The text of Article 125 of the Commercial Act (Official Gazette, issue 14 of February 15, 2011, in force as of February 15, 2011) provides for scenarios in which a partner's participation in a limited liability company may be terminated. The first paragraph of the same article outlines cases of termination that occur independently of the partner’s will and are directly linked to the occurrence of various legal and factual events.

In practice, the text of the second paragraph, which states that "a partner may terminate their participation in the company by written notice given at least three months prior to the date of termination," raises interest and controversy.

This is a scenario in which the legislator has allowed a partner wishing to leave the company to do so by expressing this intent to the company, represented by its supreme collective body – the general meeting. The departing partner must submit a written notice. The prescribed form is simplified – no special verification is required for its validity. It is sufficient for the partner's intent to be objectively expressed in writing and received by the general meeting. In practice, this means that the notice can be sent via mail, courier, fax, or email (the method should be specified in the company's articles of association) to the company's registered office, containing an explicit and unambiguous declaration notifying the other partners of the departure.

The question arises: How should the relations between the partners be arranged following the receipt of this notice?

Once the notice has been duly sent and received, the legislator has provided a fairly long period of three months during which the partners must take appropriate steps to settle the relations between themselves and the departing partner. It is expected that an extraordinary general meeting will be convened to confirm the departure, decide how the financial relations with the departing partner will be settled, and determine how the departing partner’s shares will be distributed among the remaining partners.

If they fail to do so, the partners will be forced to endure the effect of the departure under the law, allowing the company to have unallocated shares without an owner. However, the legislator does not concern itself with this problem and has left the issue without explicit legal regulation.

Judicial practice rightly assumes that, on the one hand, the effect of the terminated membership relationship is considered to have occurred automatically upon the expiration of the three-month period, and, on the other hand, the issue of settling financial relations between the partners is a subsequent matter and should not be seen as a prerequisite for a partner's departure.

The opposite would mean, in practice, that the legal possibility provided in Article 125 of the Commercial Act would have no practical application in cases where there is no proper will from the remaining partners in this regard. The law aims, in this scenario, for the departure of one partner to occur solely based on the declaration of the departing partner, which may be accompanied by, but not restricted by, the will of the remaining partners.

Otherwise, the institution of leaving with notice would remain a dead letter in the law. /In this sense, see: Decision 21/19.01.2011 of the Plovdiv Court of Appeals, issued in commercial case (V) 51/2011/.

Consent of the Spouse in the Sale of the Family Home Attorney Dimitar Angelov

The new Family Code (SG, issue 47 of June 23, 2009, in force as of October 1, 2009), in Article 26, introduces a completely new cumulative requirement for Bulgarian law. This requirement is that the spouses, or one of them, must not have another home, which is added as a condition to one of the two alternative conditions—the consent of the other spouse or the permission of the competent district court. The condition that the spouses or one of them do not have another home is new to Bulgarian family law and further develops the existing legal framework under Article 23 of the old Family Code (repealed). The legislator has introduced an additional cumulative condition—the presence of another common or personal home. Thus, the consent of the other spouse or the permission of the district court, added cumulatively to the lack of another home, forms a factual composition that must be fulfilled in order for the disposition of the family home to be lawful.

A practical issue arises, which has yet to find its correct resolution in court practice. When both spouses have lived in the family home, which is solely owned by one spouse, the owning spouse could dispose of the family home by purchasing another “home,” thereby formally fulfilling the legal requirement of having another home. Subsequently, the spouse could sell the family home without violating the law. So far, so good. In practice, however, the newly purchased “other home” may turn out to be a completely unusable property (e.g., an apartment in an inconvenient or dangerous neighborhood, in poor condition, in a dangerous building, etc.). Thus, despite the existence of “another home” under the law, it may turn out that this home is actually equivalent to not having one. However, the legislator did not dare to raise the standards for the other available home by remaining silent on whether this home should be in a condition and quality close to or better than that of the family home.

This creates a risk of establishing a flawed practice, both in life and in court. Specifically, in cases of deteriorating relations between spouses, through the simple formal fulfillment of the legal norm—acquiring another home—harm could be done to the other parent. There is also a risk of harm to minor children, should they be entrusted to the non-owner parent. The harm to the children arises from depriving them of the opportunity to live in their current home under the same or similar living conditions.

When the law is silent on a legal issue, it is the court's duty to interpret and apply the law not strictly formally but in accordance with the spirit of the law, moral rules, and, most importantly, in the best interests of the children.

Once the spouse-owner has concluded two consecutive transactions, which are themselves valid and produce the intended legal consequences, the other spouse is left with the option to protect their interests in civil court by requesting the annulment of the alienation transaction due to circumvention of the law.

In resolving such cases, the courts tend to rely on the old regulatory framework, and some panels are inclined to consider this a case of nullity due to lack of consent rather than circumvention of the law. While this reasoning may seem logical, it is incorrect and should not be followed. In the created situation, with a deliberately purchased “other” (but unusable) home and the immediate sale of the family home, formally, the consent of the other spouse is not required, as per Article 26 of the Family Code. This is not a case of “lack of consent”—because such consent is not required. In this case, there are two valid transactions, which together result in “circumvention of the law” under Article 26, para. 1, second sentence of the Law on Obligations and Contracts (LOC), namely: through permitted legal transactions, an impermissible legal result is achieved—the alienation of the family home, bypassing the legally required “consent” of third parties—the other spouse or the district court. And this is done with full awareness that such consent will not be given.

Here, the court would incorrectly be tempted to rely on a Supreme Court ruling—Decision No. 1115/20.10.2008 in civil case No. 4475/2007—which, however, was issued under the repealed Family Code of 1985. The cited Supreme Court practice was created under different factual and legal circumstances and under a different legal framework. Relying on this Supreme Court practice is irrelevant to the case at hand.

Currently, there is no available court practice that has established a consistent interpretation of this legal norm and its application to the factual circumstances of the presented case. Therefore, the legal application of such cases has yet to be consistently brought to the limitation of abuses in practice and the improper alienation of family homes.