I very often assist my clients in procedures for entering into the Commercial Register of procurators of Sole Proprietors or single-person Limited Liability Companies. The procedures themselves are relatively simple and do not cause any particular difficulties. However, this is not the case when deciding whether or not a procurator needs to be appointed in the first place – as far as such steps are usually undertaken for reasons of social-insurance nature (in compliance with the requirements for becoming entitled to maternity benefits – for pregnancy and child-birth, child-care, etc.).
It is clear from the instructions and letters of the National Social Security Institute (that I am aware of) that the appointment of a procurator is not necessary for the pregnancy and child-birth period (up to 410 days). Such appointment according to the said instructions is required after the expiration of the 410 days period – when receiving benefits for raising a child up to 2 years of age (unless the company discontinued its business activity, of course). The requirement for appointing a procurator is justified by the need to prove the fact that the self-insured person does not perform any labor during the respective period.
The judicial practice does not recognize the said understanding of the NSSI. The latter is not shared by the National Revenue Agency (NRA) either – following from some of the more recent instructions of the NRA that I am aware of.
According to the practice of the Supreme Administrative Court1 burdens and obligations on citizens and their organizations can be imposed only by virtue of the law – and in the case of self-insured persons suspending their labor activity when using a leave for pregnancy and child-birth (child-care, respectively) there is no explicit legal obligation for concluding and respectively registering a contract with a procurator pursuant to Art. 21 of the Commerce Act as a means of establishing and proving such circumstance.
In general, when activity is being suspended, a standard form declaration is to be filed (pursuant to Art. 1, par. 2 of the Ordinance on social insurance of self-insured persons and of Bulgarian citizens employed abroad and seamen) and no appointing of a procurator is required. Furthermore, in the situations at question even such declaration would not be needed – on the grounds of the last sentence of the said provision stating that the declaration of suspension of activity should not be filed for the periods referred to in Art. 9, par. 2, it. 5 of the Social Insurance Code.
However, it is very important to make a clarification that is essential for the proper understanding of the issue discussed in this article.
The lack of necessity to appoint a procurator as per the above outlined refers only to the proving of the non-performance of any labor activity as a prerequisite for the right to benefits to arise. It does not, however, override such prerequisite and may not be interpreted as empowering the respective person to carry out activity while receiving benefits – the absence of labor activity and the inability to perform such activity are fundamental in social security law.
In other words, the appointment of a procurator may turn out to be necessary – if the company has not discontinued its activity and the participation of the respective self-insured person is necessary for its operation. This is why it is also important to discuss the matter of such involvement – what is meant by participation and whether it constitutes labor activity.
When it comes to personal participation in the business itself, it would be easy to conclude that such activity is labor-related in its nature. However, when the participation involves the performance of only organizational management actions, the answer may not be that clear and definitive – mostly because the said actions are of episodic character (to some extent).
It seems that according to the standpoint of the NSSI and the NRA any action that is related to the functioning of the company, including the conclusion, signing or submission of any type of contracts, documents, declarations (such as D1, D6), etc., would constitute labor activity in its nature. The judicial practice is contradictive on that matter. In some of the court judgments such understanding is recognized but other judgments tend to focus on the necessity of the said actions to be systematic in their nature in order to be defined as labor activity within the meaning of the social security legislation.
The above practically necessitates the appointment of a procurator whenever the company carries on with its business activities with the involvement of the respective person, regardless of the fact that the latter’s participation might be limited in scope and nature. This is why in order to avoid the risk of unnecessary complications, it would be advisable to appoint a procurator and enter him into the Commercial Register; similar effect may be achieved in other ways as well – for example, by electing a new director, authorizing a commercial proxy, etc. (depending on the needs and specifics of the particular situation).