A survey presented at a November 20 round table on the newly set Commercial Register (CR) revealed pessimism from managers and magistrates on how to challenge corporate thefts successfully in court.

The round table was organised by the Bulgarian-language magazine Praven Svyat (Legal World), a publication that conducted a survey in the first half of November among company owners and managers, magistrates and notaries.

Just 11.4 per cent of respondents thought that victims of such thefts could prove cases of fraud in court. Another 48.6 per cent said that this was possible but extremely difficult while 40 per cent deemed this to be fundamentally impossible. In addition, 64 per cent thought that people who fell victim to such frauds were very unlikely to have their losses restored. Perhaps such a negative attitude towards the issue is unsurprising; since the end of 2007 there has been more than one example of a company changing hands without the knowledge of its original owners.

The showcase
One such case is that of the Anamar Development, a real estate investment trust run by three Venezuela-based Greeks. As reported by The Sofia Echo on December 4 2007 the company owners were surprised to find the company's board of directors had been changed the month before on November 12. This occurred through the use of fake documents and was officially sealed by a Sofia City Court ruling that changed the court registration of the company's board of directors.

The company's owners found out about the change of the board of directors by accident when they applied for a verification of their firm's current status. One option available to them was to alert the authorities and inform notaries not to verify any deals in the name of the three Bulgarians who had emerged as the new - illegal - owners. It seemed that the court simply registered the change of ownership without probing the information handed to them by the Bulgarians. The three fraudsters had simply presented forged invitations for a general meeting to elect a new board of directors, as well as records of the meeting.

These papers were missing from the company file at the Commercial Register. As public information, it could have been stolen by everyone. Fortunately, this case had a happy outcome. The bona fide Greek owners, aided by media interest, saw their original board of directors restored by the court on December 11 2007.

Serious doubts
Despite the "lucky" outcome of this story a year later the Praven Svyat survey showed that both business and magistrates have serious concerns as to how such thefts could be prevented and then proven and punished by courts.

When addressing the issue in 2007 Sofia City Court representative Roumyana Palikarova said that the court's actions in Anamar Development's case resulted from overwork and were not deliberate. This can no longer serve as an excuse because, from the beginning of the year, it is not the court that registers companies. Instead this is now the responsibility of the new Commercial Register (CR).

"All changes of ownerships in companies is now dealt by the CR," a CR representative told The Sofia Echo. "If someone wants to change the ownership of a company that has been registered before January 1 2008 when the CR came into being, he or she must present a certificate stating the current company owners from the court which has registered the company." The validity of these certificates is checked by the CR's officials.

The latter claims that it has more strict control over the validity of all papers when a company is registered, closed or has its ownership changed. It seems to have worked because, since January 2008, no further cases of corporate thefts have been reported by Bulgarian media.

Doubts, however, still remain because fraud happens with access to reliable information and, in the CR's case, getting hold of this is not a problem. On January 22 computer specialists noticed that the CR's website provided free access to personal data of company owners. The information included the names, the single identity number, ID card number, home address and phone number of owners. The Registry Agency, which administrates the Commercial Register, explained that the relevant law required the publication of complete data filed by applicants. While the local legislation did not specify it, the data included scanned copies of ID cards.

The specialists filed a petition calling for the site to be closed until the site developers were able to ensure the data was protected as outlined under European Union regulations, the Personal Data Protection Act and the constitution. They noted that full disclosure exposed company owners to crimes such as personal identity theft. In turn, that could lead to bank withdrawals and all kinds of operations on "behalf" of the owner of the data. Similar worries were expressed by the Bulgarian Industrial Association. As a result of the pressure, a month after it launched the website, the CR stopped putting all companies' documents online.

The trust issue
The big issue, however, remains the trust that managers have in the country's legal system, bearing in mind that commercial registers around the world also make company information public. The Praven Svyat survey showed that 88 per cent of managers interviewed said they feared being robbed of their property. As if to confirm their worries came the results from the November 20 roundtable. It showed that, from a legal point of view, fraudsters currently face few, if any, sanctions. All participants, including representatives of the General-Prosecutor's Office, Justice Ministry, Interior Ministry, Parliament, the judiciary and the CR, agreed that corporate thefts should be categorised as a severe crime under the Penal Code.

At the moment nothing exists in the Penal Code defining corporate theft as a crime. Hence prosecutors have to find other parts of the code that can serve as legal grounds for an investigation. In all cases, however, even if proven, such a scam may lead to no more then three years' imprisonment. And if this is the accused's first offence it could result in just a fine. Proving such a scam usually takes several months or even years. This is more than enough time for people to lose their business and so it's hardly a harsh preventative measure.

Until then victims of such thefts can only follow the actions of Anamar Development's owners in 2007. They had only two options: to file a complaint against the decision of the court that had authenticated the change of court registration in the first place. Or sue the current board of directors for damages and ask the court for an injunction against the company's real estate.