I. How Commercial Files Become Criminal Ones
The boundary between a commercial failure and a criminal offence is not always obvious from inside the business. A company that cannot pay its suppliers is, in the ordinary case, simply insolvent. The same facts acquire a different character where assets were moved out shortly before the collapse, where obligations were incurred at a point when the director already knew they could not be met, or where the accounting record does not reflect what happened.
Four routes account for most files. A revenue audit that concludes with an assessment can be referred onward where the authority considers the shortfall deliberate rather than erroneous. An insolvency can generate a referral where the trustee or a creditor considers that assets were dissipated. A dispute between shareholders or with a former manager frequently arrives as a complaint, since a criminal file is a form of pressure that civil proceedings do not supply. And a counterparty who has lost money will sometimes report the transaction as a fraud rather than sue on it.
II. What Happens First
Bulgarian criminal procedure divides into a pre-trial phase, conducted by investigating authorities under the supervision of the prosecution, and the trial phase before the court. Almost everything that determines the outcome of an economic crime file happens in the first.
A director typically becomes aware of proceedings in one of three ways: an invitation to attend and give explanations; a request addressed to the company for documents; or, less often, a search of business premises. Each of these means a file already exists. None of them means charges have been brought — a person may be questioned as a witness in a file that later names them as accused, and the distinction between the two statuses carries very different rights.
III. The Difference Between Witness and Accused
A witness is obliged to answer and answers truthfully, subject to the privilege against self-incrimination. An accused person is not obliged to answer at all, may decline to give explanations without any adverse inference, and is entitled to counsel. The two positions are not interchangeable, and a person questioned as a witness in a matter that concerns their own conduct is in a materially worse position than one who has been charged.
This is why the status in which a person is being questioned should be established before the questioning begins rather than during it. It is a proper question to ask, and the answer determines what obligations attach.
IV. Why the Commercial Record Is the Defence
Economic crime allegations turn on intent. The prosecution must establish not merely that a loss occurred, but that the director acted knowingly — that obligations were incurred in the knowledge they could not be met, that assets were moved in order to defeat creditors, that the accounting entry was made to conceal rather than in error.
Intent, in a commercial file, is proved or disproved by documents. Board minutes recording why a decision was taken, correspondence showing what was known at the time, management accounts showing the position as the director understood it, valuations, cash-flow forecasts, and the advice on which the director relied — these are the material that distinguishes a bad commercial judgement from a criminal one. A defence conducted without reference to the underlying commercial record is conducted with one hand tied.
It follows that the moment a file surfaces, the company’s records become critical. They should be preserved and organised, not tidied. Documents that go missing after proceedings begin attract precisely the inference their absence was meant to avoid.
V. Measures of Restraint
Where a person is charged, a measure of restraint is imposed. These range from an undertaking to appear, through bail and a prohibition on leaving the country, to detention. For a director of a trading company the travel prohibition is often the most disruptive in practice, particularly where the business depends on the director’s presence abroad.
Measures are not fixed. They may be varied on application, and the arguments that succeed are concrete rather than general: settled residence, family, an established business, the absence of any history of non-appearance, and the practical consequences of the restriction for the company and its employees.
VI. What the Company Should Do
- Establish whether the director is being approached as a witness or as an accused person before any questioning
- Preserve the commercial record in full — accounts, minutes, correspondence, contracts — without alteration
- Identify which transactions are actually in issue before offering explanations about them
- Separate the company’s position from the director’s, since their interests may diverge
- Where the file arose from a tax assessment or an insolvency, treat the underlying proceeding and the criminal file as one exercise, not two
The last point deserves emphasis. A director who settles the tax position without regard to the criminal file, or who concedes matters in an insolvency that will later be read against them, has improved one position at the cost of another. The proceedings run in parallel and are read together.