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RULES
OF PROCEDURE OF THE BOARD OF DIRECTORS OF ADVANCE TERRAFUND REIT
I.
GENERAL PROVISIONS
Article 1. These Rules shall be adopted in accordance with Article 48 of the Bylaws of
ADVANCE TERRAFUND REIT, regulate the rights and obligations of the members of the Board
of Directors of ADVANCE TERRAFUND REIT and ensure the effective organization of the
Company.
/2/ The Board of Directors shall decide on all issues concerning the Company that are
beyond the scope of competence of the General Meeting of Shareholders.
Article 2. /1/. The Board of Directors of the Company shall be elected by the General
Meeting of Shareholders for a mandate of 5 (five) years.
/2/ Members of the Board of Directors may be reelected without limitation.
/3/ Upon mandate expiry, members of the Board of Directors shall continue the
performance of their functions until the election of a new Board of Directors by the General
Meeting of Shareholders.
Article 3. /1/. The Board of Directors shall be in the composition of 3 (three) to 5 (five)
active individuals and/or legal entities elected by the General Meeting of Shareholders.
/2/ Where a member of the Board of Directors is a legal entity, such member shall
appoint a reprehensive to perform their functions in the Board of Directors. The legal entity
shall be jointly and unlimitedly liable with the other members of the Board of Directors for all
obligations arising out of the actions of their representatives.
Article 4. /1/ A member of the Board of Directors shall hold a higher education diploma
and shall not:
1. have been convicted of any willful crime of general nature;
2. have been declared insolvent as a private merchant or an unlimited liability
shareholder in a commercial company or be in insolvency proceedings;
3. have been a member of the managing or controlling body of a company or
cooperative dissolved due to insolvency over the last 2 (two) years preceding the date of
insolvency declaration decision, if there are any unsatisfied creditors;
4. have been deprived of the right to hold a position involving financial liability;
5. be a spouse or a relative up to third degree inclusive or direct or collateral relative of
another member or a member of the managing or controlling body of a servicing company.
/2/ The requirements mentioned in Paragraph 1 shall also apply to all individuals
representing legal entities that are members of the Board of Directors.
/3/ At least 1/3 (one-third) of the members shall be independent persons.
Article 5. An independent member of the Board of Directors may not be:
1. an employee of the Company;
2. a shareholder holding not less than 25% (twenty-five per cent) of the votes in the
General Meeting of Shareholders directly or through third parties or a related party of the
Company;
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3. a person having long-term business relations with the Company;
4. a member of the managing or controlling body of another company, a procurator or
an employee of a commercial company or another legal entity pursuant to Items 2 and 3 of
this Paragraph;
5. a related party of another member of the managing body of the Company.
II.
RIGHTS AND OBLIGATIONS OF THE MEMBERS OF THE BOARD OF
DIRECTORS
Article 6. /1/ All members of the Board of Directors shall meet the requirements of the
Law on Public Offering of Securities, the Law on Commerce, the Law on Special Purpose
Investment Companies and the Bylaws of ADVANCE TERRAFUND REIT.
/2/ The Board of Directors shall make decisions on the operations of the Company
insofar as such decisions are not within the exclusive scope of competence of the General
Meeting of Shareholders in accordance with the effective legislation and the Bylaws.
Article 7. The members of the Board of Directors shall perform their functions with due
diligence and to the best interest of shareholders, undertaking:
1. to perform their official duties in a professional and responsible manner that they
reasonably consider to be in the interest of all shareholders of the Company, using reliable,
detailed and timely information only;
2. to give priority to the interest of the Company and its investors over their own
interests and to refrain from using facts or circumstances, which come to their knowledge in
the course of performance of their official and professional duties, to gain personal benefit or
benefit other persons at the expense of the Company and its shareholders;
3. to refrain from disclosing information on the discussions and decisions made at the
sessions of the Board of Directors and other non-public information about the Company,
including after termination of their membership with the Board of Directors, until the public
disclosure of such information by the Company.
4. to provide and disclose information to shareholders and investors in accordance with
the regulatory and internal documents of the Company.
Article 8. In managing the Company, the Board of Directors shall strictly comply with the
restrictions set forth in Article 114 and the following of the Law on Public Offering of
Securities and the effective legislation.
Article 9 /1/ Prior to election of a person nominated for a member of the Board of
Directors, such person shall notify the General Meeting of Shareholders of any participation in
commercial companies as an unlimited liability shareholder, holding of over 25 (twenty-five
per cent) of the capital of another company and/or participation in the management of other
companies and cooperatives as a procurator, a manager or a board member. Where such
circumstances occur after election, the person elected a member of the Board of Directors
shall duly notify the Board of Directors in writing and the Board of Directors shall present all
received notices to the Company at the next session of the General Meeting of Shareholders.
/2/ A member of the Board of Directors shall be entitled, on own behalf or on behalf of
other persons, to execute commercial transactions, to participate in commercial companies as
an unlimited liability shareholder and be a procurator, a manager or a board member of other
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companies or cooperatives performing activities that are competitive to these of the Company
provided that the Board of Directors of the Company preliminary approves such participation
with an unanimous decisions of all its members.
Article 10. /1/ The members of the Board of Directors shall present all information, data
and documents required by applicable regulatory provisions to the Financial Supervision
Commission and other competent bodies and to the shareholders of the Company.
/2/ A member of the Board of Directors shall submit an annual declaration of property
and business interest to the Financial Supervision Commission.
Article 11. /1/ The members of the Board of Directors shall have equal rights and
obligations regardless of the internal allocation of functions and of the additional rights
management and representation rights given to the Executive Director (Member).
/2/ The members of the Board of Directors shall perform their obligations in the interest
of the Company and keep all its secrets throughout the period of mandate.
III.
COMPOSITION, MANAGEMENT AND REPRESENTATION
Article 12. /1/ The Company shall be operationally managed by an Executive Director
elected by the Board of Directors with a majority of 2/3 (two-thirds).
/2/ The Executive Director shall be appointed for a mandate that is the same as the
mandate of the Board of Directors and perform assigned functions until the election of a new
Executive Director.
/3/ The management powers of the Executive Director shall be set forth in the election
decision made by the Board of Directors and the management agreement.
/4/ The authorization of the Executive Director may be withdrawn based on a decision
made by the Board of Director with the majority required for the election, at any time.
/5/ The Executive Director shall generally report to the Board of Directors.
/6/ At a regular session of the Board of Directors, the Executive Director shall report
their activities on a current basis.
/7/ Where the Executive Director is absent, their functions related to the management of
the Company shall be performed by the Chairperson of the Board of Directors.
Article 13. /1/ The Company shall be represented by the Executive Director (Executive
Member) elected by the Board of Directors.
/2/ All persons authorized to represent the Company shall be permanently residing in the
Republic of Bulgaria.
/3/ The names of the persons pursuant to Paragraph 1 shall be entered into the
Commercial register and promulgated.
Investor Relations Director
Article 14. /1/ The Board of Directors of the Company shall appoint an Investor Relations
Director under the terms and conditions of an employment agreement.
/2/ The Investor Relations Director shall have proper qualification and/or experience to
perform the assigned functions and may not be a member of the Board of Directors or a
procurator of the Company.
/3/ The Investor Relations Director shall:
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1. ensure the effective communication between the Board of Directors of the Company
and its shareholders and the persons interested in investing in securities of the Company,
providing information on the current financial and economic position of the Company and any
other information to which they are legally entitled in the capacity of shareholders or
investors;
2. ensure the sending of the materials related to a convoked session of the General
Meeting of Shareholders to all requesting shareholders within the statutory time limit;
3. take and keep true and detailed minutes at the sessions of the Board of Directors of
the Company;
4. ensure the timely submission of all required reports and notices of the Company to
the Deputy Chairperson in charge of the Investment Supervision Division of the Financial
Supervision Commission, the regulated market where the securities of the Company are
traded and the Central Depository;
5. keep a register of all sent materials pursuant to Items 2 and 4 and received requests
and provided information pursuant to Item 1, describing related reasons for no provision of
such information, if applicable.
/4/ The Investor Relations Director shall report to the shareholders at the annual session
of the General Meeting of Shareholders.
/5/ The members of the Board of Director shall render assistance to the Investor
Relations Director and control the performance of functions pursuant to Article 3.
/6/ Article 116a, Paragraph 1 and Article 116b of the Law on Public Offering of Securities
shall apply to the Investor Relations Director.
IV.
SCOPE OF COMPETENCE OF THE BOARD OF DIRECTORS
Article 15. /1/ The Board of Directors shall:
1. assign the evaluation of real estates to be acquired by the Company to one or more
experts with proper qualification and experience in accordance with the requirements of the
Bylaws and the Law on Special Purpose Investment Companies;
2. make a decision on the conclusion of a preliminary agreement or an agreement in the
form of notary deed on acquisition and/or disposal of real estate or real right subject to the
limitations set forth in the Bylaws and the effective legislation;
3. appoint and dismiss persons to act as an Executive Director and Chairperson and
Deputy Chairperson of the Board of Directors
4. appoint and dismiss employees of the Company, including the person to act or acting
as an Executive Director, and determine their remuneration;
5. undertake actions related to the preparation of the Annual Financial Statements;
6. approve a proposal on profit allocation;
7. conclude, terminate and cancel agreements with the servicing company(ies) and the
depository bank as set forth there in or in the effective Bulgarian legislation subject to the
approval of the Financial Supervision Commission and present a comprehensive report on the
grounds for termination or cancellation of such agreements at the next session of the General
Meeting of Shareholders;
8. control the performance of all agreements with the servicing company(ies) and the
depository bank and render assistance to the latter in the course of performance of their
functions in accordance with the effective legislation and the Bylaws;
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9. elect and authorize investment intermediaries to undertake and/or service the issues
of shares upon increase of the capital of the Company and the issues of bonds issued by the
Company;
10. adopt Rules of Procedure to govern its activities and approve Internal Organization
Rules of the Company;
11. immediately convoke a session of the General Meeting of Shareholders where
material circumstances concerning the Company occur in the cases provided for by law and/or
at own discretion;
12. make decisions on investment of the free funds of the Company in assets pursuant
to Article 12, Paragraphs 1 and 2 of the Bylaws subject to the limitations set forth therein;
13. make a decision the conclusion of a loan (bank credit) agreement in accordance with
the requirements of Article 11, Paragraph 2, Items 2 and 3 of the Bylaws and on provision of
collaterals to secure obligations of the Company subject to the applicable regulatory
limitations;
14. have the right to increase the capital of the Company through issue of new shares
over a period of 5 (five) years as from the registration of the Company in accordance with the
provisions of the Bylaws;
15. make decisions on the execution of all transactions between the Company and
stakeholders subject to the limitations set forth in the Bylaws and the effective legislation;
16. elect a person to act as a Procurator of the Company;
17. approve a good corporate governance program of the Company in accordance with
the generally accepted standards of good corporate governance determined by the Deputy
Chairperson in charge of the Investment Supervision Division of the Financial Supervision
Commission;
18. have the right to issue bonds through public offering over a period of 5 (five) years
as from the registration of the Company in accordance with the provisions of the Bylaws;
19. make decisions on insurance of real estates acquired by the Company;
20. elect and conclude an agreement with an investment intermediary for opening client
sub-accounts for the new shares in the name of their holders upon increase of the capital of
the Company in accordance with the requirements of Article 27a of Ordinance No 1/15
September 2003 on the Requirements to the Activities of Investment Intermediaries.
21. make decisions on all other issues beyond the exclusive scope of competence of the
General Meeting of Shareholder in accordance with the effective legislation or the Bylaws.
/4/ Subject to the limitations set forth in Article 114 and the following of the Law on
Public Offering of Securities and the effective legislation, the Board of Directors of the
Company shall be entitled to make an unanimous decision on execution of the transactions
pursuant to Article 236, Paragraph 2 of the Law on Commerce.
Article 16. /1/ Over the period of mandate, a member of the Board of Directors, their
representative respectively, may not:
a/ be sentenced to prison for a willful crime of general crime of general nature;
b/ be declared insolvent or be a member of a managing or controlling body or an
unlimited liability shareholder in a company dissolved due to insolvency, if there are any
unsatisfied creditors;
c/ be a spouse or a relative up to third degree inclusive or direct or collateral relative or
relative by marriage up to third degree inclusive of another member of the Board of Directors;
d/ be in violation of other applicable requirements set forth in the effective legislation or
the Bylaws.
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/2/ Where ineligibility of a member (representative) occurs, such member
(representative) shall immediately resign from their position of a member of the Board of
Directors. Otherwise, the Board of Directors shall propose to the General Meeting of
Shareholders to terminate the membership rights of such member or propose to such member
to replace their representative in the Board of Directors, if a legal entity.
V.
SESSIONS OF THE BOARD OF DIRECTORS, QUORUM AND MAJORITY
Article 17. /1/ The Board of Directors shall hold regular sessions.
/2/ An extraordinary session shall be convoked at the request of any member of the
Board of Directors.
/3/ A session shall be held at the registered office of the Company. The Board of
Directors may hold a session at another place at own discretion.
Article 18 /1/. A session shall be convoked by the Chairperson of the Board of Directors
not less than twice a month. Each member of the Board of Directors may request the
convocation of a session by the Chairperson to discuss particular issues. In this case, the
Chairperson shall convoke a session by sending a notice within 3 (three) days prior to the
session date except for urgent matters where a session may be convoked earlier.
/2/. A notice to convoke a session shall specify the session place, date, hour and
proposed agenda.
/3/. No notice shall be sent to members present at the preceding session of the Board of
Directors and notified of the next session place, date, hour and agenda. Members not present
at such session shall be notified in accordance with Paragraphs 1 and 2.
/4/. Each member of the Board of Directors may request from the Chairperson or the
other members of the Board of Directors all necessary materials related to the items to be
discussed at the forthcoming session.
Article 19. /1/ A session of the Board of Directors shall be regular if all its members are
invited not later than 3 (three) days prior to the session date and more than ½ (one half) of
its members are present thereat unless another quorum is set forth in the effective legislation
or the Bylaws.
/2/ Insofar as the effective legislation or the Bylaws do not provide for otherwise, all the
Board of Directors shall make decisions with a majority of 2/3 (two-thirds) of the votes of all
directors.
/3/ A session of the Board of Directors shall be chaired by its Chairperson or the Deputy
Chairperson where the Chairperson is absent.
/4/ A decision of the Board of Directors shall be made by open voting.
/5/ Each member of the Board of Directors shall be entitled to one vote.
/6/ At a session of the Board of Directors, minutes shall be taken and signed by all
present persons, indicating the manner of voting on all issues discussed.
/7/ The Board of Directors may make a decision without holding a session where all
members declare their written approval of such decision. The minutes recording such
decisions may be signed by the Chairperson and the Secretary of the Board of Directors only
and accompanied by all approvals pursuant to the preceding sentence.
VI.
FUNCTIONS OF THE BOARD OF DIRECTORS
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Article 20. /1/ The Board of Directors shall be a collective management body of the
Company. It shall report its activities to the General Meeting of Shareholders.
/2/ The Board of Directors shall perform its functions in accordance with the
requirements set forth in the effective legislation and the Bylaws of the Company.
VII.
ANNUAL REPORTS
Article 21. /1/ By the end of February, the Board of Directors shall prepare its Annual
Financial Statements and Activity Report related to the management of the Company over the
last calendar/financial year.
/2/ The Activity Report shall include analysis of all key events in the course of the
organizational and business activities of the Company, the status of the affairs of the
Company and explanations to the Annual Financial Statements.
/3/ The Annual Financial Statements shall be audited by a certified public account
(registered auditor) elected by the General Meeting of Shareholders who is to ascertain the
compliance with the requirements of the Law on Accountancy and the Bylaws. Such audit
shall be required for the approval of the Annual Financial Statements.
/4/ Where no certified accountant is not elected by the calendar year end, such
accountant shall be appointed by the competent court at the request of the Board of Directors
or any shareholder.
Article 22. /1/ The Company shall submit annual, quarterly and monthly reports to the
Deputy Chairperson in charge of the Investment Supervision Division of the Financial
Supervision Commission in accordance with the contents and within the time limits set forth in
the Law on Special Purpose Investment Companies, the Law on Public Offering of Securities
and its implementing instruments.
/2/ The Company shall publish a notice on the annual and quarterly reports presentation
and the place, manner and time for their availability for inspection.
Approval
Article 23. /1/ The Activity Report, the Annual Financial Statements and the Proposal on
Profit Allocation of the Board of Directors shall be presented to the General Meeting of
Shareholders for discussion.
/2/ The Annual Financial Statements approved by the General Meeting of Shareholders
shall be presented to the Commercial register.
VIII.
LIABILITY OF THE MEMBERS OF THE BOARD OF DIRECTORS
Article 24. /1/ The members of the Board of Directors shall perform their functions in
person and to the interest of the Company only.
/2/ The members of the Board of Directors shall be jointly and severally liable for any
and all damages caused to the Company.
/3/ A member of the Board of Directors may be released from liability if it is proved that
such member is not personally liable for the damages caused to the patrimony of the
Company.
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Article 25. Each member of the Board of Directors shall provide a management
guarantee whose type and amount is to be determined in a decision made by the General
Meeting of Shareholders. The amount of such guarantee may not be less than the total gross
remuneration of a member for 3 (three) months.
TRANSITIONAL AND FINAL PROVISIONS
§ 1. Any and all amendments and supplements to these Rules shall be effective as from
the day following the date of the session of the Board of Directors where they are decided
unless the Board of Directors determines otherwise.
§ 2. These Rules shall be interpreted by the Board of Directors itself.
These Rules were adopted and approved with Minutes taken at a session of
the Board of Directors of Advance Terrafund REIT held on 20 October 2016.
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