The system of law rules, regulating the existence of the trading corporations could be seriously discredited.
The documentary frauds are not a seldom occasion in Bulgarian reality and are well known to the judicial practice in various speculations. The crime intention succeeds to overcome the actions of the judicial body.
How is the right of free economical initiation in the Constitution guarantied? Is it possible to create a crime practice of frauds, which can easily put the right of free economical initiation under doubt? Unfortunately the answers of these questions may be really disappointing.
The topic of this article will be a real situation, in which a limited liability company can turn to be an object and instrument of a crime.
Behind each company stays the will of certain individuals – its shareholders. The shareholders in the company realize and exercise their right of free economical initiation through the head body of the company – the General Assembly, in whose authority lie the most important decisions like presentation and management of the company. The executive manager of the company is a natural person, who carries out daily decisions of increasing and assimilating invested capital and/or property. This clearly explains the importance of the choice and in consequence – the functional relation between the executive manager and the shareholders, suggests trusted relations.
Concerning the fact that the trading corporation is a specific legal subject, the law executes a definite procedure for its initial constitution and following transformations. For the present moment the quoted procedure is regulated by the Trade Register Act and all secondary legislation thereto. The procedure includes filing the signed the requested documents in the Registry Agency. All of these documents follow to be signed by all of the shareholders and the executive managers, as well – Minutes of meetings, declarations, applications. On the base of these documents the accountable authority conducts a revision, regarding the formal outwardness and registers the Trade Corporation or the respective changes in it.
The question is what follows when the office of the shareholders turn into ordinary signatures on specific documents in front of the judicial institution, controlling trade corporations.
According to the rules set in the law, the Trade registry is public, so each person may have the opportunity of obtaining copies of the recorded material. The procedure rules, concerning lawful right of receiving information even allows to everyone to check the recorded materials.
This particular circumstance acts a dual role. On the one hand, undoubtlessly the helping function cannot be denied, each third person may check for himself the actual legal status of a trade company. However, this can easily turn into an option of abuse.
There is a way for an unscrupulous person to take advantage of his legal right of obtaining information as he requires copies of all recorded documents an the base of which to prepare a set documents suggesting crucial changes. Depositing on the new change would be easy by using an electronic signature issued for the “new” (fictitious) executive manager.
Real situation: A person can nominate himself as a Director of a company and replace the real Director, using a fake General assembly’s protocol, counterfeiting the signatures of the shareholders. Besides the fictitious replacement of the legal representative of the company, official address of management can also be changed, so all the correspondence can be transferred to somewhere else. All the documents used in this change in the company are faked. The will of the legal shareholders is not the one that stays in the protocol of the General assembly. Despite that fact, for the judge in Court, these documents express legal power because formally they fulfill all the legal requirements. That is how the fake set of documents has been accepted without any doubts for real. As a result a person can have a decision of the General assembly about non-existing changes, which has been made valid, with the acceptance of the competent body.
Then comes the question – how is this possible? The answer is simple – the formal counterfeiting of the signatures is not so difficult. For the competent body every such document is real, because there is no requirement about preliminary control for authenticity of the signatures. In the company file there is only a specimen of the signature of the Director, not of the shareholders (and the Director is not necessary to be a shareholder). Another thing is that counterfeiting the signature can be done really well. At the same time there is no requirement for notary certification of the documents, necessary to apply for a change in the company – especially for the protocol of the General assembly.
In our real situation the person, using unreal documents is obtaining a real decision for a change in the company and after that with a certificate legal status (wrongly meant to be six months valid) starts to undertake obligations on behalf of the company.
Two days after enacting the decision, changing the Director and the official address of the company, the shareholders find out about the replacement of their will and try to correct everything done so far by making a decision, which restores the situation before the changes. The damage however is already done. The criminal took advantage of the imperfect stipulations of the law and the established vicious practice. With the enacted decision and mainly with the certificate for a current legal status the deceiver starts to conclude fictitious agreements and undertake fictitious obligations, which are meant to deprive the company of its whole property of. Meanwhile the competent body and the claimants (the company and the shareholders) are trying to fulfill the absence of legal obstacles for criminal acts like this. According to the present legislation, besides the undertaken efforts to correct the formally changed Director of the company, the person, who has never been chosen at this position, is meant for a legal representative for acts, regarding third conscientious individuals for the period he has formally been a Director of the company.
The most essential problem in this situation is the lack of an adequate legislative and protective measures, which can destroy any possibility for the competent body to be so easily misled and with its decision to replace the will of the shareholders and to convert a working company into an empty subject – a name and a seal. On the other hand appears the lack of rules concerning the consequences of acts of the person formally meant to be the legal representative, regarding third conscientious individuals, when their conscientiousness can be discredited and there are enough facts, pointing participation in a crime.
Not accidentally, in recent times the need for amendments to the Trade Register Act concerning its general accessibility and visibility is constantly discussed. One of the requested changes is to give a new, more accurate and detailed definition of a “trade register”. As it is defined, the trade register is an electronic database containing facts that fit under the Act and which are made by law for all Trade Corporations and branches of foreign traders. The amendments provide that the circumstances and acts in the Trade Register can be made without personal data protected by law. It is proposed that the person seeking access to archival information on the accounts of Trade Corporations can be identified by electronic signature or digital certificate, providing his unique password or identification.
But on the other hand, a literal enforcement of data protection to data from the Trade Register by deleting for example ID number will lead to absurdities in which there will never be clear the real partnerships in Trade Corporations by involved public figures, politicians, magistrates and other public figures, but even who among the hundreds named “Ivan Ivanov Ivanov” is the executive manager of the company. On top of it all, the suggested amendments will make it possible to expire data records of users of the registry, including investigative journalists. There is not a better imaginable way to impede investigations of abuse and corruption of public figures who are now successful only in the field of media publications. Obviously this is a matter of a serious omission that may lead to difficult to correct and/or incorrigible consequences for the claimants of this documentary fraud who stand on the other side of the coin.