale shall be considered concluded by assignment of the goods.
Payment
Article 340
The buyer shall be bound to pay the price immediately, unless otherwise provided by the terms of the auction. The seller may cancel the contract if the buyer fails to fulfil this obligation.
Nullification of sale
Article 341
An auction sale concluded as a result of acts contrary to the law or good morals may de declared null and void upon the request of any interested party, within ten days following the assignment. In the case of an action for payment of the price, the buyer may demand nullification of the sale by means of an objection.
CHAPTER TWENTY-THREE
LEASING CONTRACT

Definition
Article 342
(1) Under a leasing contract the lessor undertakes to provide an item for use against payment.
(2) Under a financial leasing contract the lessor undertakes to obtain an item from a third party under terms specified by the lessee, and to provide that item to the lessee for use against payment.
(3) The lessee may acquire the item during the term of the contract or after the expiration thereof.
Risk
Article 343
In the case of a financial lease the risk of accidental destruction or damages to the article shall be on the account of the lessee.
Obligations of lessor
Article 344
(1) The lessor shall undertake the obligations of lessor pursuant to Article 230 of the Obligations and Contracts Act.
(2) The lessor under a financial lease shall be bound to transfer its rights in respect of the third party concurrently with the transfer of title of the item.
Obligations of the lessee
Article 345
(1) The lessee shall undertake the obligations of lessee pursuant to Articles 232 and 233, para 2, of the Obligations and Contracts Act , as well as the obligation to return the item upon expiration of the term of the contract.
(2) The costs pertaining to maintenance of the item shall be on the account of the lessee.
Sub-leasing
Article 346
The lessee may give the item to be used by another party with the consent of the lessor.
Reference
Article 347
(1) The rules of this Chapter shall also apply mutatis mutandis to leasing of an enterprise.
(2) (Amended, SG No. 92/2007) The rules relevant to lease contracts shall apply mutatis mutandis to leasing contracts with the exception of Article 229, Paragraph 3, Article 231 , paras 1 and 2, Article 233, para 1, Article 235, Article 236, para 1, Articles 237, 238 and 239 of the Obligations and Contracts Act.
CHAPTER TWENTY-FOUR
COMMISSION MERCHANT CONTRACT

Definition
Article 348
(1) Under a commission merchant contract the commission merchant shall undertake, for a commission, to perform on his own behalf and on the account of the principal one or more transactions.
(2) The provisions on the contract of mandate shall apply mutatis mutandis to the relationship between the principal and the commission merchant, unless otherwise provided in this Chapter.
Effect
Article 349
(1) Under a transaction concluded with a third party for performance of the mandate, rights and obligations shall also arise for the commission merchant in the case where he has informed the third party of the principal's name.
(2) The rights acquired by the commission merchant or granted thereto by the principal, shall be deemed, with respect to the commission merchant's creditors, rights of the principal even before their transfer to the principal.
(3) The commission merchant shall be bound to meet the obligations and to exercise the rights ensuing from the transaction with the third party.
(4) The principal may exercise the rights and may be compelled to meet the obligations towards a third party only after the transfer thereof by the commission merchant.
Obligations of the commission merchant
Article 350
(1) The commission merchant must perform the mandate with the care of good husband.
(2) Where the commission merchant has performed the mandate under conditions more favourable than those set by the principal, the benefit shall belong to the principal.
(3) In the case of receipt of goods from another location, the commission merchant must inspect them immediately after receipt, and should he ascertain any defects or losses he must notify forthwith the principal thereof and provide the necessary evidence.
(4) Should any changes occur in the goods which would depreciate them, and where there is no sufficient time available to wait for the instructions of the principal or the principal is in delay, the commission merchant may sell the goods at prices lower than the specified by the principal, provided in this way he protects the principal from greater damages.
(5) The commission merchant shall be bound to insure the goods received from the principal or from the third party under the executive transaction, provided the principal has given instructions to that effect.
Deviation from the mandate
Article 351
(1) Should the commission merchant deviate from the mandate, the principal shall not be obliged to recognize the transaction executed on his account, and may claim damages. This rule shall not apply where such deviation has been made in the interest of the principal and the commission merchant was not able to request in advance new instructions, or did not receive a timely response to his inquiry.
(2) A commission merchant who sells at a lower price or buys at a higher price than the one set by the principal, must notify the latter immediately thereof. If the principal does not immediately refuse to accept the transaction it shall be deemed that he has approved it.
(3) Where the commission merchant states that he shall bear the difference in prices, the principal may not refuse to accept the transaction.
(4) The principal may not refuse to accept a transaction, even though the commission merchant has not expressed readiness to bear the difference in prices, provided the commission merchant has ascertained that it was not possible to perform the transaction at the price set by the principal, and that by performing the transaction he has protected the principal from greater damages.
Notification to the principal
Article 352
(1) Where the third party is in default of its obligations, and also if damages are inflicted by anyone to the property acquired or held by the commission merchant on account of the principal, the commission merchant shall be bound to notify immediately the principal and to provide the necessary evidence.
(2) Upon receipt of notification that the third party is in default of its obligations under the executive transaction, the principal shall be entitled to request from the commission merchant to transfer immediately to him the rights in respect of such party.
Transaction on credit
Article 353
A commission merchant authorized to conclude a transaction on credit shall be liable before the principal for the performance of the obligations by the third party, provided he has been or should have been of knowledge that the third party is unable to pay.
Commission contract del credere
Article354
Where the commission merchant has guaranteed to the principal for the obligation of the third party, he shall be liable jointly and severally with the third party and shall be entitled to separate compensation.
Accounting
Article 355
The commission merchant shall be bound to account before the principal and to transfer to him the results of the transaction executed.
Obligations of the principal
Article 356
(1) The principal shall be obliged to accept from the commission merchant the results of the transaction executed, to inspect the goods acquired for him and to notify immediately the commission merchant of any defects or losses, as well as to undertake the obligations undertaken by the commission merchant towards the third party.
(2) The principal shall be bound to pay the commission merchant the expenses made in relation to the execution of the mandate, and the remuneration agreed upon. Where no remuneration has been agreed, the customary sum shall be due.
Pledge right of the commission merchant
Article 357
The commission merchant shall be entitled to a pledge on the items acquired by him on account of the principal, or which the principal has delivered to him.
Entering into executive transaction
Article 358
(1) Where subject of the mandate is the purchase or sale of goods or securities which have market or stock exchange prices, the commission merchant may state that he himself sells to the principal or buys from him the goods or securities at such prices. In such case the amount of the remuneration shall be reduced in half.
(2) The commission merchant shall be assumed a party to the sale provided he has notified the principal of the carrying out of the mandate without indicating a third party.
Refusal by the commission merchant
Article 359
(1) Unless otherwise provided in the contract, the commission merchant may not refuse to carry out an undertaken mandate, except in the case of termination of the contract due to default of the principle. The termination shall be effected in writing, whereas the commission contract shall remain in force for two weeks as from the date on which the principal has received notification from the commission merchant of the refusal.
(2) If the commission merchant refuses to carry out an undertaken mandate because of a breach of the commission contract by the principal, the commission merchant shall be entitled to a commission and to compensation for any expenses made.
(3) A principal who has been notified of the refusal of the commission merchant to carry out an undertaken mandate shall be bound, within one month following the date of notification for refusal, to dispose of his property which is in the possession of the commission merchant.
(4) Where the principal fails within the above term to dispose of the property which is in the possession of the commission merchant, the commission merchant shall be entitled to deliver such property for safekeeping on account of the principal or, in order to cover his claims towards the principal, to sell such property at the best prices for the principal.
Withdrawal of mandate
Article 360
Should the principal withdraw his mandate entirely or in part, before the commission merchant has concluded the respective transactions with third parties, he shall be bound to pay the commission merchant the remuneration and the costs incurred for transactions concluded by him before the withdrawal. In such case the principal shall have the obligation pursuant to Article 359, para 3.
CHAPTER TWENTY-FIVE
FORWARDING CONTRACT

Definition
Article 361
(1) Under a forwarding contract a forwarding agent shall undertake, for compensation, to conclude a contract for transportation of cargo in his own name and on account of the principal.
(2) The provisions for commission merchant contract shall apply mutatis mutandis to all matters not covered by this Chapter.
Forwarding agent - carrier
Article 362
The forwarding agent may carry out the transportation himself, entirely or partially. In such case he shall have the rights and obligations of a carrier as well.
Several forwarding agents
Article 363
The forwarding agent may assign to subsequent forwarding agents the carrying out of the activities under Article 361, even without authorisation therefore from the principal.
Obligation for notification
Article 364
(1) The principal shall be bound to notify the forwarding agent about any special characteristics of the cargo.
(2) Should the packing of the cargo be inappropriate for transportation, the forwarding agent shall be bound to notify the principal thereof.
Compliance with principal's instructions
Article 365
(1) The forwarding agent shall be bound to comply to the instructions of the principal pertaining to the route, direction and manner of transportation, as well as to the selection of carriers and subsequent forwarding agents.
(2) Should the forwarding agent deviate from the instructions of the principal, he shall be liable for damages, unless he proves that such could also have occurred even if he had complied to the instructions.
Limitation of actions
Article 366
An action for damages under a forwarding contract may be brought within one year.
CHAPTER TWENTY-SIX
CONTRACT OF CARRIAGE

Definition
Article 367
Under a contract of carriage a carrier shall undertake to carry out for compensation the transportation of a person, luggage or cargo to a certain place.
Obligations of the carrier
Article 368
(1) A carrier shall be bound to carry out the transportation within the specified term, to keep the cargo as from its acceptance to the delivery, to notify the consignee about the arrival of the cargo and to deliver the cargo at the point of destination.
(2) Where no consignment note has been issued, the carrier shall follow the instructions of the consignor about return of the cargo or delivery of the cargo to another person, if he has not delivered the cargo or the bill of lading.
Obligations of the carrier for transportation of passengers
Article 369
A carrier shall be bound to ensure to passengers appropriate conveniences and safety according to the type of transport vehicle and the distance of transportation.
Obligations of the consignor
Article 370
(1) A consignor shall be bound to deliver the cargo to the carrier in a state allowing it to undergo transportation, according to its type and special requirements for various types of cargo.
(2) The consignor shall deliver to the carrier together with the cargo also the documents needed in order to deliver the cargo to the consignee.
(3) Where the packing is obviously inappropriate, the carrier may accept the cargo, provided the consignor declares in writing that any damages that may occur shall be on his own account.
Consignment note
Article 371
(1) The consignor may request the carrier to issue him a consignment note for the delivered cargo, which may also be issued to order.
(2) Where a consignment note has been issued, the cargo shall be delivered to the bearer of the note who has established himself as such.
Freightage
Article 372
(1) The consignor shall pay the freightage upon the conclusion of the contract, unless otherwise agreed.
(2) Where freightage has not been paid by the consignor, it shall be paid by the consignee upon acceptance of the cargo.
Liability for losses and damages
Article 373
(1) The carrier shall be liable for losses, destruction or damages to the cargo, except where the damages are due to force majeure, to the characteristics of the cargo, or to obviously inappropriate packing, if the consignor has declared his consent pursuant to Article 370, para 3.
(2) Pursuant to the provisions of para 1 the carrier shall be liable for damages due to delay in performing the transportation.
(3) An arrangement to relieve from liability under paras 1 and 2 shall be invalid.
(4) If some lost cargo, for which the consignee has been compensated, is later on found, the carrier shall notify thereof the consignee after taking the necessary measures to preserve it. Should the consignee accept the cargo, he shall owe reimbursement of the compensation received. In the case of rejection, the carrier may sell the cargo himself.
(5) After delivery of the cargo the carrier shall be liable only if he has been notified about damages not later than one month following the delivery.
Liability in the case of subsequent carriers
Article 374
(1) Where a carrier performs the transportation entirely or in part with the participation of other carriers, he shall be liable for their actions to the time of delivery of the cargo.
(2) Each subsequent carrier shall enter into the contract and must exercise the rights of the preceding carriers, as stipulated in the contract of carriage. All carriers shall be liable jointly and severally.
Right to pledge
Article 375
A carrier shall be entitled to a pledge on the cargo for his dues under the contract. This right shall be exercised by the last carrier and shall exist until the rights of all carriers are satisfied.
Obligation for keeping the cargo
Article 376
Where it is not possible to find the consignee at the address indicated, or if he refuses to accept the cargo, the carrier shall be obliged to keep it or to deliver it for keeping to another party, notifying the consignor thereof in due time. In the case of perishable cargo, the rules for sale of items in the case of delay of a creditor, shall apply.
Transportation of luggage
Article 377
The respective rules for transportation of cargo shall apply to transportation of luggage.
Limitation of actions
Article 378
An action for damages under a contract of carriage may be brought within one year, commencing:
1. for cargo - from the date of delivery to the consignee, and where the cargo has not been delivered - from the date on which it should have been delivered;
2. for passengers, in the case of death or bodily injury - from the date of occurrence thereof or the date of coming of knowledge thereof, but not later than three years.
Special rules
Article 379
The special rules for individual types of transportation shall be governed by separate Acts.
CHAPTER TWENTY-SEVEN
INSURANCE CONTRACT

(Repealed, SG No. 103/2005)
Section I
General Provisions

Definition
Article 380
(Repealed, SG No. 103/2005)
Form
Article 381
(Repealed, SG No. 103/2005)
Pre-contract information
Article 381a
(New SG No 96/2002, repealed, SG No. 103/2005)
Payment of first premium
Article 382
(Repealed, SG No. 103/2005)
Obligation for declaration
Article 383
(Repealed, SG No. 103/2005)
Intentional incorrect declaration or holding back
Article 384
(Repealed, SG No. 103/2005)
Unintentional incorrect declaration
Article 385
(Repealed, SG No. 103/2005)
Declaration of newly occurred circumstances
Article 386
(Repealed, SG No. 103/2005)
Insurance premium
Article 387
(Repealed, SG No. 103/2005)
Prevention of damages
Article 388
(Repealed, SG No. 103/2005)
Obligation for notification
Article 389
(Repealed, SG No. 103/2005)
Insurance payment
Article 390
(Repealed, SG No. 103/2005)
Insurance interest
Article 391
(Repealed, SG No. 103/2005)
Limitation
Article 392
(Repealed, SG No. 103/2005)
Compulsory execution
Article 393
(Repealed, SG No. 103/2005)
Section II
Property insurance

Subject of contract
Article 394
(Repealed, SG No. 103/2005)
Conclusion of contract without authorization
Article 395
(Repealed, SG No. 103/2005)
Sum insured
Article 396
(Repealed, SG No. 103/2005)
Over insurance
Article 397
(Repealed, SG No. 103/2005)
Under insurance
Article 398
(Repealed, SG No. 103/2005)
Insurance indemnity
Article 399
(Repealed, SG No. 103/2005)
Partial destruction
Article 400
(Repealed, SG No. 103/2005)
Transfer of insured property
Article 401
(Repealed, SG No. 103/2005)
Subrogation into the rights of the assured
Article 402
(Repealed, SG No. 103/2005)
Insurance against transportation risks
Article 403
(Repealed, SG No. 103/2005)
Subscription insurance
Article 404
(Repealed, SG No. 103/2005)
Section III
"Liability" insurance

Definition
Article 405
(Repealed, SG No. 103/2005)
Notification
Article 406
(Repealed, SG No. 103/2005)
Direct claim
Article 407
(Repealed, SG No. 103/2005)
Settlement
Article 408
(Repealed, SG No. 103/2005)
Right of the assured
Article 409
(Repealed, SG No. 103/2005)
Section IV
"Life" and "accident" insurances

Subject of contract
Article 410
(Repealed, SG No. 103/2005)
Sum insured
Article 411
(Repealed, SG No. 103/2005)
Insurance on the life of a third party
Article 412
(Repealed, SG No. 103/2005)
Mutual insurances
Article 413
(Repealed, SG No. 103/2005)
"Life" and "accident" insurance in favour of a third party
Article 414
(Repealed, SG No. 103/2005)
Right of the third party beneficiary
Article 415
(Repealed, SG No. 103/2005)
Risks excluded
Article 416
(Repealed, SG No. 103/2005)
Payment of premium
Article 417
(Repealed, SG No. 103/2005)
Right to buy off
Article 418
(Repealed, SG No. 103/2005)
CHAPTER TWENTY-EIGHT
CONTRACT FOR CURRENT ACCOUNT

Contents
Article 419
(1) Under a contract for current account two persons, where at least one of them is a merchant, may agree the amounts receivable and payable ensuing from their mutual relations to be kept under one account, which shall be periodically settled. The party to the benefit of which a balance exists at the time of settlement, may demand it together with interest from the date of settlement of the account even though interest may have already been included therein.
(2) The settlement of the account shall be effected at the end of the calendar year, unless otherwise agreed, and shall be confirmed by the parties in writing. Should a declaration of any of the parties be invalid, the action may be brought within one year thereafter.
(3) A contract for current account may be terminated by a one-month advance notice in writing even before settlement of the account, unless otherwise agreed, whereas the party with a balance to his benefit may demand its payment.
CHAPTER TWENTY-NINE
BANKING TRANSACTIONS
Section I
Contract of bank deposit

Ordinary deposit
Article 420
(1) Under a contract of bank deposit a bank shall undertake to keep for consideration the submitted thereto bank notes, securities or other movable items.
(2) The depositor may at any time demand the return of a deposited item, even where it has been agreed that the deposit shall continue for a certain period of time. In such a case the depositor shall owe payment only for the duration of time of keeping the article, but he should pay the bank the expenses incurred thereby in view of the agreed duration of the deposit.
Monetary deposit
Article 421
(1) In the case of a monetary deposit the bank shall owe the sum of money to the depositor in the same currency and to the same amount, as well as the agreed interest.
(2) In the case of early withdrawal of sums from a time cash deposit, interest shall be due as for demand deposit, unless otherwise agreed.
Documents for deposit
Article 422
(1) In the case of a monetary deposit the bank shall issue to the depositor documents for all contributions to and payments from the deposit.
(2) In the case of a difference between the data under the bank batch and the document issued by the bank to the depositor, the data in the issued document shall be assumed to be true, until proven to the contrary.
(3) If the deposit document issued is lost, destroyed or stolen, the depositor shall be obliged to notify forthwith the bank in writing. The bank shall not be liable if before the receipt of such notification it has paid in good faith a sum to a person, who appeared authorized to receive such sum on the grounds of indisputable circumstances.
Authorization
Article 423
A proxy may draw sums from a monetary deposit, provided the power of attorney bears a signature certified by the notary public.
Management of securities
Article 424
A bank may undertake to manage deposited securities by exercising the rights thereon, unless otherwise agreed.
Conditioned deposit and deposit in favour of a third party
Article 425
In the case of a conditioned deposit or in favour of a third party, if the condition does not occur or the third party dies, the deposited monies, securities or other movable articles shall be returned to the depositor.
Section II
Current account contract

Definition and form
Article 426
(1) Under a current account contract a bank shall open an account of a person through which it shall, in return for payment, accept and effect on his instructions payments within the limits of the amounts available.
(2) A current account contract shall be concluded in writing.
Fees, expenses and interest
Article 427
(1) The holder of the account shall owe to the bank a fee and the expenses made pertaining to operations effected.
(2) The bank shall owe to the holder the interest agreed.
Notification
Article 428
The bank shall notify the holder of an account about operations effected, by a procedure and manner agreed between them, and unless otherwise agreed, monthly in writing. Provided the holder does contest the operation in writing within two weeks following the receipt of the notification, it shall be considered that he has approved it.
Application of other provisions
Article 429
The provisions of the contract of mandate shall apply mutatis mutandis to the current account contract unless the circumstances indicate otherwise.
Section III
Contract for bank credit

Definition and form
Article 430
(1) Under a contract for bank credit a bank shall be obliged to provide to a borrower a sum of money for a certain purpose and under agreed conditions and term, and the borrower undertakes to use the sum as agreed and to return it upon expiration of the term.
(2) The borrower shall pay interest on the credit, as agreed with the bank.
(3) The contract for bank credit shall be concluded in writing.
Necessary information
Article 431
The borrower shall be obliged to provide the bank with the necessary information relevant to the conclusion and performance of the contract.
Early claim
Article 432
(1) Further to the cases provided for in the contract, the bank may request early return of the sum under the credit, where:
1. the credit is not used for the purpose for which it has been received;
2. the borrower provides untrue information;
3. the security becomes insufficient and is not supplemented within a term set by request therefore;
4. the borrower fails to return other loans to the bank due to serious aggravation of his financial status.
(2) In the case under para 1, Item 4, the bank shall provide a sufficient time period before exercising its right for early return of the sum.
Section IV
Letter of credit

(Repealed, SG No. 59/2006)
Definition
Article 433
(Repealed, SG No. 59/2006)
Rights and obligations
Article 434
(Repealed, SG No. 59/2006)
Section V
Documentary letter of credit

Definition and form
Article 435
(1) A documentary letter of credit shall be a unilateral declaration in writing by a bank, by which it undertakes to pay to the person indicated in the documentary letter of credit the sum of the documentary letter of credit, provided he submits to the bank within the term specified in the documentary letter of credit the documents listed therein, and fulfils its other conditions. A documentary letter of credit shall come into force after notification of the person.
(2) A bank may assign to another bank the receipt of documents, their verification, the compliance with other conditions under the documentary letter of credit and the payment of the amount.
(3) The verification of the documents shall be prima facie.
(4) Only the conditions specified in the documentary letter of credit shall be of importance for payment of the sum under the documentary letter of credit.
(5) The obligations under the documentary letter of credit shall cease upon expiration of the term.
Irrevocability of the documentary letter of credit
Article 436
Unless anything else ensues from the documentary letter of credit, it shall be considered irrevocable and may be revoked or modified only with the consent of the third party.
Revocable documentary letter of credit
Article 437
A revocable documentary letter of credit may be revoked unilaterally by the bank, as long as it is not carried out.
Divisibility and non-transferability of a documentary letter of credit
Article 438
A documentary letter of credit shall be divisible and non-transferable, unless otherwise ensues there from.
Confirmed documentary letter of credit
Article 439
Where an irrevocable documentary letter of credit is confirmed by another bank, it shall undertake to pay on its own and directly the sum under the letter of credit.
Mandate and documentary letter of credit
Article 440
The provisions for contract of mandate shall apply to the relations between the principal and the bank which has opened the documentary letter of credit, as well as between the banks under the documentary letter of credit.
Remuneration
Article 441
The principal shall owe a fee to the bank.
Section VI
Bank guarantee

Definition and form
Article 442
Under a bank guarantee a bank undertakes in writing to pay to the person specified in the guarantee a certain sum of money in compliance with the conditions provided therein.
Section VII
Bank collection. Bank documentary collection

Definition of bank collection
Article 443
Under a contract for bank collection a bank undertakes, for a fee, to collect by mandate from the principal his cash receivable or to effect another action for collection.
Definition of bank documentary collection
Article 444
Under a contract for bank documentary collection the bank by mandate from the principal undertakes to deliver, in return for remuneration, to another person documents entitling him to dispose with goods, or other documents against payment of an amount which the bank undertakes to collect, or against effect of other actions for collection.
Rights and obligations
Article 445
(1) The principal should pay to the bank the agreed expenses.
(2) Upon performance of bank collection and of bank documentary collection the bank shall be liable only for incorrect performance of the instructions provided. It shall not be obliged to verify the form and compliance of documents.
(3) A bank which uses the services of another bank in view of performing the orders of the principal, shall do so on his account.
Subsidiary applicable provisions
Article 466
Unless the circumstances indicate otherwise the provisions for contract of mandate shall apply mutatis mutandis to the bank collection and the bank documentary collection.
Special provision
Article 447
Contracts for bank collection and for bank documentary collection shall not be terminated upon the death of the principal.
Section VIII
Bank transfer

Definition
Article 448
Under a contract for bank transfer the principal shall extend to the bank a certain monetary sum with orders to be paid to a person specified thereby.
Execution
Article 449
(1) The principal may cancel or modify an order for transfer prior to its performance.
(2) Where prior to the performance of the transfer the bank has notified the payee of the order, it may not be cancelled or modified.
Obligation for fees and expenses
Article 450
The principal shall owe to the bank fees and the expenses made by the latter related to the transfer.
Section IX
Contract for bank safe deposit box

(Repealed, SG No. 59/2006)
Definition
Article 451
(Repealed, SG No. 59/2006)
Prohibited items
Article 452
(Repealed, SG No. 59/2006)
Rights of the bank on default of payment
Article 453
(Repealed, SG No. 59/2006)
Liability in the case of force majeure
Article 454
(Repealed, SG No. 59/2006)

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