Bulgaria's Public Enterprises Act rules (ППЗПП): analysis
Analysis of the ППЗПП (Decree 85/2020): scope, key chapters, link to the Public Enterprises Act, the 2023 amendments and municipal public enterprises.
The Rules for the Implementation of the Public Enterprises Act (ППЗПП) were adopted by Decree of the Council of Ministers (ПМС) No. 85 of 30 April 2020 in implementation of § 4 of the Transitional and Final Provisions (ПЗР) of the Public Enterprises Act (ЗПП). For the in-house lawyers of state and municipal public enterprises, compliance officers and municipal administrations, the ППЗПП is not just secondary legislation but the main operational handbook in which the powers under the act are spelt out.
After the substantial amendments by ПМС No. 16/2023 (in force from 1 March 2023), the regime for competition procedures, business programmes and early termination of management contracts changed significantly. We analyse the structure of the rules, the key amendments and their application in the practice of large and municipal public enterprises.
❓What do the Rules for the Implementation of the Public Enterprises Act regulate?
Source: ППЗПП, ПМС No. 85/2020
Legal nature and chronology of the ППЗПП
The ППЗПП is a piece of secondary legislation within the meaning of Art. 7(1) of the Normative Acts Act (ЗНА): rules for the implementation of an act, issued by the Council of Ministers. It cannot introduce new obligations beyond those established in the ЗПП, but only detail its regulation. In case of any conflict the act takes priority (Art. 15(3) ЗНА).
Rules for the Implementation of the ЗПП (ППЗПП)
Promulgation and amendments
Official Bulgarian text
„Приет с ПМС № 85 от 30.04.2020 г., обн. ДВ, бр. 40 от 5.05.2020 г., изм. ДВ, бр. 89 от 26.10.2021 г., изм. и доп. ДВ, бр. 11 от 2.02.2023 г. (в сила от 1.03.2023 г.).“
The drafting of the ППЗПП and the reform of the public enterprises regime of 2019-2020 were carried out with the assistance of the Organisation for Economic Co-operation and Development (OECD, ОИСР in Bulgarian) under the European Union’s Structural Reform Support Programme. The aim was to bring the Bulgarian framework into line with the OECD Guidelines on Corporate Governance of State-Owned Enterprises, an essential indicator on the road to the eurozone and the OECD.
Structure of the ППЗПП: a systematic overview
The ППЗПП is divided into chapters that correspond thematically to the main areas regulated by the ЗПП. For in-house lawyers, knowing this structure is the first step towards effective citation and application of the rules in everyday practice.
| Chapter / Topic | Key articles | What it regulates |
|---|---|---|
| General provisions and principles | Art. 1-6 | Subject of the rules, scope, definitions, principles for exercising the state’s rights |
| Business programmes and assessment | Art. 7, Art. 16-18 | Period, content, approval and assessment of business programmes |
| Transactions with property | Art. 20, Art. 25-30 | Electronic sales platform, disposal of fixed assets, leases |
| Competition procedure for independent members | Art. 37-50 | Nomination committee, requirements for candidates, assessment, contracts |
| Management and control contracts | Art. 53-56 | Conclusion, performance, assessment and early termination |
| Municipal public enterprises | Chapter Eight | Special regime, references to the Municipal Property Act (ЗОС) and to ordinances of municipal councils |
The relationship between the ЗПП and the ППЗПП
In practice it is common to mix up provisions of the act and of the rules, especially when the procedures refer to one another. To be clear: the ЗПП sets the principles and categories, and the ППЗПП makes them operational. The Agency for Public Enterprises and Control (АПК) was created by virtue of the act, but its specific procedures are in the rules.
| Aspect | ЗПП | ППЗПП |
|---|---|---|
| Hierarchy | An act, takes priority in case of conflict (Art. 15(3) ЗНА) | Secondary legislation, cannot introduce new obligations |
| Categories of public enterprises | Defines “large” and “non-large” (§ 1 of the Additional Provisions) | Links the procedures to the category (different regime in Art. 37) |
| Business programmes | Obligation to submit (Art. 21) | Period, content, assessment (Art. 7, Art. 16-18) |
| Termination of a management contract | Grounds (Art. 24(1)) | Definition of “systematic non-performance” and “serious breach” (Art. 53(2)) |
| Control body | Creates the АПК (Art. 36 et seq.) | Regulates the procedures and reporting to the АПК |
Key amendments by ПМС No. 16/2023: what changed
The amendment of 2023 is the most substantial intervention in the ППЗПП since it was adopted and addresses weaknesses identified in practical application. It was preceded by the amendment in State Gazette (ДВ) issue 89 of 26 October 2021, but the scope and significance of ПМС No. 16/2023 are incomparably greater.
ПМС No. 16/2023 amending and supplementing the ППЗПП
Entry into force
Official Bulgarian text
„Постановление № 16 от 30 януари 2023 г. за изменение и допълнение на Правилника за прилагане на Закона за публичните предприятия, приет с ПМС № 85 на Министерския съвет от 2020 г. (ДВ, бр. 40 от 2020 г.). В сила от 01.03.2023 г. Обн. ДВ, бр. 11 от 2 февруари 2023 г.“
Among the most significant changes are: fixing the period of business programmes (instead of a range), introducing a new performance assessment, a new regime for competition procedures depending on the category of the enterprise, a mandatory electronic platform for the sale of property and (particularly important for the case law on employment and contractual disputes) an exhaustive definition of the grounds for early termination of management contracts.
| Provision | Until 1 March 2023 | After ПМС No. 16/2023 |
|---|---|---|
| Period of a business programme (Art. 7) | For a period of 3 to 5 years | For a period of 3 or 5 years (fixed options) |
| Assessment of the business programme (Art. 16) | No express new paragraph | New paragraph 4: assessment by the body exercising the state’s rights |
| Terminology | “The competent body” | “The body exercising the state’s rights” |
| Transactions creating obligations (Art. 25, Art. 26) | No “co-debtor” in scope | Added “assuming obligations as a co-debtor” |
| Sale of property (Art. 29) | Electronic auction (recommended) | Mandatory electronic sales platform |
| Competitions (Art. 37) | Single regime | Split regime: “large” vs “non-large” enterprises |
| Early termination (Art. 53) | No express definition | New paragraph 2: defines “systematic non-performance” and “serious breach” |
Ask Pravko and get an answer with citations from the law.
Competition procedure for independent members after 2023
One of the most significant changes in the ППЗПП through ПМС No. 16/2023 is the splitting of the competition procedure regime according to the category of the public enterprise. For lawyers who structure such procedures the distinction is critical, because a mistake in the type of procedure can lead to the competition being set aside and to delays in management decisions.
| Aspect | “Large” public enterprise | “Non-large” public enterprise |
|---|---|---|
| Body conducting the competition | Nomination committee under Art. 37-50 ППЗПП | The body exercising the state’s rights |
| Appointment of the committee | By the АПК | Not applicable (internal procedure) |
| Pay of external experts | Under Art. 39(2) | Not applicable |
| Declaration of impartiality | Before appointment (Art. 40(2)) | Under internal rules |
| Notifying the АПК | Mandatory, within 5 days (Art. 37(5)) | Mandatory, same period |
Standard competition procedure for a “large” public enterprise
Announcing the competition
Publishing the conditions and the deadline for submitting documents. At least 30 days before the closing date is advisable.
Appointing a nomination committee
The АПК appoints its members, including external experts paid under Art. 39(2) ППЗПП.
Declarations of impartiality
Each committee member declares the absence of a conflict of interest before starting work (Art. 40(2)).
Assessing the candidates
By the announced criteria: professional experience, reputation, independence, sector-specific knowledge.
Ranking and proposal
The committee prepares a reasoned proposal for the selection of independent members to the body exercising the state’s rights.
Concluding contracts
Management or control contracts under Art. 53 ППЗПП with the approved candidates.
Notifying the АПК
5 working daysInformation about the procedure held and the contracts concluded is submitted within 5 days (Art. 37(5) ППЗПП).
Rules for the Implementation of the ЗПП (ППЗПП)
Art. 37(5)
Official Bulgarian text
„Информация за проведените конкурсни процедури по ал. 1 – 4 се предоставя на Агенцията за публичните предприятия и контрол в срок 5 работни дни от сключването на договорите за управление и контрол.“
Transactions with property and the electronic sales platform
After ПМС No. 16/2023, use of the electronic platform for the sale of property became mandatory for disposing of the fixed tangible assets of public enterprises. Exceptions are allowed only in strictly defined cases, for example for enterprises in liquidation.
Rules for the Implementation of the ЗПП (ППЗПП)
Art. 29(1)
Official Bulgarian text
„Сделките с недвижими имоти на публичните предприятия се извършват чрез електронен търг на електронната платформа за продажба на имоти по Наредбата за електронната платформа за продажба на имоти.“
The reference is to the Ordinance on the Electronic Platform for the Sale of Property (Наредбата за електронната платформа за продажба на имоти) (adopted by ПМС No. 243 of 26 September 2019, promulgated in ДВ issue 77 of 2019, in force from 1 October 2019). In practice this means that the starting price is determined by an independent valuer appointed by the enterprise, and the conditions of sale are announced publicly. Insurance contracts are also concluded under publicly announced conditions (Art. 29(5) ППЗПП).
A common compliance risk
Management and control contracts: the new paragraph 2 of Art. 53
One of the most significant changes made by ПМС No. 16/2023 is the addition to Art. 53 ППЗПП, which now expressly defines the grounds under Art. 24(1), item 6 ЗПП for early termination of management and control contracts. Before this the definition was missing from any secondary legislation and created legal uncertainty both for managers and for the body exercising the state’s rights.
Public Enterprises Act (ЗПП)
Art. 24(1), item 6
Official Bulgarian text
„Договорът за управление и контрол се прекратява преди изтичане на срока при системно неизпълнение на задълженията по договора или при тежко нарушение, накърняващо престижа на публичното предприятие.“
Under the new wording of Art. 53 ППЗПП (new paragraph 2 et seq., in force from 1 March 2023) the following are defined: the concepts of “systematic non-performance” (системно неизпълнение) and “serious breach” (тежко нарушение); the mandatory procedure for written explanations before termination; the ground for termination on an unsatisfactory assessment of the business programme; and the possibility of a temporary assignment without a competition.
A recommendation to corporate counsel
In practice we recommend that when preparing reasons for termination you document all cases of non-performance in chronological order, ensure the manager has the opportunity to give written explanations within the period set by law, and base the termination on a reference to the specific paragraph and item of Art. 53 ППЗПП in conjunction with Art. 24(1), item 6 ЗПП. The approach is similar for the assessment of the business programme under Art. 16(4) ППЗПП.
The ППЗПП in municipal public enterprises
Chapter Eight of the ППЗПП regulates the special regime for municipal public enterprises. Within the meaning of § 1, item 13 of the Additional Provisions of the ЗПП, these are the commercial companies with over 50 per cent municipal participation in the capital, as well as companies in which the municipality otherwise exercises a dominant influence. Chapters II, V, VI and VII of the ЗПП apply to them, with the relevant adaptations.
Municipal Property Act (ЗОС)
Art. 51а(4)
Official Bulgarian text
„Общинският съвет приема наредба за условията и реда за упражняване на правата на собственост на общината в търговските дружества с общинско участие в капитала и за участието на общината в граждански дружества, която следва изискванията на Закона за публичните предприятия и правилника за прилагането му.“
According to an analysis by the National Association of Municipalities in the Republic of Bulgaria (НСОРБ) the ordinance of the municipal council must reflect: the municipality’s policy on municipal public enterprises, the competition procedure for selecting independent members, the requirements for independence and the declarations of conflict of interest, the procedure for assessing business programmes and the grounds for early termination. The deadline for bringing them into line is regulated in § 3(4) of the ПЗР of the ЗПП.
A compliance checklist for in-house lawyers
The list below covers the minimum obligations that should have been met by today’s date (May 2026) by the corporate counsel of a state or municipal public enterprise, regardless of the size of the company.
ППЗПП compliance: mandatory review
Minimum actions for compliance after ПМС No. 16/2023 and subsequent amendments.
Review of management contracts under Art. 20(3) ЗПП: the ban on parallel employment relationships for managers*
Updating the municipal council’s ordinance under Art. 51а(4) ЗОС (for municipal public enterprises)*
Structuring competition procedures under Art. 37 ППЗПП with the right regime for the category of the enterprise (“large” / “non-large”)*
Submitting business programmes with a fixed period of 3 or 5 years (new Art. 7 ППЗПП)*
Preparation for the performance assessment under Art. 16(4) ППЗПП by the body exercising the state’s rights*
Declarations of impartiality under Art. 40(2) from the members of nomination committees*
Registering and carrying out property transactions through the electronic platform for the sale of property (Art. 29(1) ППЗПП)*
Notifying the АПК of every competition procedure held, within 5 days of the conclusion of the contracts*
Internal rules for documenting the cases under Art. 53(2) ППЗПП for early termination
Recommended: reduces the risk of court challenges
* Mandatory
Practical references for corporate counsel
For full application of the ППЗПП we recommend systematically following the acts of the АПК ( appk.government.bg), including the Plans for assessing business programmes and the annual reports. The analytical materials of the Ministry of Finance on the policy towards state enterprises are also useful. For municipal public enterprises, the НСОРБ and the municipal registers of ordinances.
For the application of the ППЗПП in the context of transactions with property and public procurement, see also our analysis of the Public Procurement Act, and for the requirements of equal treatment of candidates in competition procedures: the analysis of the Protection against Discrimination Act.
Information
⚠️ Important
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