LEGAL ALERT, JULY 2025

The legal framework introduces an obligation for foreign investors to notify the competent Bulgarian authorities prior to the investment by submitting an application for screening under Art. 27b of IPA (“Application”).

The Regulation for Application introduces the requirements for the Application and the relevant documents thereto that the foreign investor is to submit. The latter includes general and detailed information and documents, including information and documents regarding:

• the investment, its approximate value, etc.;

• the target undertaking;

• other legal entities within the corporate group;

• Greenfield investments;

• the direct investor, the ultimate controlling entity, multiple investors, etc.

• organigram and shareholding structure of the group, etc.

II. Who is Obliged to Submit the Application?

Physical person/legal entity/non-incorporated entity that has made/intends to make a foreign direct investment in Bulgaria IF:

a) the physical person is not EU-Member-State national; or if the legal entity is seated outside EU Member States;

b) the legal entity is seated in an EU Member State, but it is controlled by a Non-EU physical person or by a legal entity seated in a non-EU Member State;

c) the legal entity/non-incorporated entity is seated in an EU Member State, but on the grounds of a contract/internal rules it results that the specific investment is under the direct/indirect control of a Non-EU physical person/a legal entity seated in a non-EU Member State; OR on the grounds of a contract/multi-party transaction such entity makes a foreign direct investment on its name but on behalf of the physical person/legal entity under a) and b) above.

III. What Investments Fall Within the New Obligation to Apply for a Permit? [1]

Foreign Direct Investments (“FDI”) within the following scope and value:

a) The FDI which targets either of the sectors of activity identified under Article 4 of Regulation 2019/452:

• Critical infrastructure (such as transport, energy, water, health, communications, financial systems, etc.);

• Critical technologies (such as AI, robotics, semiconductors, cybersecurity, etc.);

• Supply of critical inputs including energy or raw materials and food security;

• Access to sensitive information (personal data, or the ability to control such information);

• Freedom and pluralism of the media.

AND

b) The FDI complies with either of the below conditions for value:

• The FDI leads to an acquisition of at least 10 % of the capital of a company operating in Bulgaria or the value of the FDI exceeds EUR 2,000,000;

• The FDI leads to an acquisition of at least 10% of the capital of a company operating in Bulgaria and the company performs high-tech activities;

• The FDI is a Greenfield investment with value which exceeds EUR 2,000,000.

IV. Temporal Aspects. Ex officio Checks

FDIs, which in principle fall within the rules above and which “have started” after the adoption of the amendments of the IPA (i.e. 08.03.2024), but prior to the adoption of the amendments to the Regulation for Application (i.e. 22.07.2025) are not to be applied for permit before the Council.

The Council is competent to initiate an ex officio proceeding for screening of FDIs which could be subject to screening, but no Application was needed and filed for them. This process is limited only to investments, which in principle fall within the scope of Application of the screening procedure but were not notified and permitted prior to the investment.

Such proceedings can be initiated in case of receipt of (i) signal from another EU Member State or (ii) standpoint of the EU Commission. The Council may initiate the proceedings for investments which initiated up to 2 years prior to receipt of (i) and/or (ii).

V. Which Are the Competent Authorities and the Terms to Process?

a) Inter-department Council for Screening of Direct Foreign Investments (“Council”) – it is the main administrative body which resolves on the submitted Application and takes the final decision whether to issue the permit, to reject the Application or to apply restrictive measures within a conditional permit. In case of conditional permit, the Council (through an appointed representative) conducts negotiations with the foreign investor on the required restrictive measures;

b) InvestBulgaria Agency (“IBA”) – the foreign investor is to initially submit the Application with the IBA. The IBA checks for its compliance with the applicable legislation, it may instruct the applicant to align the Application with the legal requirements and then processes the Application to the Council;

c) Council’s assisting secretary body (“Secretariat”)– it registers the Application after receipt from the IBA, it makes motivated proposal to the Council whether or not to conduct an enhanced check on the investment.

The above authorities have the respective terms to check, assess and process the Application.

Initially the IBA has its term (3 to 7 days) to check and request the correction of the Application if needed. Then the Secretariat processes the Application. Then the Council has 45 days to review the Application and issue the respective decision. The Council can extend the latter term with additional 30 days. All the procedure may roughly take circa 2-3 months.

Lack of decision by the Council by the expiry of the above 45-days term (respectively by the expiry of the extended 30-days term) is deemed as tacit approval.

The decision of the Council can:

a) Permit the investment; or

b) Reject the application on the grounds that it could breach the national security, affect programs of the EU or breach the public order in Bulgaria; OR

c) Issue conditional permit with restrictive measures: which could include:

i. Limiting the shareholding up to 10 % or 20 %, respectively; OR

ii. Prescription related to personal data handling, to security of information, etc.

iii. Preserving special rights for the state (“golden share”) in the shareholding/management of the target for transactions under the context of privatization and post privatization procedures.

The decision represents an individual administrative act and it is subject to court appeal before the Bulgarian administrative courts.

VI. What Are the Sanctions for Non-compliance?

Foreign investors who perform FDI without the required permit OR provide untrue, incorrect, misleading information in the Application OR do not comply with the conditional permit and its restrictive measures, are subject to monetary sanction of 5 % of the investment value, but not less than BGN 50,000 (circa EUR 25,000).

Regardless of the monetary sanction, the Council can also impose different restrictive measures such as:

• restricting the right to acquire up to 20 % of the capital of the company;

• restricting the right to acquire up to 10 % of the capital of the high-tech companies;

• prescription related to personal data handling, to security of information, etc.

• preserving special rights of the state for decision making – i.e. golden share;

• change of control;

• change/suspension of the activity;

• termination of the FDI, etc.

VII. Specific Rules and Exceptions

• All FDIs with foreign investor from Russia and Belarus are subject to screening.

• All FDIs in oil and petroleum products sectors are subject to screening.

• All FDIs, irrespective of the scope and value per it. III a) and b) above are subject to screening further to grounded request by the State Agency of National Security and the State Agency of Intelligence, based on national security concerns. In such case the Council is to initiate screening.

• All FDIs regardless of their value per it. III b) above, are subject to screening if in the capital of the foreign investor there is direct/indirect participation of a Non-EU Member State, including in case of considerable funding by a state body. Publicly traded companies with more than 5% Non-EU Member State participation also trigger the obligatory screening of the FDI.

There is a specific list of Non-EU Member States, including the USA, UK, Canada, Australia, New Zealand, Japan, Republic of Korea, UAE, country – party to the EAA Agreement, Switzerland, Saudi Arabia) which are treated as equivalent to EU Member States. NOTE: The statutory text states, that investments from these countries are subject to “screening for EU Member State countries for the purposes of application of the screening mechanism”. This text raises several potential questions on its possible application because:

• • investments from EU Member States are not subject to screening at all;

• • it is not clear whether this text would apply to “state-owned” investments only or to all investments (including “private-owned” investments, made by foreign investors from such countries);

• • it is not clear whether the exception will apply only to “small investments” – i.e. below the value under it. III b) above or to all FDIs.

In view of the above, foreign investors are to prepare in advance and consider transaction timelines to accommodate these new administrative processes, to make additional effort and incur expenses to gather the numerous paperwork regarding the above information and communicate with the authorities during the process.

[1] Foreign Direct Investments (“FDI”) means an investment of any kind by a foreign investor aiming to establish or to maintain lasting and direct links between the foreign investor and the entrepreneur to whom or the undertaking to which the capital is made available in order to carry on an economic activity in a Bulgaria, including investments which enable effective participation in the management/control of a company carrying out an economic activity. FDI is also the expansion of an existing investment, including the expansion of the capacity of existing undertaking, diversification of the production of the undertaking with new products, establishing new place for doing business or increase of the capital on condition that the shares are acquired by a foreign investor. Portfolio (passive) investment does not qualify as an FDI.