presented by

Enterprise Policy Directorate

Prom., STATE GAZETTE (SG) No. 84 of 24.09.1999, amend., No. 80 of 3.10.2000, No. 92 of 10.11.2000, effective as from 1.01.2001, amend., No. 42 of 27.04.2001, effective as from 28.05.2001, amend., No. 28 of 19.03.2002, amend., No. 64 of 23.07.2004, effective as from 24.08.2004.

Issue 10/99, p. 77

vol. 8, s. 1, No. 4а

Chapter One

GENERAL PROVISIONS

        Article 1 

This Act shall regulate societal relations pertaining to the implementation of the government policy of promoting the start-up and development of small and medium-sized enterprises.

         Article 2  (Amend., SG No. 64 of 2004)

This Act shall have it as its goal to create conditions for the establishment of favourable and stable institutional and economic environment for the establishment and development of competitive small and medium-sized enterprises.

         Article 3

 (1) Small and medium-sized enterprises shall include the following: micro enterprises, small enterprises and medium-sized enterprises.

         (2) (Amend., SG No. 64 of 2004) Micro enterprises shall refer to small enterprises having an average payroll number of personnel fewer than 10 employees.

         (3) Small enterprises shall refer to enterprises which:

         1.  (Amend., SG No. 64 of 2004) have an average payroll number of personnel fewer than 50 employees, and

         2.  (Amend., SG No. 64 of 2004) have an annual turnover not exceeding 5 000 000 levs or the value of their long-term tangible assets not exceeding 1 000 000 levs, and

         3.  Are independent.

         (4) Medium-sized enterprises shall refer to enterprises which:

         1.  (Amend., SG No. 64 of 2004) have a average payroll number of personnel  fewer than 250 employees, and

         2.  (Amend., SG No. 64 of 2004) have an annual turnover not exceeding 15 000 000 levs or the value of their long-term tangible assets not exceeding 8 000 000 levs, and

         3.  Are independent.

         (5) (New, SG No. 64 of 2004) To certify the circumstances specified in paragraph (3), subparagraphs (2) and (3) and in paragraph (4), subparagraphs (2) and (3), the persons who manage and represent the enterprise shall submit a written statement, attaching any relevant documents.  To certify the circumstance specified in paragraph (2), paragraph (3), subparagraph (1) and paragraph (4), subparagraph (1), a letter of certification issued by the National Social Security Institute shall be presented.

         (6) (New, SG No. 64 of 2004) If, in two consecutive financial years, the enterprise should exceed or fall below the thresholds in terms of the average payroll number of employees or the annual turnover or the value of long-term tangible assets, this shall result in acquiring or losing the status of a micro, small or medium-sized enterprise.

         (7) (New, SG No. 64 of 2004) The annual turnover and the value of long-term tangible assets thresholds of an enterprise referred to in paragraphs (3) and (4) shall be those of the last approved 12-month accounting period.  In the case of a newly established enterprise, the annual turnover and the value of long-term tangible assets shall be derived from a reliable estimate made in the course of the financial year.

         (8) (New, SG No. 64 of 2004) Where an enterprise is defined as small or medium-sized, in calculating the thresholds of average payroll number of its employees, its annual turnover or the value of its long-term tangible assets, it is necessary to cumulate the relevant figures for the beneficiary enterprise and for all enterprises which it directly or indirectly controls through possession of 25 per cent or more of the capital or of the voting rights.

         Article 4  (Repealed, SG No. 64 of 2004)

Chapter Two

IMPLEMENTING AUTHORITIES FOR THE POLICY OF PROMOTING SMALL AND MEDIUM-SIZED ENTERPRISES

(Heading amend., SG No. 64 of 2004)

         Article 5  (Amend., SG No. 64 of 2004)

(1) The Council of Ministers shall approve a national strategy for promoting small and medium-sized enterprises, annual implementation programmes and an annual report on the current status and development of small and medium-sized enterprises, upon a proposal from the Minister of Economy.

         (2) The Minister of Economy shall:

         1.  Provide direction, coordinate and oversee the implementation of the government policy of promoting small and medium-sized enterprises through the establishment and development of competitive small and medium-sized enterprises while taking into account the need to attain a balanced social and economic development of the various regions in this country;

         2.  Coordinate the implementation of the government policy in cooperation with central government authorities, local government authorities, non-profit legal entities, associations providing support to small and medium-sized enterprises, and industry chambers and unions;

         3.  Conduct analyses of the status and development of small and medium-sized enterprises.

         (3) The authorities of the executive branch of government shall implement the government policy for promoting small and medium-sized enterprises in accordance with the national strategy and annual programmes.

         (4) Upon request from the Minister of Economy, the Customs Agency and other central government authorities shall provide information and specific data needed for the purposes of making analyses and preparing the annual report.

         Article 6  (Amend., SG No. 64 of 2004)

(1) An Executive Agency for Small and Medium-sized Enterprises Promotion shall be hereby established under the Minister of Economy, hereinafter referred to as "the Agency".

         (2) The Agency shall be managed and represented by an executive director.

         (3) The Agency shall be a legal entity with a registered address inSofia and having territorial units to be maintained from public budget resources and from income from its own operations.

         (4) The structure, activities, operational procedures and the composition of the Agency shall be determined in Rules of Organisation and Procedure to be adopted by the Council of Ministers.

         (5) The Agency shall be an administrator of revenues from fees as set out in Article 10.

         Article 7  (Amend., SG No. 64 of 2004)

(1) The Agency’s executive director shall:

         1.  Implement the government policy of promoting small and medium-sized enterprises;

         2. Take part in the drafting of, and provide opinions on draft laws and regulations and international treaties which relate to promoting small and medium-sized enterprises, and shall assess the impact of laws and regulations in that field;

         3.  Organise and coordinate the development and implementation of projects from within the annual programmes for implementing the national strategy for promoting small and medium-sized enterprises;

         4. Organise and coordinate the development and implementation of projects and programmes focused on regions for targeted impact and on groups at a disadvantage on the labour market;

         5.  Provide information services to small and medium-sized enterprises and to enterprises applying with programmes and projects funded by the European Union and other donors;

         6.  Carry out research and analysis of specific factors impacting the conditions for the conduct of business activities by the enterprises;

         7.  Organise training courses and seminars for small and medium-sized enterprises and for the facilitation of trading skills and expertise;

         8.  Facilitate investments in small and medium-sized enterprises by foreign and local natural and legal persons in cooperation with the Bulgarian Investment Agency;

         9. Cooperate with local, foreign and international government and non-government organisations involved in the development and promotion of small and medium-sized enterprises;

         10. Organise the establishment and maintenance of an information system;

         11. Carry out other activities, aimed at facilitating the development of competitive small and medium-sized enterprises.

         (2) The Agency’s executive director may delegate the activities referred to in paragraph (1), subparagraphs (5) through (7), and the organisation and coordination of projects referred to in paragraph (1), subparagraphs (3) and (4) on a geographical basis through a competition, and where there is one single candidate, direct negotiation may be held.  Such activities shall be delegated to non-profit legal entities, which are involved in providing support for small and medium-sized enterprises.

         (3) The terms and procedure for delegating the activities referred to in paragraph (2) shall be determined in a regulation to be issued by the Council of Ministers.

         Article 8  (Amend., SG No. 64 of 2004)

The Agency shall set up and maintain an information system containing data about:

         1.  Small and medium-sized enterprises in the Republic of Bulgaria; about local producers, exporters and importers;

         2. Organisations, banks, donor programmes providing earmarked financing for small and medium-sized enterprises, the terms of such financing and application forms;

         3. Organisations providing other support to small and medium-sized enterprises, including the introduction of new technology, provision of information and consulting services;

         4.  Projects, programmes and training courses for small and medium-sized enterprises;

         5. Administrative services provided by the Agency, including standardised and sample forms, where available.

         Article 9  (Repealed, SG No. 64 of 2004)

         Article 10 

Fees charged for the services provided by the Agency shall be determined under a fee schedule to be adopted by the Council of Ministers.

Chapter Three

ADVISORY BOARD FOR PROMOTING SMALL AND MEDIUM-SIZED ENTERPRISES

(Heading amend., SG No. 64 of 2004)

         Article 11  (Amend., SG No. 64 of 2004)

(1) For the purposes of carrying out cooperation in the area of promotion of small and medium-sized enterprises, an Advisory Board for promoting small and medium-sized enterprises shall be set up under the Minister of Economy, hereinafter referred to as "the Advisory Board".

         (2) The Advisory Board shall be a consultative body composed of representatives of government ministries, the National Association of Municipalities in the Republic of Bulgaria, non-profit legal entities, associations providing support to small and medium-sized enterprises, industry chambers and unions, the Nasarchitelna Banka (Encouragement Bank) AD, as well as scholars specialising in economic policy issues.

         (3) The Advisory Board shall be chaired by the Minister of Economy by entitlement.

         (4) The Agency’s executive director shall be a member of the Advisory Board by entitlement.

         (5) In its operations, the Advisory Board will be supported, in terms of organisational and technical matters, by the Agency’s administration.

         (6) The Advisory Board’s rules of procedure as well as its composition shall be determined under rules to be issued by the Minister of Economy.  The members of the Advisory Board shall be named under an order to be issued by the Minister of Economy.

         Article 12 

(1) (Amend., SG No. 64 of 2004) The Advisory Board shall:

         1.  Discuss the status and policy of promoting the establishment and development of small and medium-sized enterprises and make proposals as to its priority directions for the respective year;

         2.  (Amend., SG No. 64 of 2004) Discuss results of analyses of the status and development of small and medium-sized enterprises by area and by sector, and make proposals in the process of preparation of the annual report;

         3.  Propose improvements to the laws and regulations as to societal relations involving small and medium-sized enterprises;

         4. Ensure public access to information about legislative initiatives and participation of entrepreneurs and their associations in the discussion of laws and secondary legislation;

         5. (New, SG No. 64 of 2004) Discuss results and make recommendations regarding the implementation of the national strategy for promoting small and medium-sized enterprises and the annual programmes for its implementation.

         (2) (Amend., SG No. 64 of 2004) The Advisory Board may establish expert groups on specific issues within its competence.

Chapter Four

MEASURES TO PROMOTE THE ESTABLISHMENT AND DEVELOPMENT OF SMALL AND MEDIUM-SIZED ENTERPRISES

Section I

General Provisions

         Article 13  (Amend., SG No. 28 of 2002, No. 64 of 2004)

(1) The national strategy for promoting small and medium-sized enterprises shall determine the goals and priorities of such promotion and the role of central and local government authorities in its implementation.

         (2) The annual programmes shall include projects and initiatives to ensure the implementation of the national strategy in the respective year.

         Article 14  (Amend., SG No. 64 of 2004)

(1) The national strategy for promoting small and medium-sized enterprises and the annual implementation programmes shall provide for measures to:

         1.  Promote the establishment of small and medium-sized enterprises under the terms, procedures and criteria stipulated in the State Aid Act and its implementation rules through:

         a) Creating conditions conducive to the emergence of new small and medium-sized enterprises;

         b) Creating appropriate conditions for access to capital, including the provision of financing to small and medium-sized enterprises;

         c) Providing guarantees for a portion of the credit risk on loans extended with a special focus on small and medium-sized enterprises;

         d) Developing and implementing projects for small and medium-sized enterprises;

         e) Organising training to develop entrepreneur skills;

         f) Creating a positive image of entrepreneurship through programmes and measures for its promotion;

         g) Supporting research of opportunities to implement new business ideas;

         h) Renting out properties constituting private state and private municipal property;

         i) Establishing technology parks and business incubators for the development of small and medium-sized enterprises;

         2.  Promote the development and increase the competitiveness of small and medium-sized enterprises under the terms, procedures and criteria stipulated in the State Aid Act and its implementation rules through:

         a) Developing projects aimed at encouraging the dissemination of technology and innovation among small and medium-sized enterprises and the expansion of their possibilities to select and apply technologies and innovations;

         b) Implementing projects to increase the competitiveness of enterprises through the increase of their productivity beside the measures for the introduction of new technology;

         c) Developing a methodology and providing training for best possible use of resources earmarked for small and medium-sized enterprises within the European Union’s pre-accession funds, structural funds and programmes and building the appropriate administrative capacity for its application;

         d) Providing information services to small and medium-sized enterprises;

         e) Organising training to upgrade the professional foreign trade expertise of enterprise management and personnel;

         f) Providing support for the participation of small and medium-sized enterprises in international fairs;

         g) Developing projects for promoting small and medium-sized enterprises in certain industries and regions for targeted impact as well as among the groups at a disadvantage on the labour market;

         h) Other activities and measures to the benefit of small and medium-sized enterprises under other laws.

         (2) The measures referred to in paragraph (1), subparagraph (1), items "d", "g" and "i" and subparagraph (2), item "a" may also be implemented with the participation of scientific organisations and schools of higher education.

         (3) The measures referred to in paragraph (1) shall not apply to small and medium-sized enterprises which are banks, insurance and pension insurance companies, investment intermediaries and investment companies in the meaning of the Public Offering of Securities Act, and to those whose activity involves organising gambling games and the production of and trade in high-alcohol beverages.

Section II

Financial Support for the Activities of Promoting the Establishment and Development of Small and Medium-sized Enterprises

         Article 15  (Amend., SG No. 64 of 2004)

The State may support the activities promoting small and medium-sized enterprises within the framework of the budget of the Ministry of Economy with funds for the projects and the measures included in the national strategy for promoting small and medium-sized enterprises and in its annual implementing programmes.

         Article 16  (Amend., SG No. 80 of 2000, No. 64 of 2004)

Nasarchitelna Banka (Encouragement Bank) AD shall lend, on a priority basis, to small and medium-sized enterprises under terms and following procedures as determined in the bank’s charter and in its rules of procedure.

Section III

Programmes to Promote the Development of Small and Medium-sized Enterprises

         Article 17 

In their sector programmes, government ministries and agencies shall, in accordance with their competences, provide measures to:

         1.  Increase the number of persons employed in small and medium-sized enterprises;

         2. Increase the export activity of small and medium-sized enterprises and their competitiveness;

         3.  Promote investing in small and medium-sized enterprises;

         4. Improve information and consulting service provision for small and medium-sized enterprises;

         5.  Improve professional expertise and the acquisition of entrepreneur skills;

6.      Increase the number of high-tech small and medium-sized enterprises.

         Article 18  (Repealed, SG No. 64 of 2004)

         Article 19 

(1) Municipal councils shall, within the framework of resource provision for regional development and in accordance with their regional development plans;

         1.  Develop and implement long-term and mid-term programmes for promoting small and medium-sized enterprises on the territory of their municipality;

         2.  (Amend., SG No. 64 of 2004) Assist small and medium-sized enterprises, the Agency for Employment and other organisations in implementing programmes for training and improving the expertise of managers and employees in small and medium-sized enterprises.

         (2) The activities referred to in paragraph (1) shall be implemented jointly with the Agency.

            Article 20 

In the programmes referred to in Articles 17 and 19, municipal councils, government ministries and agencies shall specify the details of the focus of measures and the conditions for participation required of small and medium-sized enterprises.

Section IV

Participation of Small and Medium-sized Enterprises in the Privatisation of State-Owned and Municipal Enterprises and the Rental of Property Constituting Private State and Private Municipal Property

         Article 21  (Repealed, SG No. 28 of 2002)

         Article 22  (Repealed, SG No. 28 of 2002)

         Article 23  (Repealed, SG No. 28 of 2002)

         Article 24  (Repealed, SG No. 28 of 2002)

         Article 25 

(1) In determining the procedures for the acquisition, stewardship, management and disposal with municipal property, municipal councils shall define the share of properties constituting private municipal property, which are to be rented out exclusively to small and medium-sized enterprises under the terms and following the procedure set out in Article 14 of the Municipal Property Act.

         (2) The term of a rental contract cannot be shorter than 2 years.

         (3) The properties referred to in paragraph (1) may not be sublet for the period for which they have been rented out, or be used jointly under a contractual arrangement with third parties except where the party under a subsequent contract is an enterprise that meets the requirements specified in Article 3.

         (4) (New, SG No. 64 of 2004) Mayors of municipalities shall, on an annual basis, submit a list of the properties referred to in paragraph (1) to the Agency.

         Article 26

         (1) In a second tender to rent out a property constituting private state property designed for administrative, manufacturing or business use, small and medium-sized enterprises shall have the right to rent it at a starting bid price equal to 60 per cent of the starting price as at the previous tender.

         (2) Small and medium-sized enterprises shall exercise the right specified in paragraph (1) provided that they are an only candidate and the original tender was not carried out because the requisite number of candidates did not apply.

         (3) The term of a rental contract executed under the terms of paragraph (1) cannot be shorter than two years.

         (4) The properties referred to in paragraph (1) may not be sublet for the period for which they have been rented out, or be used jointly under a contractual arrangement with third parties except where the party under a subsequent contract is an enterprise that meets the requirements specified in Article 3.

Chapter Five

ADMINISTRATIVE PENAL PROVISIONS

         Article 27 

A tenant which has violated the prohibitions under Article 25, paragraph (3) on subletting the property or for joint use under a contractual arrangement with third parties shall be punished with a property sanction in an amount ranging from 50 to 200 levs following the procedure set out in Article 80 of the Municipal Property Act.

         Article 28 

A tenant which has violated the prohibitions under Article 26, paragraph (4) on subletting the property or for joint use under a contractual arrangement with third parties shall be punished with a property sanction in an amount ranging from 500 to 2000 levs following the procedure set out in Articles 87 and 88 of The State Property Act.

ADDITIONAL PROVISION

         § 1.  In the meaning of this Act,:

         1.  (Amend., SG No. 42 of 2001) "An enterprise" shall refer to any party that is a trader under Article 1 of the Commercial Act or a craftsman in the meaning of the Crafts Act.

         2.  (Amend., SG No. 64 of 2004) "Associations supporting small and medium-sized enterprises" shall refer to any associations that are registered under the Non-Profit Legal Entities Act whose registered purpose is to provide support and assistance to small and medium-sized enterprises independent of the form of their implementation, or associations where more than two-thirds of their membership are small and medium-sized enterprises, or more than half of the projects and programmes implemented by them are aimed at small and medium-sized enterprises.

         3.  (Amend., SG No. 64 of 2004) "Industry chambers and unions" shall refer to any associations registered under the Non-Profit Legal Entities Act whose members operate in a similar line of business activity in one and the same sector of the economy.

         4.  (Amend., SG No. 64 of 2004) "Independent enterprise" shall refer to any sole proprietor, or a company, or a cooperative where no more than 25 per cent of the capital or of the voting rights are held by a person or persons that do not meet the definition requirements for small and medium-sized enterprises.  The enterprise shall remain independent also in cases where:

         a) More than 25 % of the capital or of the voting rights are held by investment companies, venture capital companies or institutional investors, provided that no control is exercised either individually or jointly; or

         b) The capital is distributed in such a way that it is impossible to determine the party, which exercises control.

         5.  "Newly established small and medium-sized enterprises" shall refer to any small and medium-sized enterprises for which up to 12 months have lapsed since they were recorded in the Trade Register with the respective regional court.

         6.  (Amend., SG No. 64 of 2004) "Average payroll number of employees" shall refer to the average payroll number of persons employed under a Labour Code-governed contract in full time employment including those hired part time, and those seasonally hired, including the persons who work under a management or control contract and/or under a decision of the general meetings of companies.  The average payroll number shall include also the persons who operate as sole proprietors, work as a member of a cooperative following the procedure set out in The Cooperatives Act, and craftsmen following the procedure set out in The Crafts Act, or as agricultural producers.  The average payroll number of personnel shall be determined on the basis of the previous financial year.  For newly established enterprises, the average payroll number of personnel shall be determined for the current financial year.

         7.  "An annual turnover" shall refer to the turnover from all transactions and services generated in the previous financial year.

         8. (New, SG No. 64 of 2004) "Groups at a disadvantage on the labour market" shall refer to groups at a disadvantage on the labour market in the meaning of the Employment Promotion Act.

         9. (New, SG No. 64 of 2004) "Institutional investor" shall refer to an institutional investor in the meaning of the Public Offering of Securities Act.

         10. (New, SG No. 64 of 2004) "Regions for targeted impact" shall refer to regions for targeted impact in the meaning of the Regional Development Act.

TRANSITIONAL AND CONCLUSING PROVISIONS

         § 2.  Any assets, liabilities, and any other rights and obligations of the Small and Medium-sized Enterprises Agency under the Ministry of Industry shall be transferred to the Small and Medium-sized Enterprises Agency under the Council of Ministers.

         § 3.  (1) As of 1 January 1999, the Small and Medium-sized Enterprises Fund operated by the Small and Medium-sized Enterprises Agency under the Ministry of Industry, and the extra-budgetary account for financing activities of the Small and Medium-sized Enterprises Agency shall be closed down.

         (2) Any balances available and any receivables in the closed down fund and extra-budgetary account referred to in paragraph (1) shall be remitted to the budget of the Small and Medium-sized Enterprises Agency.

         § 4.  This Act shall repeal The State Bank for Investment and Development Act (prom., SG No. 95 of 1996; amend., No. 52 of 1997, No. 153 of 1998).

         § 5.  In Article 2, paragraph (2) of The Transformation and privatisation of State-Owned and Municipal Enterprises Act (prom., SG No. 38 of 1992; amend., No. 51 of 1994, Nos. 45, 57 and 109 of 1995; Nos. 42, 45, 68 and 85 of 1996; corr., No. 86 of 1996.; amend., Nos. 55, 61, 89, 98 and 122 of 1997, No. 39 of 1998.; corr., No. 41 of 1998.; amend., No. 70 of 1998), an item 7 shall be set up, to read as follows:

         "7.  Measures to promote the development of small and medium-sized enterprises."

         § 6.  In Article 10, paragraph (1), subparagraph (3) of The Protection in Unemployment and Employment Promotion Act (prom., SG No. 120 of 1997; amend., No. 155 of 1998, Nos. 26, 50, 65, 67 and 68 of 1999), at the end, the following addition shall be made: "and training for the development of small and medium-sized enterprises".

         § 7.  (Repealed, SG No. 64 of 2004).

         § 8.  (1) (Amend., SG No. 92 of 2000) The Minister of Finance should assign an audit to be carried out of the Bulgarian Economic Association under the terms and following the procedure set out in The Public Internal Financial Control Act.

         (2) If the audit referred to in paragraph (1) should establish any receivables and resources of the State under the Small and Medium-sized Enterprises Fund against the Bulgarian Industrial and Economic association (the Bulgarian Economic Association), these shall be provided to the Small and Medium-sized Enterprises Agency.

TRANSITIONAL AND CONCLUSING PROVISIONS

to the Act Amending and Supplementing the Small and Medium-sized Enterprises Act

(SG, No. 64 of 2004, effective as from 24.08.2004)

         § 22.  (1) The Executive Agency for Promoting Small and Medium-sized Enterprises established under this Act shall be the legal successor of the Small and Medium-sized Enterprises Agency under the Council of Ministers and the Executive Agency for Trade Promotion under the Minister of Economy.

         (2) Any assets, liabilities, the archive and any other rights and obligations of the Small and Medium-sized Enterprises Agency and of the Executive Agency for Trade Promotion shall be assumed by the Executive Agency for Promoting Small and Medium-sized Enterprises.

         (3) Legal relationships of public service and employment with the employees of the Small and Medium-sized Enterprises Agency and of the Executive Agency for Trade Promotion shall be dealt with under the terms and following the procedure set out in Article 87a of The Public Service Act, or Article 123, paragraph (1) of the Labour Code, as the case may be.

         § 23. Any certification statements issued for recordation in the register of small and medium-sized enterprises shall remain effective until the expiration of their validity.  Any proceedings already initiated for recordation in the register shall be terminated, and any recordation fees paid shall be reimbursed.

         ....................................

         § 25.  (Effective as from 23.07.2004) (1) The Council of Ministers shall adopt Rules of Organisation and Procedure of the Executive Agency for Promoting Small and Medium-sized Enterprises within one month of the publication of this Act in the State Gazette.

         (2) The Council of Ministers shall adopt the regulation referred to in Article 7, paragraph (3) within two months of the publication of this Act in the State Gazette.

         § 26.  Regional governors and mayors of municipalities shall provide the conditions and assist the Executive Agency for Promoting Small and Medium-sized Enterprises by providing it with the use of buildings, premises and other facilities as necessary for the realisation of its activities.

         § 27.  This Act shall come into force one month after it has been published in the State Gazette, with the exception of § 25, which shall take effect as from the day of such publication.