The Bulgarian Commercial Act differentiates the following commercial company types in Bulgaria:

• Limited Liability Company
• Joint Stock Company
• Partnership Limited by Shares
• Unlimited Partnership
• Limited Partnership

We start with the most popular company type when it comes to company registration in Bulgaria – limited liability company.

Limited Liability Company

A limited liability company in Bulgaria (LLC) can be incorporated by two or more local or foreign nationals or legal entities whose liability for the company’s debts shall be limited to the amount of their contributions to the company’s share capital. The company is liable for its obligations with its assets. There is no limitation on the number of shareholders participating in a LLC. For specific steps towards effecting the limited liability company registration in Bulgaria click here.

The share capital of the LLC consists of the members’ interests that are divided into shares, and no interest shall be smaller than BGN 1. The share capital shall not be less than BGN 2 (approx. EUR 1). The interests of the individual shareholders may have different values but the sum of the total interests shall be equal to the share capital, and the value of each participating stake shall be a multiple of 1. Every shareholder has the obligation to pay his share in the amount and manner determined in the articles of association. Several natural or legal persons can hold one interest. In this case, they shall exercise their rights over it only jointly. They shall be liable jointly and severally for any obligations arising from such interest. Every shareholder is entitled to a company interest in the company’s assets the amount of which shall be determined in proportion to its interest in the share capital, unless otherwise agreed.

The payment of the share capital can be performed through either monetary or non-monetary (in-kind) contributions. Should a partner make a non-monetary contribution, the Articles of Association, shall state the name of the contributor, a full description of the non-monetary contribution, its monetary value, and the grounds for the contributor’s rights. The in-kind contributions can be in the form of movable and immovable assets, intangible assets and existing receivables. The latter shall not be in the form of future labor or services. The in-kind contribution shall be evaluated by three certified experts appointed by the Commercial Registry. The cash evaluation of the contribution must be included in the Articles of Association together with the contributor’s name.

The company bodies are the general meeting of shareholder and the manager(s). If the manager is not a company shareholder then he/she participates in the general meeting sessions with an advisory vote. When the employee number exceeds 50 then the latter are entitled to an advisory vote at the general meeting. The voting power of a shareholder in the general meeting is proportional to his/her interest in the company share capital, unless otherwise agreed. The general meeting, inter alia, has the power to determine the distribution of the profit and to pass a resolution for its payment.

Without the company’s consent, the manager is prohibited from the following: 1. to enter commercial contracts in his/her own name or on behalf of another individual; 2. to participate in other general partnerships, limited partnerships or limited liability companies; 3. to take managing positions in other companies. The above restrictions apply when the activities executed are similar to those of the LLC. In case of breach of his/her fiduciary duties the manger is liable for the damages.

Single member LLC in Bulgaria can be also incorporated by a single natural or legal person. In this case, the company foundation document is deed of incorporation, and the sole shareholder of the capital can manage the company without the appointment of a manager. The sole owner of the LLC is liable for the entity’s debts up to the amount of its contribution to the company share capital.

Joint Stock Company

A Joint Stock Company in Bulgaria (JSC) can be incorporated by either local or foreign nationals or legal entities. There is no limitation on the number of shareholders participating in a JSC. For specific steps towards effecting the joint stock company registration in Bulgaria click here. The shareholders are liable for the company’s debts up to the amount of their contributions to the company share capital. The JSC is liable for any breach of its obligations with all its assets.

The minimum share capital requirement for incorporation of JSC is BGN 50,000 (approx. EUR 25,000). All the share capital must be subscribed, and at least 25 percent of the latter shall be contributed in order to initiate a registration procedure before the Commercial Registry. The minimum amount of the capital stock required for performing banking, insurance activities or voluntary health insurance activities is determined by other specific statutes.

The Bulgarian Commerce Act establishes the following types of shares which can be issued by the JSC:

• bearer shares—the current owner is entitled to the rights in the share simply by having physical possession of the share. The transfer of the bearer shares can be effected only if their nominal or issue price has already been paid in full.
• registered shares—the shareholder’s name is written on the share certificate which is entered into the Company’s Book of Shareholders. The registered shares shall be transferred by endorsement which, to be binding on the company, must be recorded in the Book of Shareholders. The Articles of Association may provide for other conditions for the transfer of registered shares.
• ordinary shares—grant its holder the right to vote at the General Meeting, and the right to a dividend and liquidation quota.
• privileged shares—may grant its holder additional voting power and other rights such as increased dividend right and liquidation quota and/or the right to a veto.

One-tier management system

When one-tier management system is set up, the company shall be managed and represented by a Board of Directors. The Board of Directors shall consist of minimum three and maximum nine directors. The Board may also endorse one of its members to represent the company in his/her capacity of executive director.

Two-tier management system

The joint-stock company shall be managed by a Management Board which shall act under the control of a Supervisory Board. The members of the Management Board shall be appointed by the Supervisory Board, which shall determine their remuneration and shall have the right to dismiss them at any moment. No person may simultaneously serve on both the Management Board and the Supervisory Board of one company. When the two-tier system is establish, the formation of both the management and the supervisory board is mandatory. The Management Board with the approval of the Supervisory Board may endorse an executive director to represent the company. Bulgarian or foreign nationals or legal entitles can be board members in both one-tier and two tier management systems.

Fiduciary Duties and Duty of Loyalty of the Board Members Board members must perform their duties with the care of a good merchant and in the interest of the company and of all shareholders. Members of the Board of Directors and the Management Board shall not have the right, on their own behalf or on behalf of another, to execute business transactions, participate in companies as procurators, managers or board members of other companies or cooperatives when thus engaging in a competitive activity vis-a-vis the company.

Personal Liability of the Board Members

The directors shall be jointly and severally liable before the company for any damages caused by them. A board member may be held not liable if it has been established that he/she has no fault for the damages suffered by the company. The directors shall deposit a guarantee for their management of the affairs of the company in an amount determined by the general meeting, but not less than their three month gross income. The guarantee may be in the form of shares or bonds deposited with the company.

Partnership Limited by Shares

The partnership limited by shares shall be formed by the general partners. They shall have the right to select the limited liability shareholders. The number of the latter shall not be less than three and their liability is limited to the amount of their contributions to the company capital. The Articles of Association shall be drafted by the unlimited partners.

The bodies of the partnership limited by shares shall be the same as for the one tier- system JSC. The Board of Directors shall consist of the general partners. Only the limited liability partners shall have the right to vote in the general meeting. The general partners, even when they own shares, shall take part in the meeting in an advisory capacity. The provisions of the Commerce Act that apply to the JSC shall be applicable to the partnership limited by shares unless the law provides otherwise.

Unlimited Partnership

An unlimited partnership shall be incorporated by two or more persons for the purpose of conducting commercial transactions. The partners are jointly and severally liable for the entity’s debts and their liability is unlimited. For example, if the partnership defaults on a loan payment, the partners’ personal assets are not shielded from attachment by the creditors. The unlimited partnership is similar to the German general commercial partnership (offene Handelsgesellschaft or OHG) and the US general partnership.

Each of the partners has the right to manage and represent the partnership unless the partners have agreed otherwise upon signing the articles of partnership. The management can be assigned to one or more partners or it can be delegated to a manager.

The partners owe a duty of loyalty to each other and to the partnership and shall not compete with the partnership. Each partner is entitled to receive an annual payout from the partnership profits, as well as a share of the assets upon liquidation. Every partner also has to bear a portion of the partnership losses. The distribution of profits and losses between the partners shall be determined in the articles of the partnership.

Limited Partnership

The limited partnership has many of the characteristics of the general partnership. The general partnership provisions are applicable to the limited partnership to the extent that it is not otherwise stated by the Bulgarian Commerce Act. The differences between the two forms originate from the existence of one or more limited partners in addition to the general partners.

Consequently, the general partners are still jointly and severally liable and their liability is unlimited. On the other hand, the limited partners create a class of non-managing investors whose liability is limited to the amount of their agreed contributions in the company.

Only the general partners are entitled to manage and represent the limited partnership. Moreover, the limited partners are not allowed to block resolutions of the general partners.

When it comes to the general partners, the same rules apply to them as in the general partnership. In contrast, the limited partners are liable up to the amount of their contribution in the company. In case a limited partner has not paid in full his agreed contribution then the amount owed is deducted from its share of the profits. If a limited partner conducts transactions on behalf of the company prior to its registration then that limited partner will bear unlimited liability. The provisions for the limited partnership to a large extent resemble the provisions for the German Kommanditgesellschaft or KG.