Employment issues in M&A transactions in Bulgaria

I. Obligations of the purchaser

1. Check

1.1. whether a participation in a share plan has been offered to the employees in the respective companies, and respectively in the agreement in which these have been implemented;

1.2. for the existence of lock-in clauses, particularly, the lock-in period, change of control trigger, and the relevant exceptions;

1.3. existence of work councils, collective bargaining agreements, as well as the existence of employee representatives at the respective company;

1.4. any circumstances of the deal may trigger a requirement for a transfer of undertakings pursuant to Council Directive 2001/23/EC and the Bulgarian Labour Code. Generally, this will not be the case in the event of a share deal, as mere changes to the ownership structure of an enterprise do not change the identity of the employer. Bulgarian law does not contain significant requirements relating to labour law in such share deal arrangements.

2. Prepare

2.1. There are no obligatory preparatory tasks as far as the purchaser is concerned.

3. Inform/Notify

3.1. No notification to work councils and employee representatives would be required as the employer remains the same.

4. Consult

4.1. No consultations with work councils and employee representatives would be required as the employer would remain the same.

5. Implement 

5.1. No mandatory employment-related procedures need to be implemented. However, certain corporate resolutions would need to be taken, and declarations would need to be submitted to the Commercial Register.

1. Check

1.1.  Existing agreement contains change of control provisions; 

1.2. any circumstances of the deal may trigger a requirement for a transfer of undertakings pursuant to Council Directive 2001/23/EC and the Bulgarian Labour Code. Generally, this will not be the case in the event of a share deal, as mere changes to the ownership structure of an enterprise do not change the identity of the employer. Bulgarian law does not contain significant requirements relating to labour law in such share deal arrangements.

2. Prepare

2.1. There are no obligatory preparatory tasks related to employment issues.

3. Inform/Notify

3.1. Notification would be required in case an agreement (e.g. lease agreement) contains a change of control provision.

4. Consult

4.1. No consultations with work councils and employee representatives would be required as the employer remains the same.

5. Implement 

5.1. No mandatory employment-related procedures need to be implemented.

1. Check

1.1. for the existence of employee representatives elected by the general assembly of all employees at the seller and for the existence of trade union organisations;

1.2. for the existence of a European Works Council, if the seller is located in a different EU Member State;

1.3. whether the deal represents transfer of a going concern or whether the asset deal also involves transfer of business activity to which the assets are associated in which cases the obligations specified in section 2-5 below shall apply;

1.4. whether there are employees who are engaged in the performance of the business activity subject to the asset deal (including when there is a transfer of a going concern), and if so, which ones. The transfer of those employees to the purchaser takes place automatically. Therefore, employees who the seller may wish to retain could end up being transferred to the purchaser without either the employees or the seller wanting such a transfer to take place. Identifying the employees to be transferred together with the assets allows the seller and purchaser to take adequate measures to allocate the workforce in a mutually acceptable way.

2. Prepare

2.1. notification letters to the employees’ representatives and the trade union organisations’ representatives as described in section 1.1. above, relating to:

1. the planned changes as a result of the asset deal and the respective date on which the change will take place;
2. the reasons for the above-mentioned changes;
3. the possible legal, economic and social implications of the changes for the employees;
4. the measures envisaged in relation to employees, including measures related to the liability of the seller and the purchaser for outstanding obligations to the seller’s employees who will be transferred.

2.2. the above information to the European Works Council if section 1.2. above applies;

2.3. amendments to the existing staff schedule reflecting the changes in the workforce of the seller as a result of the asset deal;

2.4. the relevant information pursuant to any individual or collective bargaining agreement, or internal regulations of the seller (if applicable).

3.  Inform/Notify

3.1. trade union organisations’ representatives and employees’ representatives of the seller regarding each item under section 2.1. Notification must be made at least two months before the planned asset deal takes place;

3.2. In cases where trade union organisations’ representatives and employees’ representatives as described in section 1.1. above do not exist, the employer must provide all employees with the information under section 2.1;

3.3. There are no requirements regarding the form in which the information is to be provided. It may be either oral or in writing.

4. Consult

4.1. In the event that measures are being planned as described in section 2.1. d) above, the employer is obligated to consult the trade union organisations’ representatives and employees’ representatives, and to strive to reach agreement with them on these measures.

5. Implement

5.1. Any relevant agreements and regulations containing information and/or consultation obligations must be complied with.

5.2. The file of every transferred employee must be handed over to the purchaser.

1. Check

1.1. for the existence of employee representatives elected by the general assembly of all employees at the purchaser and for the existence of trade union organisations;

1.2. for the existence of a European Works Council, if the purchaser is located in a different EU Member State;

1.3. whether the deal represents transfer of a going concern or whether the asset deal also involves the transfer of the business activity the assets are associated with – in which case, the obligations specified in section 2-5 below shall apply;

1.4. whether there are employees who are engaged in the performance of the business activity subject to the asset deal (including in cases of transfer of a going concern), and if so, which ones. The transfer of those employees to the purchaser takes place automatically, and therefore employees who the seller may wish to retain could end up being transferred to the purchaser without either the employees or the seller wanting such a transfer to take place. It is also important to identify which payment scheme applies to these employees, including basic remuneration, any additional bonuses, payments and other incentives, labour regulations, holiday entitlements, etc., and to check whether any outstanding liabilities exist towards these employees. This is necessary because both the seller and the purchaser will be jointly and severally liable for any outstanding liabilities as a result of the asset deal;

1.5. whether any collective agreements exist at the seller. Existing collective agreements will remain in force for the purchaser as an employer of the transferred employees until conclusion of a new collective agreement, but for not more than one year after the asset deal has taken place;

1.6. whether any risks are identified in the course of the due diligence of the seller (e.g. any pending employment-related litigation, inspections by labour control authorities, etc.).

2. Prepare

2.1. notification letters to the employees’ representatives and the trade union organisations’ representatives as described in section 1.1. above, relating to:

1. the planned changes as a result of the asset deal and the respective date when the change will take place;
2. the reasons for the above-mentioned changes;
3. the possible legal, economic and social implications of the changes for the employees;
4. the measures envisaged in relation to employees, including measures related to the liability of the seller and the purchaser for outstanding obligations to the seller’s employees who will be transferred;

2.2. the above information for the European Works Council if section 1.2. above applies;

2.3. any amendments to the existing staff schedule, incorporating new job positions and/or employees transferred to it as a result of the asset deal.

3. Inform/Notify

3.1. trade union organisations’ representatives and employees’ representatives of the purchaser regarding each item under section 2.1. Notification must be made in good time, but no later than two months before the employees are directly affected by the change of work conditions and employment as a result of the asset deal;

3.2. In cases where there are no trade union organisations’ representatives and employees’ representatives as described in section 1.1. above, the employer must provide all employees with the information under section 2.1;

3.3. There are no requirements regarding the form in which the information must be provided. It may be either oral or in writing;

3.4. the National Revenue Agency after the asset deal takes place by registering the purchaser as a new employer of the transferred employees.

4. Consult

4.1. In the event that measures are being planned as described in section 2.1. d) above, the employer is obligated to consult with the trade union organisations’ representatives and employees’ representatives, and to strive to reach an agreement with them on these measures.

5. Implement

5.1. Register the change of the employer of the transferred employees with the National Revenue Agency, indicating that the purchaser is the new employer;

5.2. Amend the records in the labour book of each transferred employee (or in the unified electronic employment record if the asset deal takes place after 1 June 2025), reflecting the change of the employer as a result of the asset deal;

5.3. Provide each transferred employee with a copy of all HR policies and rules used by the purchaser. Each transferred employee should sign the policies to indicate they have read and understood them;

5.4. Adjust any internal rules and regulations applicable to employees as a result of the asset deal where necessary and ensure that all employees read and understand them.

1. Check

1.1. for the existence of employee representatives elected by the general assembly of all employees at the companies and for the existence of trade union organisations;

1.2. whether any collective agreements exist at the companies. Existing collective agreements will remain in force for the newly established company/for the acquiring company as an employer of the transferred employees until conclusion of a new collective agreement, but for not more than one year after the merger takes place;

1.3. whether any outstanding liabilities exist towards employees of the companies, as the newly established entity/the acquiring company will take them over;

1.4. whether employees enjoy particular status, in as much detail as possible, including the content of employment contracts, holiday and payment entitlements, any other special rights provided for in individual employment contracts and/or collective agreements, and/or internal regulations, since all these will be transferred to the newly established entity/the acquiring company.

2.  Prepare

2.1. notification letters to the employees’ representatives and the trade union organisations’ representatives as described in section 1.1. above, relating to:

the planned changes and the respective dates when the merger will take place;

the reasons for the merger/acquisition;

the possible legal, economic and social implications of the changes for the employees;

the measures envisaged in relation to employees, including measures related to the liability of the companies for outstanding obligations to the employees who will be transferred to the newly established entity/ the acquiring company;

2.2. new staff schedule, incorporating job positions at the newly established entity/at the acquiring company where the employees will be transferred.

3. Inform/Notify

3.1. trade union organisations’ representatives and employees’ representatives of the companies regarding each item under section 2.1. Notification must be made at least two months before the planned merger/acquisition takes place;

3.2. In cases where trade union organisations’ representatives and employees’ representatives as described in section 1.1. above do not exist, the companies must provide all employees with the information under section 2.1;

3.3. There are no requirements regarding the form in which the information must be provided. It may be either oral or in writing;

3.4. the National Revenue Agency after the merger/acquisition takes place by registering the newly established entity/ the acquiring company as the new employer of the transferred employees.

4. Consult

4.1. In the event that measures are being planned as described in section 2.1. d) above, the companies are obligated to consult the trade union organisations’ representatives and employees’ representatives, and to strive to reach an agreement with them on these measures.

5. Implement

5.1. Register the change of the employer of the transferred employees with the National Revenue Agency, indicating that the newly established entity/the acquiring company is the new employer;

5.2. Amend the records in the labour book of each transferred employee (or in the unified electronic employment record if the merger takes place after 1 June 2025), reflecting the change of the employer as a result of the merger/acquisition. This must be done by the new employer (i.e. the newly established company);

5.3. Hand over each transferred employee’s file to the newly established company/the acquiring company;

5.4. Provide each transferred employee with a copy of all HR policies and rules used by the newly established company/the acquiring company. Each transferred employee should sign to indicate that they have read and understood these policies.