One signature from a managing director can create major liability for a company — and the damage is often discovered too late

Examples may include:
• employment agreements or annexes containing excessive termination compensation clauses;
• commercial contracts featuring disproportionate penalty clauses;
• agreements concluded at non-market conditions or containing otherwise unfavorable terms.

The problem becomes even more serious when documents are backdated after the managing director has already left the company.

Under Bulgarian law, a backdated agreement may be challenged on the grounds that the director no longer had representative authority at the actual signing date.

However, proving backdating in practice is an uphill battle. Forensic methods are limited, qualified experts are scarce, and some examinations involve partial destruction of the document — a risk courts are highly reluctant to take.
As a result, companies may find themselves bound by agreements that are clearly detrimental to their interests.

Bulgarian law allows claims for damages against managing directors, but the legal tools for protecting companies against bad-faith agreements remain limited and uncertain in practice.

A highly anticipated interpretative case currently pending before the Bulgarian Supreme Court of Cassation is expected to finally clarify whether the general rule on agreements concluded to the detriment of the represented party also applies to commercial companies — potentially rendering such agreements unenforceable against the company.

Until clearer guidance is provided by the courts, companies may consider preventive measures such as:

• double-signature mechanisms (joint representation);
• electronic signatures and timestamping solutions;
• stricter document management procedures;
• shareholder or board approval for specific high-risk categories of transactions.

These safeguards cannot fully eliminate abuse, but they may significantly strengthen a company’s position in potential disputes or litigation.