Bulgarian law regulates 5 types of business entities:
- Unlimited partnership
- Limited partnership
- Limited liability company (“LLC”)
- Joint-stock company (“JSC”)
- Limited partnership with shares
The most typical corporate forms are the LLC and the JSC. This short guide will focus on this two types of companies.
The LLC is the most used and preferred form for foreign investors willing to enter the market and establsih their sole-owned subsidiary in Bulgaria. On the other hand, usually the JSC is the form used for large projects.
- Incorporation and registration
For the incoproration of both LLCs and JSCs a set of documents are needed, such as resolutions, articles of association/ statute with specific content. In addition, comapnies are registered with Bulgarian Commercial Registry which is kept by the Registry Agency. During the last year such registrations are usually made online and take around a week after submitting the documents.
- Business activity
LLCs and JSCs may engage in any type of commercial activity allowed by law. Certain types of activities such as insurance, banking, telecoms etc. require a special permission or license in order to operate.
Both LLCs and JSCs may may be sole-owned or may have several shareholders.
LLCs and JSCs are liablefor their obligations with all their assets and property. In general shareholders in LLC and JSC do not assume personal liability for the debts of the company itself.However, some changes in tax and social security legislation during the last years imposed personal liability for shareholders (and/or managing bodies) in cases related to tax evasion.
The main obligation of the shareholders is to make the required capital contribution in consideration of the acquired shares in the capital. Each share gives the respective shareholder a voting right, a right to dividends, a right to liquidation proceeds upon termination as well as rights to receive information about the company.
- Capital. Shares
The nominal capital requirement for the LLC is BGN 2 (approx. EUR 1), and for the JSC - BGN 50,000 (approx. EUR 25,000).
The respective shareholder in JSC is obliged to pay in at least 25% of the their contribution upon registration of the company in the Commercial Registry. With respect to LLC, shareholders are obliged to pay in at least 70% of their contribution upon registration of the company in the Commercial Registry.
Shares in a JSC are individually issued and registered at the name of the respective shareholder. A month ago the bearer shares were excluded and do not exist under Bulgarian law anymore.
Shares in LLCs are not individually issued, they are rather allocated between theshareholders.
The LLC should have at least one manager who manages the company and represents it before third parties. Only an individual may be appointed a manager of the LLC. The manager is appointed by the General meeting of the shareholders or by a decision of the sole owner of the company (in case of sole-owned company). Usually the relations between the company and the manager are set out in a management agreement. In addition, the manager is registered with the Commercial Register under the file of the company.
The JSCmay have a one-tier or two-tier system, depending on the chosen governance system:
The one-tier system has a board of directors (“BoD”)
- the BoD consists of members (between 3 and 9) appointed by the General meeting of the shareholders.
- It manages and represents the company before third parties.
- The members may be individuals and/or legal entities.
The two-tier system has a supervisory board ("SB") and a managing board ("MB")
- The SB consists of members (between 3 and 7) appointed by the General meeting of the shareholders. It controls the activity of the MB. Its members may be individuals and/or legal entities.
- The MB consists of members (between 3 and 9) appointed by the SB. It manages and represents the company before third parties. The members may be individuals and/or legal entities
The members of the Bod, respectively the MB, represent the company jointly, unless the statute provides otherwise. The BoD, respectively the MB (subject to the approval of the SB) may authorize one or more persons to serve as executive directors who represent the company before third parties.
Any member of respeticve board is registered with the Commercial Registry under the file of the company.
The members of the boards unlike managers in LLC, are chosen for a specific period of time. However, they may be appointed unlimited number of times.