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Setting Up A Company in Bulgaria
1. Legal Framework
2. General Review
The primary legal act governing the types, corporate structure and governance as well as the requirements for the establishment of commercial companies in Bulgaria is the Commerce Act 1991. The new Commercial Register Act 2008 regulates the requirements and procedure for registration in the commercial register of commercial legal entities operating under Bulgarian law and of changes in the corporate status of such entities. Other relevant primary legislation governing specific corporate matters includes the Corporate Income Tax Act 2006, the VAT Act 2006, the Foreign Investments Promotion Act 1997, the BULSTAT Register Act 2005, the Social Security Code 1999, the Tax and Social Security Procedure Code 2005, the Protection of Personal Data Act 2002, etc.
2. General Review
Bulgarian law recognizes the following types of commercial companies exhaustively listed in the Commerce Act: (i) general partnership; (ii) limited partnership; (iii) limited liability company (“LLC”) or one-person-owned limited liability company; (iv) joint stock company (“JSC”) or one-person-owned joint stock company; and (v) company limited by shares.
A joint stock company can be publicly listed or private. Under Bulgarian law, joint stock companies are the only type of companies that may become listed, provided that they have conducted an initial public offering or have a registered share issue for the purposes of trading on a regulated securities market. As public companies further qualify joint stock companies with more than ten thousand shareholders as of the last day of two consecutive calendar years. The Public Offering of Securities Act 1999 sets forth the general legal framework of public companies.
In addition to the five types of commercial companies mentioned above, business may also be conducted in one of the following organisational forms: (i) sole trader; (ii) holding; (iii) branch; (iv) trade representative offi ce (“TRO”); and (v) cooperative.
Under Bulgarian law, sole traders, partners in general partnerships and unlimited partners in limited partnerships and in companies limited by shares have unlimited personal liability to the company’s creditors. On the other hand, the shareholders’ exposure in limited liability companies and joint stock companies as well as the liability of limited partners in a limited partnership and in a company limited by shares is capped at the amount of their shareholding in the company’s capital.
3. Establishment of a Company
The procedure for incorporation of a company in Bulgaria does not differ when local or foreign persons participate in its establishment. Under Bulgarian law there are no restrictions as to the size of the foreign participation in the capital of a Bulgarian company and, therefore, up to 100% of the registered capital of a local company can be held by foreign persons.
As of 01 January 2008 all types of commercial companies and all branches of foreign commercial companies are incorporated by way of registration in the commercial register administered by the Registry Agency functioning under the authority of the Ministry of Justice. This is a one-stop shop registration and it serves for all commercial, tax, social security, statistics and other public purposes. Upon its registration in the commercial register a newly incorporated company or branch receives a unique unified identification number, which serves to identify the company throughout its entire existence.
No other secondary registration is any more required from newly incorporated companies and branches to start effectively performing their business activity. In this relation as of 01 January 2008 BULSTAT registration is no more applicable to newly incorporated companies and branches.
The requirements for the registration of each particular type of commercial company or branch are set forth in the Commerce Act, while the registration procedure and applications and documents relevant to each particular type of commercial company or to branch, in the Commerce Register Act, respectively. The new registration procedure currently takes four to six weeks as of filing
the relevant documents, the idea being such term period to be decreased down to one or two business days. The incorporated company or branch becomes a capable legal entity as of the date of its entry in the commercial register.
Unlike commercial companies and branches of foreign commercial companies, a trade representative office of a foreign company is established by means of registration in the commercial register held by the Bulgarian Chamber of Commerce and Industry (the “BCCI”) and is subject to secondary registration in BUSLTAT Register, a united national administrative register also held by the Registry Agency under the BULSTAT Register Act 2005. This secondary registration serves as tax, social security and statistics registration.
Although a local company or a branch should register its scope of activities, it is free to conduct any type of activities not prohibited by law, even if the respective activity is not expressly included in its registered scope of activities (under Bulgarian commercial law, there is no applicable ultra vires rule in this respect). Where a license or permit is required by virtue of special laws for the performance of a specific activity, such activity may be performed after obtaining the respective license or permit. By way of example, activities subject to licensing/ permit regime include banking, insurance, gambling, trade in medicines, trade in tobacco, etc.
Find out more about Most Commonly Used Forms of Business Organisations, branches and Trade Representative Offices and other legal issues here.
In addition to the five types of commercial companies mentioned above, business may also be conducted in one of the following organisational forms: (i) sole trader; (ii) holding; (iii) branch; (iv) trade representative offi ce (“TRO”); and (v) cooperative.
Under Bulgarian law, sole traders, partners in general partnerships and unlimited partners in limited partnerships and in companies limited by shares have unlimited personal liability to the company’s creditors. On the other hand, the shareholders’ exposure in limited liability companies and joint stock companies as well as the liability of limited partners in a limited partnership and in a company limited by shares is capped at the amount of their shareholding in the company’s capital.
3. Establishment of a Company
The procedure for incorporation of a company in Bulgaria does not differ when local or foreign persons participate in its establishment. Under Bulgarian law there are no restrictions as to the size of the foreign participation in the capital of a Bulgarian company and, therefore, up to 100% of the registered capital of a local company can be held by foreign persons.
As of 01 January 2008 all types of commercial companies and all branches of foreign commercial companies are incorporated by way of registration in the commercial register administered by the Registry Agency functioning under the authority of the Ministry of Justice. This is a one-stop shop registration and it serves for all commercial, tax, social security, statistics and other public purposes. Upon its registration in the commercial register a newly incorporated company or branch receives a unique unified identification number, which serves to identify the company throughout its entire existence.
No other secondary registration is any more required from newly incorporated companies and branches to start effectively performing their business activity. In this relation as of 01 January 2008 BULSTAT registration is no more applicable to newly incorporated companies and branches.
The requirements for the registration of each particular type of commercial company or branch are set forth in the Commerce Act, while the registration procedure and applications and documents relevant to each particular type of commercial company or to branch, in the Commerce Register Act, respectively. The new registration procedure currently takes four to six weeks as of filing
the relevant documents, the idea being such term period to be decreased down to one or two business days. The incorporated company or branch becomes a capable legal entity as of the date of its entry in the commercial register.
Unlike commercial companies and branches of foreign commercial companies, a trade representative office of a foreign company is established by means of registration in the commercial register held by the Bulgarian Chamber of Commerce and Industry (the “BCCI”) and is subject to secondary registration in BUSLTAT Register, a united national administrative register also held by the Registry Agency under the BULSTAT Register Act 2005. This secondary registration serves as tax, social security and statistics registration.
Although a local company or a branch should register its scope of activities, it is free to conduct any type of activities not prohibited by law, even if the respective activity is not expressly included in its registered scope of activities (under Bulgarian commercial law, there is no applicable ultra vires rule in this respect). Where a license or permit is required by virtue of special laws for the performance of a specific activity, such activity may be performed after obtaining the respective license or permit. By way of example, activities subject to licensing/ permit regime include banking, insurance, gambling, trade in medicines, trade in tobacco, etc.
Find out more about Most Commonly Used Forms of Business Organisations, branches and Trade Representative Offices and other legal issues here.