Articles of Association of Bulgarian Development Bank EAD

CHAPTER I
GENERAL PROVISIONS

SECTION I
LEGAL STATUS, COMPANY NAME AND REGISTERED OFFICE

Art. 1. (as amended by resolution of the sole owner of the capital of 21.05.2021) BULGARIAN BANK FOR DEVELOPMENT EAD referred to in these Articles of Association as "THE BANK", is a credit institution with its registered office in the city of Sofia, Sredets District, 1 Dyakon Ignatii Str., Bulgarian Development Bank EAD, hereinafter referred to as the "BANK", shall be a credit institution having its corporate seat at Sredets District, 1 Dyakon Ignatiy Str., Sofia, whose organization and scope of business are set out in the Bulgarian Development Bank Act, as promulgated in the State Gazette No. 43/ April 29, 2008, as amended in No. 82/October 16, 2009, effective as of October 16, 2009, No. 99/December 16, 2011, effective as of January 1st, 2012, as amended in No. 102/December 21, 2012, effective as of January 1st, 2013, as amended in No. 107/December 24th, 2014, effective as of January 1st, 2015, as amended in No. 63/August 4th, 2017, as amended in No. 96/December 1st, 2017, effective as of January 1st, 2018.

Art. 2. (as amended by resolution of the of the sole owner of the capital of 21.05.2021) The BANK shall operate under the company name „БЪЛГAPCKA БАНКА ЗА РАЗВИТИЕ“ ЕАД which may be spelled for international correspondence in English translation - "BULGARIAN DEVELOPMENT BANK".

Art. 3. The BANK shall be a joint stock company established for an unlimited duration in whose capital the State’s interest shall be not less than 51 percent.

Art. 4. The BANK shall have headquarters at its registered office and may establish branches, offices and representative offices in the country and abroad.

Art. 5. (1) (as amended by resolution of the sole owner of the capital dated 21.05.2021) The BANK shall have a circular seal with the inscription “БЪЛГАРСКА БАНКА ЗА РАЗВИТИЕ“ ЕАД /BULGARIAN BANK FOR DEVELOPMENT EAD”, Sofia.

The seals of the branches of the BANK shall also bear the name of the locality where the branch is located.

SECTION II
OBJECTS OF BUSINESS

Article 6. (1) The BANK shall carry out the activities provided for in Article 2 (1) and (2) of the Credit Institutions Act, in accordance with a license issued by the Bulgarian National Bank.

The BANK may carry out the following activities:
publicly raising deposits or other repayable funds and providing loans or other financing for its own account and at its own risk;
performance of payment services within the meaning of the Payment Services and Payment Systems Act without issuing bank payment cards and electronic money, as well as performance of payment operations through bank payment cards and electronic money instruments;
issuing and administering other means of payment such as travelers’ cheques and letters of credit, in so far as this activity is not covered by paragraph 2;
activity as a depository or custodial institution;
financial leasing:
guarantee transactions:
trading on own account or on behalf of clients in
money market instruments - cheques, bills of exchange, certificates of deposit, etc.
outside the cases under paragraph 8;
foreign currency and precious metals;
financial futures, options, instruments related to foreign exchange rates and interest rates, as well as other derivative instruments, outside the cases referred to in paragraph 8
trading for own account or for the account of clients in transferable securities, participation in issues of securities, as well as other services and activities under Article 5 (2) and (3) of the Markets in Financial Instruments Act]
money brokerage:
Advising companies on their capital structure, sectoral strategy and related matters, as well as advice and services on company reorganisations and acquisition transactions:
acquisition of loan receivables and other forms of financing (factoring. forwarding, etc.);
acquisition and management of shareholdings;
collecting, providing information and references on the creditworthiness of customers;
other similar activities as defined by a regulation of the Bulgarian National Bank.
The BANK may not carry out other activities outside those mentioned in paragraph 2 and provided for in the Bulgarian Development Bank Act, except when this is necessary in connection with the implementation of its activities or in the process of collecting claims and loans granted. The BANK may establish or acquire companies for the performance of ancillary services.
(4) The Bank may participate in companies, consortia and other forms of association in compliance with the legislation in force.

SECTION III
PRINCIPAL ACTIVITIES OF THE BANK

Art.7. (as amended by resolution of the sole owner of the capital dated 18.06.2024) The BANK shall carry out its activities in accordance with the Bulgarian Development Bank Act and the strategy approved by the Council of Ministers.

Art.8. (1) (as amended by resolution of the sole owner of the capital dated 21.05.2021. as amended by resolution of the sole owner of the capital dated 18.06.2024 a.) The activities of the BANK shall be oriented towards:

Pre-export and export lending to small and medium-sized enterprises: on-lending or direct lending to other types of activities of small and medium-sized enterprises; refinancing of banks lending to small and medium-sized enterprises (SMEs), financing of investments outside the SME sector, participation in public and public-private projects or partnerships of strategic, national and/or regional importance, implementation of public policies for the economic development and growth of the country, implementation of instruments for financing public investment in the SME sector.

The BANK also provides other types of credit as exposure to a single customer or a group of related customers other than credit institutions, central governments and central banks, subject to the requirements and limitations of Regulation 575/2013/EU, after taking into account the effect of credit risk mitigation in a manner determined by the Board of Directors.

The BANK shall not lend to the following activities/borrowers:
Activities that are not in compliance with national legislation, including environmental legislation:
Companies with unknown ultimate controlling owner.
Political parties and persons associated with them. Within the meaning of this paragraph, persons related to political parties are: youth, women's and other organizations that by law the parties may establish, as well as persons established by political parties for the sole purpose of carrying out their business activities permitted by law - publishing, copyright and use of intellectual property, as well as from the sale and distribution of printed, audio and audiovisual materials with party-propaganda content;
Not-for-profit companies and organisations:
(amended by decision of the sole owner of the capital dated 18.06.2024) Activities of providing media services:,
Activities related to sport and sporting events;
Other activities prohibited by law.
(as amended by resolution of the sole owner of the capital dated 18.06.2024) (The BANK shall grant loans directly or through credit or financial institutions.
The terms and conditions for the granting of credits shall be determined by the Board of Directors.
(as amended by resolution of the sole owner of the capital dated 20.07.2021. as amended by resolution of the sole owner of the capital dated 18.06.2024) The Bank may not form new exposures on an individual and consolidated basis to a single customer or a group of related customers, the total amount of which exceeds the amount of BGN 5 000 000, and to financial institutions under Article 15 of the Credit Institutions Act for the purpose of indirect financing of small and medium-sized enterprises - BGN 15 000 000.
(as amended by resolution of the sole owner of the capital dated 01.06.2021, as amended by resolution of the sole owner of the capital dated 07.06.2022) The limitation under paragraph 5 shall not apply to exposures to exposures to subsidiaries of the Bank, any other credit institutions, the Council of Europe Development Bank, the European Investment Bank and the European Investment Fund, from development banks of EU Member States, and in such cases as provided for in paragraph 8.
(new, supplemented by resolution of the sole owner of the capital dated 07.06.2022 corrected by resolution of the sole owner of the capital dated 21.07.2022) The restriction under paragraph 5 may be waived by unanimous decision of the Board of Directors and following a decision of the Supervisory Board in the event of an increase in an existing exposure where, as a result of the implementation of exposure restructuring measures within the meaning of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 to improve its collectability, the complex application of other restructuring measures is not sufficient, or the increase is necessary to preserve the rights and interests of the Bank, the total amount of the increases shall be up to 20% of the gross value of the exposure as of 31.12.2021, but not more than BGN 5 million, and the total exposure after the increases shall remain within the regulatory and internal bank limits for large exposures.
(as amended by resolution of the sole owner of the capital dated 07.06.2022: previous paragraph7) The BDB shall also carry out financial transactions within the scope of the Bank's business under specific programmes assigned to it by the Government of the Republic of Bulgaria. Where such programmes provide for the placement of funds on less than market terms, whereby losses and/or foregone benefits are likely to be realised, their amount shall be specified in the relevant programme.
(as supplemented by resolution of the sole owner of the capital of 07.06.2022; former paragraph 8) The Bank may finance/refinance companies with liabilities classified in the credit register at the BNB in the groups "Non-performing" or "Loss" (or equivalent in case of regulatory changes), at the time of application for a loan from the BNB, subject to confirmation by the Supervisory Board.
(new, as supplemented by resolution of the sole owner of the capital of 18.06.2024) The BANK shall be entitled to form exposures to individual or group customers outside the limits under paragraph 5:
In the case of financing to end-clients wholly or partly with funds received or managed by the Bank from the EU, the European Investment Bank, the European Investment Fund, another EU instrument, the Council of Europe Development Bank, other development banks, where the single exposure limit follows the limits of the Bank's financing agreement with the relevant institution;
In financing public enterprises;
In the case of funding beneficiaries under national or EU programmes up to the amount of their approved grant. Funding outside the programmes referred to in the previous sentence or in excess of the grant under national or EU programmes shall be up to the maximum amount referred to in paragraph 5.
For exposures fully or partially secured by cash and/or government securities and/or government guarantee, bank guarantees issued by first class banks or significant credit institutions (as determined by the European Central Bank), the portion of the exposure covered by other types of collateral may not exceed the limit under paragraph 5;
In joint financing/guaranteeing with development banks, prime banks and significant lending institutions (as defined by the European Central Bank), EXIM institutions;
In the case of customer financing for projects contracted by budget holders/budget organisations or public undertakings, up to the amount receivable from the relevant contracting authority;
When financing pre-export and export activities for products manufactured by exporting companies registered in Bulgaria. Financing is carried out in accordance with a programme approved by the Bank;
Financing of military-industrial complex companies registered in Bulgaria. Financing is carried out in accordance with a programme approved by the Bank.
When issuing bank guarantees for payment in order to guarantee (secure) the fulfilment of obligations under contracts for the provision of grant financial assistance under the Investment Promotion Act and its implementing regulations;
Art. 9. (As amended by resolution of the sole owner of the capital dated 18.06.2024) (1) The BANK shall be independent in making decisions regarding the selection of credit or financial institutions and the direct granting of loans.

(2) (As amended by resolution of the sole owner of the capital dated 20.07.2021) Approval of credit transactions and amendments to contracts already concluded shall be carried out in accordance with the Bank's rules for lending activities in force at the relevant time, the Articles of Association and applicable law.

SECTION IV
OBJECTIVES AND PRINCIPLES OF THE BANK

Art. 10. The objectives of the Bank shall be:

improving, stimulating and developing the overall economic, export and technological potential of SMEs by facilitating their access to finance;
Attracting and managing the medium and long-term domestic and foreign resources needed for the country's economic development:
implementing schemes and instruments to finance public investments and projects that are priorities for the country's economy;
fundraising and project management from international financial and other institutions:
attracting funds and providing financing to reduce regional imbalances in the country:
funding projects of local companies creating exports, innovation, high employment and/or added value,
financing companies operating in priority sectors of the economy, in accordance with the adopted government policy for economic development, as well as those implementing strategic projects and/or projects of national and/or regional importance.
Art. 11. (1) In carrying out its activities, the Bank shall be guided by the principles of transparency, neutrality, profitability, efficiency, market compatibility and good banking practice.

The BANK shall create conditions for compliance with the requirements for confidentiality, prevention and disclosure of conflict of interest by all its employees.
The BANK does not have as its main objective to achieve maximum profit.

CHAPTER II
FIXED CAPITAL AND SHARES

SECTION 1
CAPITAL

Art. 12. (as amended. and supplemented by the resolution of the sole owner of the capital dated 21.07.2022) The share capital of the BANK shall be BGN 1 135 500 000 (one billion one hundred and thirty-five million and five hundred thousand) and shall consist of:

а cash contribution - BGN 587 963 500 (five hundred eighty-seven million nine hundred sixty-three thousand five hundred Bulgarian levs);
a cash contribution of BGN 700 000 000 (seven hundred million Bulgarian levs):
a cash contribution of BGN 140 000 000 (one hundred and forty million Bulgarian levs);
an in-kind contribution of BGN 1 610 000 (one million six hundred and ten thousand Bulgarian levs) as an in-kind contribution in respect of immovable property, to be contributed by the Ministry of Finance with the rights of the contributor, pursuant to the Act of Private State Ownership No. 00218/21.05.1999 and the Order of the Council of Ministers No. 16/13.04.1999, and comprising of: a two-storey solid building with basement and attic premises with a total floor area of 2315.79 m2, located in Sofia, 1 Dyakon Ignatii Str., plot II (plot second) of borough 482; with the said property abutting on: east - plot VIII; west - Dyakon Ignatii Str.; north - plots II-7 and III-8; south – Aksakov Str.. The monetary valuation of the property is BGN 1 610 000;
an in-kind contribution - BGN 12 200 000 (twelve million and two hundred thousand Bulgarian levs), to be paid by the Bulgarian State, represented by the Ministry of Finance, representing the value of the ownership right to the immovable property - private state property, namely. Regulated Landed Property (RLP) II in borough 482 of the Zoning Plan of the City of Sofia, Centrum locality, having an area of 893.42 m2 (eight hundred and ninety-three square meters point forty-two), and on sketch – landed property with identifier 68134.100.122 and an area on sketch of 903 m2, located in Sofia, Sredets District, 1 Dyakon Ignatii St., with the said property abutting on: northeast - RLP I; southeast - RLP I and RLP III; southwest - RLP III; northwest - street with axial points 208, 208a and 208b; as shown on Private State-Owned Property Certificate No. 06449 dated January 23, 2008 and in implementation of Council of Ministers Decision No. 340 of May 28, 2010.
The amount of the capital referred to in the first sentence was formed after the capital reduction by the Resolution of the sole owner of the capital dated 21 July 2022 by cancellation of 3 062 735 (three million sixty-two thousand seven hundred thirty-five) ordinary registered voting shares with a nominal value of BGN 100 each.

SECTION II
SHARES

Art. 13.(1) (as amended by resolution of the sole owner of the capital dated 21.07.2022) The capital of the BANK shall be divided into 11 355 000 (eleven million three hundred and fifty-five thousand) registered dematerialised shares with a nominal value of BGN 100 /one hundred/ each.

(as amended by resolution of the sole owner of the capital dated 21.05.2021) Each share is registered and indivisible and carries one vote, the right to a dividend and a liquidation share in proportion to the nominal value of the share.
Where the share belongs to several persons, they shall exercise the rights thereunder jointly by appointing a proxy.
The Bank's shares may not be pledged. Rights to shares may not be subject to transfer transactions.
The shareholders' book of the BANK is an extract from the register of security holders of the Central Depository.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The amount of the annual share dividend shall be determined by the Sole Owner of the capital.
Dividend shall be paid to shareholders for the relevant year only upon full payment of their subscribed capital.
Any shareholder may waive his or her dividend entitlement. In this case, the funds shall be paid into the bank's "Additional Reserves" fund.
Art. 14. By acquiring shares, the shareholder shall be deemed to have accepted the Articles of Association of the BANK.

SECTION III
CAPITAL RESTRICTIONS

Art. 15. (1) The shareholding of the State may not be less than 51% of the registered share capital at the time. The shares of the State forming such shareholding shall not be transferable.

In addition to the Bulgarian State, the shares of the Bank's capital may be acquired and held by the Council of Europe Development Bank, the European Investment Bank and the European Investment Fund and by development banks from EU Member States.

SECTION IV
CAPITAL INCREASE AND DECREASE

Art. 16. (1) The amount of the share capital may be amended in accordance with the procedure laid down in the legislation and these Articles of Association. The decision to amend shall specify the manner in which it is to be effected.

Art. 17.(1) (as amended by resolution of the sole owner of the capital dated 21.05.2021) The capital of the BANK may be increased by resolution of the sole owner of the capital by:

issuing new shares;
increasing the nominal value of the shares:
the conversion of bonds into shares under the procedure provided for in the Commerce Act;
other means permitted by law.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The sole owner of the capital may decide to increase the capital by converting part of the profit into capital.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The capital may be increased by cash and non-cash contributions. When deciding to increase the Bank's capital by contributions, the sole owner of the capital shall set a time limit for making the contributions, which may not be longer than 6 months from the registration of the capital increase.
Art. 18. A capital increase shall be admissible only after the amount specified in the Articles of Association has been fully paid up.

Art. 19. (repealed by decision of the sole owner of the capital of 21.05.2021).

Art. 20. (repealed by resolution of the sole owner of the capital dated 21.05.2021).

Art. 21. (as amended by resolution of the sole owner of the capital dated 21.05.2021) Where the capital of the BANK is increased by a contribution in kind, the resolution of the sole owner of the capital shall specify the object of the contribution, the person making it and the nominal value of the shares granted in exchange for such contribution.

Art. 22. (as amended by resolution of the sole owner of the capital dated 21.05.2021) The increase of the capital shall be carried out in the manner provided for in the Commerce Act and in compliance with the requirements of the Credit Institutions Act. In exchange for the contributions made, the Sole owner of the capital shall receive registered dematerialised shares.

Art. 23. (As amended by resolution of the sole owner of the capital dated 21.05.2021) In case of failure to pay contributions within the stipulated time limit, the sole owner of the capital shall owe the BANK the statutory interest for delay.

Art. 24. (as amended by resolution of the sole owner of the capital of 21.05.2021) Shares on which the due contributions have not been made or which have not been sold within the prescribed period shall be cancelled and the Sole Owner of the capital shall take action to reduce the capital to the amount of the capital actually paid in. The decision to amend must be taken not later than three months after the expiry of the period referred to in Article 17, paragraph 3 of these Articles of Association.

Art. 25. (as amended by resolution of the sole owner of the capital dated 21.05.2021) The reduction of the share capital shall take place by resolution of the sole owner of the capital and subject to the provisions of the Commerce Act and the Credit Institutions Act.

Art. 26. The decision on the reduction must contain the purpose of the reduction and the manner in which it will be carried out.

Art. 27. The capital may be reduced by:

reduction of the nominal value of shares;
 cancellation of shares.
Art. 28. (repealed by resolution of the sole owner of the capital dated 21.05.2021)

SECTION V
SHARE BUYBACK

Art. 29. The BANK may repurchase its own shares subject to the requirements of the law.

SECTION VI
BONDS

Art. 30. The BANK may issue bonds and convert the same into shares in accordance with the procedure and under the conditions specified by the Commerce Act.

 

CHAPTER III
PROPERTY, EQUITY, FUNDS AND LIABILITY

Art. 31. The property of the BANK shall consist of property rights, bond rights and obligations, rights to intellectual property objects, securities, shares in commercial companies and other rights, obligations and de facto

relationship.

Art. 32. (1). The BANK shall maintain its own capital in accordance with the regulatory requirements.

The total amount of the Bank's shareholdings in subsidiaries that are not banks, investment intermediaries, insurers or financial institutions may not exceed 40 per cent of its equity capital, and together with its investments in real estate and other tangible fixed assets - its equity capital.
The bank's direct and/or indirect shareholding in a company which is not a bank, investment firm, insurer or financial institution may not exceed 15 per cent of its equity capital:
Art. 33. (1). The BANK shall form funds in accordance with the legislation in force.

The BANK periodically assesses loans and other risk exposures and makes impairments and provisions according to criteria set by the Bulgarian National Bank.
Art. 34. (1). The Bank shall mandatorily form a reserve fund, which shall be replenished for the annual financial result after taxes, but not less than 1/10 of the profit after taxes, up to 10 per cent of the authorized capital.

(2) The Bank may not pay dividends or make capital distributions before setting aside the necessary funds for the Reserve Fund, and if this would result in a breach of the requirements established by the Bulgarian National Bank.

Reserve Fund resources shall be used only to cover the annual loss and/or to cover losses from the previous year's operations of the BANK, after the depletion of special reserves.
Where the resources of the Reserve Fund exceed the minimum amount referred to in paragraph 1, the excess may be used to pay dividends as well as to increase the capital.
The BANK may also establish other funds as decided by the Board of Directors.
Art. 35. The BANK shall be liable for its obligations with its property.

Art. 36.(1) The BANK shall guarantee the secrecy of the operations carried out by its customers in accordance with the legislation in force.

All employees of the BANK, the members of the management and control bodies of the BANK, as well as all other persons working for the BANK, shall sign a declaration of bank secrecy.

CHAPTER IV
MANAGEMENT OF THE COMPANY

SECTION I
BODIES OF THE COMPANY

Art. 37. The management bodies of the BANK shall be:

(as amended by resolution of the sole owner of the capital dated 21.05.2021) Sole owner of the capital.
Supervisory Board.
Board of Directors.

SECTION II
SOLE OWNER OF THE CAPITAL

(as amended by resolution of the sole owner of the capital dated 21.05.2021)

Art. 38. (repealed by resolution of the sole owner of the capital of 21.05.2021).

Art. 39. (repealed by resolution of the sole owner of the capital of 21.05.2021).

Art. 40. (as amended by resolution of the sole owner of the capital of 21.05.2021 and a resolution of 07.06 2024): The sole owner of the capital shall:

amend and supplement the Articles of Association of the BANK;
increase and decrease capital;
reorganize and dissolve the BANK;
elect and dismiss the members of the Supervisory Board in accordance with the procedure laid down in Art. 50, paragraph 1 of these Articles of Association and determine their remuneration;
select a specialist audit firm to audit and certify the annual accounts;
elect and dismiss the management of the specialised internal audit service;
approve the annual financial statements after certification by the selected specialist audit firm;
takes a decision to issue bonds;
appoint liquidators upon the dissolution of the BANK, except in the event of insolvency;
discharge the members of the Supervisory Board and the Board of Directors;
decide on other matters within its competence as provided by law or the Articles of Association.
Art. 41. (repealed by resolution of the sole owner of the capital dated 21.05.2021).

Art. 42. (repealed by resolution of the sole owner of the capital dated 21.05 2021 ).

Art. 43. (repealed by resolution of the sole owner of the capital dated 21.05 2021).

Art. 44. (repealed by resolution of the sole owner of the capital dated 21.05.2021).

Art. 45. (repealed by resolution of the sole owner of the capital dated 21.05.2021).

Art. 46. (repealed by resolution of the sole owner of the capital dated 21.05.2021)

Art. 47. (repealed by resolution of the sole owner of the capital dated 21.05.2021).

Art. 48. (repealed by the sole owner of the capital on 21.05.2021).

Art. 49. (As amended by resolution of the sole owner of the capital dated 21.05.2021) (1) For each resolution of the sole owner of the capital, a written record shall be drawn up and signed.

Resolutions of the sole owner of the capital shall take effect immediately unless postponed.
The resolutions of the sole owner of the capital for amending and supplementing the Articles of Association and for dissolution of the Bank shall come into force after their entry in the Commercial Register and the Register of Non-Profit Legal Entities.
Increase and decrease of capital, transformation of the Bank, election and dismissal of members of the Boards, as well as appointment of liquidators shall have effect from their entry in the Commercial Register and the Register of Non-Profit Legal Entities.
The minutes of the resolutions of the sole owner of the capital and the annexes thereto shall be filed in a minute book and kept for at least five (5) years.

SECTION III
SUPERVISORY BOARD

Art. 50. (1) (as amended by resolution of the sole owner of the capital dated 21.05.2021 and resolution dated 10.06.2021 and resolution dated 07.06.2024.) The Supervisory Board shall consist of three to seven persons who shall be elected for a term of five years by the sole owner of the capital from among the nominees proposed by the sole owner of the capital and identified and recommended by the Selection Committee, in accordance with the Internal Rules for Selection, Succession and Suitability Assessment of the Supervisory Board approved by the sole owner of the capital and pursuant to Article 51(3)(3) of these Articles of Association. A member of the Supervisory Board may also be removed from office before the expiry of his tenure in the event of his death or placement under disability or in the event of his factual inability to exercise his powers as a member of the Supervisory Board for more than one year. The mandate of a member of the Supervisory Board may be terminated early by the sole owner of the capital in the event of a negative subsequent assessment of individual suitability. The mandate shall be terminated automatically as from the date on which the circumstances referred to in Article 11(2) in conjunction with Article 11, paragraph 1, items 3-8 of the Credit Institutions Act, which would prohibit the person from being a member of the Supervisory Board of a credit institution.

Members of the Supervisory Board shall be eligible for re-election without restriction.
A person who does not meet the statutory conditions may not be a member of the Supervisory Board.
The Supervisory Board may not participate in the management of the BANK. It shall represent it only in relations with the Board of Directors.
The Supervisory Board shall adopt rules for its work and elect a Chair or a Deputy Chair from among its members.
The Chairperson shall convene meetings of the Supervisory Board at least once every three months on his/her own initiative, at the request of a member of the Supervisory Board or at the request of at least two members of the Board of Directors made through the Chairman of the Board of Directors. A meeting of the Supervisory Board may also be convened at the request of the Bulgarian National Bank to decide on the measures to be adopted by the BANK.
The Supervisory Board may at any time request the Board of Directors to provide information or a report on any matter affecting the BANK.
The Supervisory Board has the right to request the reports of Internal Audit. as well as the opinions and reports of the Audit Committee on matters within their competence.
The Supervisory Board may make the necessary enquiries in the performance of its duties and may use experts for this purpose.
The Supervisory Board shall:
elect and dismiss the members of the Board of Directors from among the nominees identified and recommended by the Selection Committee in accordance with the procedure laid down in Article 51(3)(3) of these Articles of Association, determining their remuneration and may replace them in accordance with the legal requirements;
approve the rules of procedure of the Board of Directors;
approve the rules for the organisation and operation of Internal Audit;
(as amended by resolution of the sole owner of the capital dated 21.05.2021) shall monitor the implementation of the decisions of the sole owner of the capital and the implementation of the strategic objectives of the BANK:
remove members of the Board of Directors in cases where they do not meet the requirements of the law for holding such a position.
approve the remuneration policy and is responsible for its implementation;
decide on matters provided for in the law and these Articles of Association.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) Exposures to a single client or group of related clients, the amount of which exceeds BGN 1 000 000 shall be granted by the Board of Directors only after authorisation of the Supervisory Board.
Art. 51. (as amended by resolution of the sole owner of the capital dated 07.06.2024) (1) The members of the Supervisory Board shall have equal rights and obligations irrespective of the internal allocation of functions between them

The members of the Supervisory Board are obliged to perform their duties in the interest of the BANK and its shareholders, and to keep the banking secrecy even after they cease to be members of the Supervisory Board by signing a declaration to that effect.
The Bank shall establish the following committees and subsidiary bodies to the Supervisory Board:
a Risk Management Committee, functioning on the basis of Ordinance No. 7 of 2014 of the BNB on the organisation and management of risks in the banks in connection with Article 73, paragraph 1, item 4 and paragraph 6 of the Credit Institutions Act. The Risk Management Committee advises the Supervisory Board and the Board of Directors in relation to the overall current and future risk strategy and risk appetite of the BANK and assists in overseeing its implementation by senior executives.
a Remuneration Committee functioning on the basis of Ordinance No. 4 of 2010 of the BNB on remuneration requirements in banks in connection with Article 73b of the Credit Institutions Act. The Remuneration Committee determines the remuneration policies and practices and the incentives created thereunder for risk, capital and liquidity management.
The Selection Committee, functioning on the basis of Ordinance No. 20 of 2019 of the BNB on the requirements for members of the management and supervisory bodies of a credit institution, as well as for the assessment of their suitability and of persons holding key positions in relation to Article 73c of the Credit Institutions Act. The Selection Committee shall identify and recommend for election by the Supervisory Board, and in the case of the election of members of the Supervisory Board - by the sole owner of the capital, candidates for members of the Board of Directors and the Supervisory Board, taking into account the balance of professional knowledge and skills, the diverse qualifications and professional experience of the members in the composition of the Board necessary for the management of the Bank.
an Advisory Council with the participation of representatives of nationally representative organizations of employers , nationally representative organizations of employees, and the National Association of Municipalities in the Republic of Bulgaria. The Advisory Council supports the process of interaction between the BBB and the organisations involved: facilitates public scrutiny of the Bank's activities in relation to the successful implementation of its objectives and tasks; provides preliminary opinions to the sole owner of the capital on changes to the Supervisory Board.
Art. 52. (1) The Supervisory Board may adopt decisions if at least half of its members are present in person or are represented by another member of the Board by written power of attorney, unless the decisions are to be taken unanimously. No person present may represent more than one absentee.

Decisions of the Supervisory Board shall be taken by a simple majority of all members, unless the law, these Articles of Association or the rules of procedure of the Supervisory Board require a different majority.
The Supervisory Board may also adopt decisions in absentia by minutes signed by all members who declare their consent to the decision.
Art. 53. (1) The members of the Supervisory Board shall provide a guarantee for their management in the amount of three months' gross remuneration.

The members of the Supervisory Board shall be jointly and severally liable for the damages they have culpably caused to the BANK.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) Any member of the Supervisory Board may be discharged from liability by the sole owner of the capital if it is established that it is not at fault for the damage.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The relationship between the Bank and a member of the Supervisory Board shall be governed by a contract. The contract shall be concluded on behalf of the Bank through a person authorised by the sole owner of the capital.

SECTION IV
BOARD OF DIRECTORS

Art. 54. (as amended by resolution of the sole owner of the capital dated 10.06.2021) (1) The BANK shall be managed and represented by a Board of Directors composed of 3 (three) to 7 (seven) members.

The Board of Directors shall manage the activities of the BANK and shall exercise its rights and duties as provided by law, these Articles of Association, its rules of procedure and other internal rules of the BANK.
Members of the Board of Directors shall be elected for a term of 5 years and may be re-elected without limitation.
No person may be a member of the Board of Directors who does not meet the requirements laid down in the statutory provisions.
No legal entity may be elected as a member of the Board.
The Board of Directors shall adopt rules of procedure and submit them to the Supervisory Board for approval.
The Board may elect a Chair and a Deputy Chair from among its members.
The Board of Directors meets at regular meetings at least once a month to discuss the status and development of the BANK.
Any Board member may call a meeting to discuss individual matters.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The Board of Directors shall decide on all matters which are not within the exclusive competence of the sole owner of the capital or the Supervisory Board.
The Board of Directors has full responsibility for the operational management of the BANK.
Art. 55. (1) The Board of Directors, with the approval of the Supervisory Board, shall elect and empower at least two executive members - executive directors.

The Bank shall be jointly represented by two Executive Directors or at least one Executive Director and one Procurator. They may not delegate the overall management and representation of the BANK to one person but may authorise employees of the BANK or third parties to carry out individual acts. None of the members of the Board of Directors may manage and/or represent the BANK alone but may authorise third parties to perform individual acts.
(3) (as amended by resolution of the sole owner of the capital dated 21.05.2021) The names of the persons authorized to represent the BANK shall be entered in the Commercial Register and the Register of Non-Profit Legal Entities with the Registry Agency.

The authorization and its revocation shall have effect against third parties acting in good faith from the time of entry.
The relationship between the Bank and a member of the Board of Directors is governed by a management contract. The contract shall be concluded in writing on behalf of the company through the Chairman of the Supervisory Board or through a member authorised by him.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The Board of Directors shall, in accordance with the procedure provided for by law and these Articles of Association, elect branch managers and any other person who may enter into transactions on behalf of the BANK, except those persons who are legally elected by the sole owner of the capital of the BANK.
Art. 56. (1) The members of the Board of Directors shall have equal rights and obligations regardless of:

1. the internal allocation of functions between them;

2. the provisions conferring management rights on executive directors.

(2) The members of the Board of Directors are obliged to perform their duties in the interest of the BANK and its shareholders and to keep the banking secrecy after they cease to be members of the Board by signing a declaration to that effect.

Art. 57. (1) The Board of Directors may adopt decisions if more than half of its members are present in person or represented by another member of the Board by written proxy. No member present may represent more than one absentee.

(2) Decisions shall be taken by a simple majority of the members of the Board of Directors represented at the meeting, except in the cases provided for by law and these Articles of Association and the internal rules of the Bank.

(3) Minutes shall be kept of the meetings of the Board of Directors and the decisions adopted and shall be signed by all members present.

(4) The Board of Directors may also take decisions by absentia, with minutes signed by all members who declare their agreement to the decision.

(5) Decisions of the Board of Directors requiring the approval or confirmation of the Supervisory Board shall take effect when given.

(6) A minute book shall be kept for all decisions of the Board.

(7) The Board of Directors shall immediately notify the Chairman of the Supervisory Board of any circumstances that arise that are material to the Company. The Board of Directors shall take decisions, subject to the prior consent of the Supervisory Board, concerning the establishment of branches and representative offices of the BANK.

(8) The Board of Directors shall unanimously decide on the formation of an exposure to a single client or a group of related clients, the amount of which exceeds BGN 1 000 000, subject to the requirements of the Credit Institutions Act and the Bank's internal rules.

Art. 58. (1) The members of the Board of Directors shall be jointly and severally liable for any damages they have caused to the BANK.

Any member of the Board of Directors may be exempted from liability if it is established that he or she was not at fault for the damage.
By their election, the members of the Board of Directors shall deposit a guarantee for their management in the amount of three months' gross remuneration.
Art. 59. The Executive Directors shall:

organize the implementation of the decisions of the management bodies of the BANK:
carry out the overall management, organization and day-to-day management control of the activities of the BANK, ensure the management and protection of its assets:
by decision of the Board of Directors, authorize branch managers and other persons who may conclude transactions on behalf of the BANK;
conclude, amend and terminate employment contracts with the employees of the BANK;
perform the functions assigned to them by a statutory instrument or by the Board of Directors:
each of the Executive Directors shall report to the Board on the occurrence of circumstances that are material to the BANK
Art. 59a. (1) Executive directors may allocate among themselves their duties, each being responsible for a relevant field of the Bank's activities, their functions being specified in the Rules of Procedure of the Board of Directors.

Executive Directors are entitled to additional remuneration to be determined by the Supervisory Board.
Article 59b. (1) Upon a decision of the Board of Managing Directors and after the approval of the Supervisory Board, preceded by the approval of the BNB, one or more natural persons may be entrusted and authorized as commercial representative - procurator of the BANK and/or of its branch. The proxy shall exercise his powers of representation of the BANK in accordance with the law and these Articles of Association.

(2) A procurator's contract shall be concluded with the procurator, which shall regulate the powers and duties of the procurator in the performance of actions in the management of the BANK in accordance with the law and these Articles of Association.

(as amended by resolution of the sole owner of the capital dated 21.05.2021) The authorization of a procurator shall be made by notarized signature and shall be applied for entry in the Commercial Register and the Register of Non-Profit Legal Entities. The authorisation shall be terminated by its withdrawal and the entry of the withdrawal in the Commercial Register and the Register of Non-Profit Legal Entities.
Section V

AUDIT COMMITTEE

Art. 60. (1) The BANK shall establish an Audit Committee acting in accordance with the provisions of the Independent Financial Audit Act and other relevant legislation.

(as amended by resolution of the sole owner of the capital dated 21.05.2021) The Audit Committee shall consist of three members to be elected by the sole owner of the capital for a term of 3 years.
The members of the Audit Committee must meet all legal requirements for independence and avoidance of conflicts of interest.
The members of the Audit Committee are obliged to perform their duties in the interest of the BANK, to keep the bank's secrecy and after they cease to be members of the Audit Committee, they shall sign a declaration to that effect.
The Audit Committee shall have the following functions:
monitors the financial reporting processes in the BANK;
monitors the effectiveness of the internal control systems in the BANK:
monitors the effectiveness of the Bank's risk management systems:
oversees the independent financial audit of the BANK;
reviews the independence of the registered auditor of the BANK in accordance with the requirements of the Independent Financial Audit Act and the Code of Ethics for Professional Accountants, including monitoring the provision of additional services by the registered auditor of the BANK;
makes recommendations for the selection of the registered auditor,
reports to the Supervisory Board on all matters within its competence
(as amended by resolution of the sole owner of the capital dated 21.05.21.) The Audit Committee shall report on its activities once a year to the sole owner of the capital together with the approval of the annual financial statements.

CHAPTER V
INTERNAL CONTROL

Art. 61. Internal control in the system of the BDB Group shall be a continuous process carried out by the management bodies and the persons engaged in internal control functions.

Art. 62. (1) Elements of internal control shall be the systems for:

Management control;
Risk Control;
Reporting and information; and
Internal Audit.
The first three elements of the internal control system are within the competence and authority of the respective management bodies.
The fourth element of internal control is the commitment of the bank's internal audit
Art. 63. (1) The Board of Directors shall establish an internal audit unit which shall carry out audit engagements in accordance with the terms of reference.

(As amended by resolution of the ECC dated 21.05.2021) The Head of Internal Audit shall be elected and dismissed by the sole owner of the capital.
Internal audit in the Bank's group is carried out as a follow-up through observations, checks and assessments of the operations, activities and processes carried out and, in certain cases, as a preventive audit, in order to advise on the internal regulatory framework of the organisation and operating procedures of the Bank and its subsidiaries. Its objectives, tasks and functions are derived from the principles and standards of professional practice of internal audit and are tailored to the specific nature of the audited entities and processes within the Bank's group.
In performing its functions, Internal Audit reviews and evaluates:
operational activity;
(as amended by resolution of the sole owner of the capital dated 21.05.2021) the execution of the orders, contracts and decisions of the sole owner of the capital, the Supervisory Board and the Board of Directors;
the legality, compliance with accepted standards, accuracy and completeness of the reporting and information system, its reliability and information availability:
protection of the property of the BANK:
(as amended by resolution of the sole owner of the capital dated 21.05.2021) other tasks assigned by the sole owner of the capital, the Supervisory Board and the Board of Directors.
Art. 64. (as amended by resolution of the sole owner of the capital dated 21.05.2021) If the officers of the internal audit unit and their supervisor find a violation committed by the Board of Directors or its members, they shall submit a report to the Supervisory Board and, where the findings relate to the Supervisory Board or its members - to the Sole owner of the capital. The Head of the Internal Audit Unit shall immediately inform the Bulgarian National Bank of the breaches in the management of the BANK which he has identified, and which have resulted or may result in material damage to the BANK.

Art. 65. Employees of the internal audit unit may not be members of the Board of Directors or the Supervisory Board, as well as spouses and relatives by consanguinity and affinity up to the third degree, including each other or members of the Supervisory Board or the Board of Directors.

Art. 66. The Board of Directors shall approve, and the Supervisory Board shall endorse the Articles of Association, the Code of Ethics and the Rules for the Organization and Activities of Internal Audit in accordance with the Credit Institutions Act, the Ordinance on Internal Control in the Banks of the Bulgarian National Bank and the International Professional Practices on Internal Audit.

CHAPTER VI
BANK BRANCHES

Art. 67. (1) The Bank may open branches, representative offices and offices in the country. The Bank may open more than one branch in a separate locality, including its head office.

Bank branches shall carry out the transactions which are the subject of the BANK's business within the scope of the powers submitted to them by the Board of Directors and in accordance with the procedure set out in the internal rules.
Subject to the provisions of Bulgarian law, the BANK may open branches, representative offices and offices abroad in accordance with the legislation in force in the respective country.

CHAPTER VII
ANNUAL CLOSING AND PROFIT DISTRIBUTION

Art. 68. (1) The BANK shall keep accounts in accordance with the Accounting Act and the legislation in force.

The financial year of the BANK coincides with the calendar year.
The Board of Directors shall ensure, within the time limits prescribed by law, the annual closing of the financial year, the preparation of the annual financial statements of the activities of the BANK and submit them to the registered auditors selected by the sole owner of the capital.
The annual financial statements and the report on the activities of the BANK shall be prepared in the form and with the content specified for banking institutions.
(as amended by resolution of the sole owner of the capital dated 21.05.2021) The audited annual financial statement approved by the sole owner of the capital shall be submitted for publication in the Commercial Register and the Register of Non-Profit Legal Entities.
Art. 69. (as amended by resolution of the sole owner of the capital dated 21.05.2021) The distribution of profits shall be carried out on the proposal of the Board of Directors, approved by the Supervisory Board, by resolution of the sole owner of the capital, in accordance with the requirements of the law and these Articles of Association.

Art. 70. (1) Where the BANK closes its business with a loss, the loss may be deducted from taxable profits in the manner provided for in this legislation.

(as amended by resolution of the sole owner of the capital dated 21.05.20212.) The loss on the annual financial statement shall be covered by a resolution of the sole owner of the capital, insofar it is not provided for otherwise in the law.

CHAPTER VIII
STORAGE AND PROVISION OF INFORMATION

Art. 71. (1) The BANK shall establish and maintain in a current state an information system containing:

the Articles of Association and other internal rules with all amendments and additions thereto,
data on shareholders as determined by the BNB.
(as amended by resolution of the sole owner of the capital dated 21 May 2021) books containing the minutes of the meetings of the sole owner of the capital and other management and control bodies:
accounting information that clearly and fairly reflects the nature, amount and basis of transactions entered into and their effect on the financial condition of the bank, from which it can be ascertained whether the bank is conducting its business in accordance with the provisions of the Credit Institutions Act:
information per client with details of transactions concluded with or on behalf of them and their credit and debit balances;
other information in accordance with the requirements of the Credit Institutions Act and BNB Acts.
Art. 72. The Bank shall establish and maintain files for each loan with data on the client, the grounds, conditions and amount of the loan and its collateral, the decision of the competent authority to grant the loan and any other data related to the conclusion and performance of the contract.

CHAPTER IX
TERMINATION AND LIQUIDATION

Art. 73. The activity of the Bank shall be terminated according to the procedure and in the cases stipulated by the law.

TRANSITIONAL AND FINAL PROVISIONS

1 The provisions of the Commerce Act, the Credit Institutions Act and other special laws governing the activities of banks and banking transactions, as well as the legislation in force in the country shall apply to matters not explicitly settled herein.
2 These Articles of Association was adopted at the Founding Shareholders' Meeting of Encouragement Bank AD held in the city of Sofia on 15.01.1999, amended and supplemented by the resolutions of the General Meeting of Shareholders of 15.10.1999, 23.03.2001, 19.10.2001 and 11.01.2002, of 25.01.2003, of 21.05.2004, of 01.02.2006, of 23.05.2006, of 26.03 2007, of 04.05.2007, of 29.04.2008, of 27.06.2008, of 05.12.2008, of 08.09.2009, of 07.06.2010, of 10.09.2010, of 08.12.2011, of 25.03.2013, of 02.07.2013, of 04.07.2014, of 26.01.2015, of 07.04.2015, of 28.11.2016, of 13.11.2017, of 08.11.2019, of 02.04.2020, of 06.07.2020 and of 20.08.2020, as well as by resolutions of the sole owner of the capital of 21.05.2021, of 01.06.2021, of 10.06.2021, of 20.07.2021, of 07.06 2022, of 21.07.2022, of 07.06.2024 and of 18.06.2024.
3 The cash contribution of BGN 140 000 000 (one hundred and forty million) shall be paid by the State through the Minister of Economy as follows:
25 per cent of the nominal/issue value of each new share, namely BGN 35,000,000 (thirty-five million) in total - within 30 (thirty) days from the date of the extraordinary general meeting of shareholders at which the decision to increase the company's capital by BGN 140,000,000 was taken:
75 per cent of the nominal/issue value of each new share, namely a total of BGN 105,000,000 (one hundred and five million) - within the period specified by the effective legislation;