Our legal team has prepared this overview to help you understand the key aspects of this new framework.
A foreign direct investment requires screening if it meets a cumulative set of criteria related to the investor's origin, the target industry, and the investment's value.
1. The Investor: The screening applies to investments made by:
A citizen or entity from a non-EU country.
An entity registered in the EU but ultimately controlled by a non-EU citizen or entity.
2. The Target Sector: The investment must be in one of the strategic sectors listed in the EU FDI Regulation, including but not limited to:
Critical Infrastructure: Energy, transport, water, health, communications, media, data processing, and financial infrastructure.
Critical Technologies: Artificial intelligence, robotics, cybersecurity, aerospace, defence, quantum and nuclear technologies.
Supply of Critical Inputs: Including energy, raw materials, and food security.
Access to Sensitive Information: Including personal data or the ability to control such information.
Freedom and Pluralism of the Media.
3. The Investment Threshold: The transaction must meet one of the following conditions:
The acquisition of at least 10% of the capital in a Bulgarian enterprise, or an investment valued at over €2 million.
The acquisition of at least 10% of the capital in a Bulgarian high-tech company.
A new "greenfield" investment exceeding €2 million.
Certain investments are subject to mandatory screening regardless of the thresholds above. These include:
Investments by foreign investors from Russia or the Republic of Belarus.
Investments related to the production of petroleum-based products at critical infrastructure sites.
Investments by any company with significant direct or indirect financial participation from a non-EU public authority. A list of low-risk countries, including the USA, UK, Canada, Australia, Japan, and others, are exempt from this specific rule.
The new regulations clarify that certain transactions are not considered FDI for the purposes of screening. This is a critical detail for multinational corporations. Specifically, screening is not required for:
Intra-group reorganisations where the ultimate controlling entity of both the investor and the target company remains the same.
Transfers of shares between companies within the same economic group, provided the transaction does not result in a change of ultimate control or the entry of a new foreign investor.
The newly formed Interdepartmental Council for Screening of Foreign Direct Investments ("the Council") is the competent authority overseeing the process.
Application: Investors must submit a standardized application form to the Bulgarian Investment Agency.
Timeline: The Council has 45 days to issue a decision, which can be extended once by an additional 30 days. Failure to issue a decision within the deadline is considered tacit approval.
Possible Outcomes: The Council may (i) authorize the investment, (ii) reject it, or (iii) authorize it subject to specific mitigation measures, such as limiting the acquired shareholding or imposing data protection requirements.
Failure to comply with the screening obligation carries significant penalties. An investor may face a fine of 5% of the investment's value, with a minimum of BGN 50,000 (approximately €25,500). Furthermore, the Council can impose post-closing corrective measures, including the suspension of activities or the forced termination of the investment.
The introduction of this FDI screening regime adds a crucial regulatory layer to transactions involving non-EU investors. The scope of the rules is broad, and the consequences of non-compliance are severe.
Our team is prepared to guide you through every stage of this process, from assessing whether your investment requires screening to preparing the application and liaising with the relevant authorities. Proactive engagement is key to ensuring your investment proceeds smoothly and without delay. Contact PenevLLP to discuss how we can support your business objectives in Bulgaria.
