In 1997 the Law on Registered Pledges was introduced in Bulgaria. It enables traders and other persons specified in the Bulgarian Law on Commerce to create a non-possessory registrable pledge. One of its key characteristics is that the pledgor is able to use the pledged property in his business activity and to dispose of it through legal transactions. A wide range of assets can be subject to a registered pledge including chattels, debts, shares, receivables, dematerialized securities and intellectual property rights. The special pledge is registrable in the Central Pledge Registry (in Bulgarian) and its priority is determined by the date of registration.

1997 Law on Registered Pledges (in Bulgarian) can be accessed here.

1997 Law on Registered Pledges (English translation) can be accessed here (PDF version)

The 1997 Act was amended in December 2016. The Act governs “special” pledges: pledges that are not physically delivered to the pledgee. The 2016 Amendments have brought certainty into the law. For example, one of the amendments states that the establishment of a pledge may only be complete once there has been registration. Before this amendment, the signing and notarisation of the special pledge agreement was generally enough. Another amendment that brings efficiency into the law is the facilitation of out-of-court enforcement. Additionally, following the 2016 Amendments, it is envisaged that a pledgor can dispose of pledged assets within their ordinary course of business. However, if they are making a disposal which is considered to be outside their course of business, they will need the explicit consent of the pledgee. This consent must be registered prior to the transfer. If the pledgor disposes of pledged assets outside their ordinary course of business and without the pledgor’s consent, the assets will continue to be encumbered by the pledge, and bind the subsequent transferee of the goods. However, if the transferee may show that they acquired the pledged assets in good faith, without knowing about the encumbrance of the assets or the pledgee’s lack of consent, they may take the assets unencumbered. This will prevent secured creditors from enforcing their pledges against third parties in these cases of good faith

Further Reading on Amendments:

• https://chambers.com/articles/amendments-to-the-regime-of-pledges-in-bulgaria-effective-as-of-30-december-2016-are-creditors-in
• https://cms.law/en/bgr/publication/changes-to-the-bulgarian-special-pledges-act-more-protection-for-creditors

Last Checked August 2020

If you have any questions or would like to suggest an update please email magda.raczynska@ucl.ac.uk