I. Implementing legislation
The legal relationship between a commercial agent and a principal is regulated by Section II of Chapter VI of the Bulgarian Law on Commerce (the “LC”) (promulgated State Gazette No. 48 of 18 June 1991, effective as of 1 July 1991, lastly amended State Gazette No. 20 of 28 February 2013). The rules on commercial agents – Articles 32 to 48 of the LC, were incorporated in the initially adopted version of the said law in 1991. Some rules on termination of the agency agreement and on obligations of the commercial agent were supplemented in 1993 and 1996. The latest amendments to the said provisions were adopted with a view to the complete harmonisation of the commercial agency rules with Directive 86/653/EEC and entered into force on 13 May 2006.
II. Definition of a “commercial agent”
Article 32, paragraph 1 of the LC provides the basic definition for a “commercial agent”, described as a person, engaged independently and by occupation in assisting the business of another merchant (principal). A commercial agent may be authorized to effect transactions on behalf of the principal (direct agent), or in its own name, but for account of the principal (indirect agent).
Based on the definition as provided above, the commercial agent may be either a natural or a legal person. In addition, the agent should have the status of a “merchant”, or should be otherwise entitled to engage by occupation in agency transactions pursuant to the relevant lex personae.
III. Proper notice
An agency agreement, which has been concluded for a fixed term, may be terminated before expiration without fault if the party wishing to terminate it compensates the other party for the damages suffered.
The termination of an agency agreement concluded for an indefinite term requires sending of a prior notice thereof. Article 47, paragraph 1 of the LC provides for the following minimum notice periods:
- 1 month during the first year of effectiveness of the agency agreement;
- 2 months during the second year;
- 3 months during the third and any subsequent year.
An agency agreement for a fixed term, which continues to be performed by both parties following the expiry of such term, is deemed to be converted into an agency agreement for an indefinite term. In this case, the duration of the agreement before the expiry of its term is also to be taken into consideration upon calculating the required period of notice.
The parties may not agree upon shorter periods but are entitled to specify longer periods of notice insofar they are equal for both parties. Unless otherwise agreed between the parties, the agency agreement will be considered terminated as of the end of the calendar month during which the respective period of notice has expired.
IV. Indemnity or compensation or both
The LC has adopted the right of indemnity of the commercial agent stipulated in Article 17, paragraph 2 of Directive 86/653/EEC.
In accordance with the provision of Article 40, paragraph 1 of the LC upon termination of the agency agreement the commercial agent (respectively, the successors of a deceased agent) is entitled to a one time payable indemnity provided that the principal (i) continues, after termination of the agency agreement, to derive benefits from customers brought by the agent, or (ii) the agent has considerably increased the number of transactions concluded with existing customers. The agent s entitlement to such indemnity should be determined considering all relevant circumstances, including the application of any restraint of trade clauses.
The agent is not entitled to claim indemnity under any of the circumstances provided for in Article 40, paragraph 3 of the LC, and namely as follows:
- if more than one year has passed since termination of the agreement and the agent has not notified his claims to the principal in writing; or
- the agency agreement has been rescinded because of default of the agent or has been unilaterally terminated by the latter either (a) with a prior notice where the agreement has been concluded for an indefinite term, or (b) before expiry of the term with payment by him of compensation to the principle, covering the damages, incurred by the latter in that regard, unless such termination is due to the permanent disability or the age of the agent; or
- the agent has assigned the rights and obligations under the agency agreement to a third party, including with the consent of the principal.
In addition to the indemnity, the agent may seek payment of remuneration for already concluded or prepared for conclusion transactions.
V. Calculation of indemnity/ compensation
The amount of the indemnity is equal to the amount of the annual remuneration of the agent calculated on the basis of his average annual remuneration for the entire period of duration of the agency. agreement, but for not more than the last 5 years.
VI. Pre-termination commission
VII. Post-termination commission
Yes. It should be noted that the Bulgarian law does not require that such transactions are concluded within a reasonable period after termination of the agency agreement. It is sufficient that such transactions are attributable to work done by the agent during the term of the agency.
VIII. Back commission
IX. Restrictive covenants
1. Under Bulgarian law, is it possible to have a restraint of trade clause operating during the agency agreement and, if so, is it subject to any qualifications?
In accordance with the rule of Article 44 of the LC the agent may represent several merchants insofar there is no competitive relationship among them.
The agent and the principal may enter into an agreement (i) whereby the agent could be permitted to represent competitors, or (ii) they could restrict the agent even further, limiting his rights to represent (any) other merchants except for the principal. Insofar as such rights or obligations form part of the agency agreement, they must be concluded in writing.
2. Under Bulgarian law, is it possible to have a restraint of trade clause operating following the termination or expiry of the agency agreement and, if so, is it subject to any qualifications?
The parties are allowed to agree on a restraint of trade clause operating following the termination or expiry of the agency agreement. Such restriction on the agent s activity is subject to the validity conditions stipulated in Article 41 of the LC which reiterates the provision of Article 20 of Directive 86/653/EC. Pursuant to the said rules the non-compete covenant must: (i) be concluded in writing; (ii) relate to the geographical area and the group of goods or services covered by the agency agreement; and (iii) cover a term of no more than two years after the termination of the agency agreement. The agent is entitled to an appropriate compensation for the period over which the restraint clause is operating.
If the agency agreement is rescinded by the agent due to a fault of the principal, the agent is entitled to discharge himself from the non-compete restriction by a notice in writing served to the principal within one month as of the date of rescission.
X. Other comments
Pursuant to Article 35 of the LC an agent may undertake to be personally liable for the performance of obligations under transactions effected with clients. In this case the agent is entitled to an additional commission (del credere commission), which should be agreed upon with the principal in writing. The agent may not waive its right to such commission in advance.
XI. Do Bulgarian commercial agency laws cover both agents who are engaged in the sale of goods as well as in the supply of services?
The rules of the LC apply not only to agents in transactions related to sale of goods, but also to sale of services, and to almost all kinds of intermediation in commercial transaction (so far as the law does not impose specific requirements to a particular intermediary, which is the case, inter alia, for financial and insurance services). The LC expressly excludes from its scope persons engaged as representatives or brokers in stock exchange transactions, or as representatives of persons engaged in auction operations.
Due to the broad definition of “commercial agent”, the LC also covers agents whose agency activities are “secondary” (i.e. their activities are not the primary purpose of their agency agreement with their principal), as long as such activities are related to provision of assistance in respect to the business activities of the principal.
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