At the end of 2020, amendments to the Commercial Register and Non-Profit Legal Entities Register Act (CRA) were adopted through the Transitional and Final Provisions of the Execution of Sentences and Detention Act. The change consists of adoption of several rather controversial texts, which led to complete chaos in the appeal of refusals in 2021, creating a contradictory case law in the country.
What has changed in the CRA?
The changes concern art. 25, in which the procedure for appealing the refusal, issued by the Commercial Register, is set out. Everyone who works with the Commercial Register at least once has faced a refusal of an application.
The changes provide that the Agency (Commercial Register) would be able to respond to the complaint with written evidence. The other change is that: The judgment of the court is subject to appeal within seven days as of its communication the applicant and the agency, before the respective court of appeal, the decision of which is final.” Last but not least, a new paragraph has been created to address the issue of costs in these proceedings. This issue has been extremely controversial since the very establishment of the Commercial Register with a rather contradictory case law. The new regulation reads: „In the proceedings, the court awards costs to the parties under the Code of Civil Procedure.“
The reasons for the legislative changes only state that there is a need for a legislative change in order to be able to settle the issue of the costs of the appeals proceedings.
It is interesting to note that during the discussion of the bill the Registry Agency submitted an opinion expressing a position against the proposed changes, referring to the non-contentious nature of this type of proceedings.
How was the appeal proceedings developing until the new changes?
Prior to the changes, the refusal appeal procedure included an appeal against the refusal by the applicant before the District Court. For its part, the District Court ruled on the revocation of the refusal or its confirmation. If the decision confirms the refusal, the applicant has the right to appeal this decision to a higher court – the Appellate Court. The decision of the appellate court was final.
The agency’s involvement in the process was in no way envisaged. Neither when filing responses to appeals, nor as an active party that has the right to appeal court decisions in revoking refusals.
What started to happen after the changes were accepted?
After the adoption of the changes, the vicious practice began, which consisted in a total change in the manner of appealing the decisions of the District Courts, which revoked the refusals of the Commercial Register. The agency began to appeal en masse against the revocation decisions, which in turn delayed the desired entry or announcement in the Commercial Register.
The Registry Agency uses the arguments that it has recognized procedural legitimacy as a party in the court proceedings on appeal against the refusals of the registration official, incl. and it has the right to appeal against the decision of the district court. This argument is reached by interpreting the new provisions that which prescribe that the Agency can express an opinion on the appeal, the decision of the district court is served to the Agency and the costs are awarded, these inevitably lead to active procedural legitimacy or, more simply said, enables the Agency to lodge appeals against annulment decisions of a district court.
A number of courts in the country flatly refused to allow a change in the way these cases were conducted, repeatedly emphasizing the non-contentious nature of the proceedings. Unfortunately, there were many courts that allowed appeals of the Registry Agency to be considered, and thus this contradictory practice was created.
What is the case law of the courts of appeal in this case?
The prevailing practice of the Sofia Court of Appeal (for example) in this case is that the amendments to Art. 25 CRA do not lead to a change in the nature of the appeal proceedings against the refusal of the registration official. In this proceeding the legal interest of the applicant in the registration proceedings is subject to protection, for which legal consequences arise in case of refusal to enter, declare or delete the requested circumstance or act in the commercial register and the register of non-profit legal entities. The legal sphere of the registration body is not affected by the ruling, due to which it does not become a party in the court proceedings for control over the refusal to satisfy the submitted application. The proceedings retain their legal characteristics of non-contentious proceedings within the meaning of Part VI of the Civil Procedure Code. The possibility for the agency to file an opinion on the appeal and receive a copy of the decision of the district court does not give it the status of a party, and hence the right to file an appeal against the annulment decision of the district court.
Ruling of the Supreme Court of Cassation on the case
At the beginning of October 21, the Supreme Court of Cassation had the opportunity to rule on the issue in several of its rulings. Fortunately, the Supreme Court of Cassation shares the thesis that the legislative changes in their essence cannot and do not lead to a change in the nature of the proceedings from unilateral non-contentious proceedings to bilateral contentious proceedings on the merits of the dispute. In its rulings, the Supreme Court of Cassation states that
“the amendments to Art. 25CRA /in SG, issue 105/2020 / direct only to an attempt by the legislator to resolve the issue of the costs in the procedure for appealing the refusal of the registration official, but not to essentially define the legal characteristics of the registration procedure.”
In early December, the Supreme Court of Cassation issued a similar ruling in a case in which we represented one of our clients.
We welcome this interpretation of the SCC. We hope that the vicious practice of the Registry Agency to appeal the revocation decisions and thus to delay the registration process will end soon.