Comprehensive information regarding the most used companies types by foreign investors in Bulgaria.
Main forms of business organization
The main legal forms of business entity in Bulgaria are the limited liability company, the joint-stock company, the branch and the Trade Representative Office (TRO). The Bulgarian Commercial Code also provides for three forms of partnership – the general partnership, the limited partnership (and the partnership limited by shares, but these are rarely used by foreign investors.
Limited-liability company, abbreviated in Bulgarian to OOD has a minimum share capital of BGN 2, divided into shares. It may be founded by any number (including a single person) of persons, natural or legal. There are no restrictions as to nationality or residence. Its governing body is the shareholders’ meeting and it is managed by one or more managers (directors), who are usually but not necessarily members of the company themselves. Unless its initial share capital is the minimum required (i.e. BGN 2, in which case it must be fully paid up), at least 70% of the share capital of an OOD must be paid up upon incorporation, and the company must register in the Commercial Register. Members may not freely transfer their shares to third parties, but must first offer them to other existing members.
The joint-stock company, abbreviated in Bulgarian to AD, has a minimum share capital of BGN 50 000, divided into shares. It may be founded by any number (including a single person) of persons, natural or legal. There are no restrictions as to nationality or residence. At least 25% of its share capital must be fully paid up upon incorporation. The AD’s governing body is the shareholders’ meeting, and it is managed by one or two boards. Under the single-tier system, there is only one board of directors (‘the executive board’), which manages the company and is directly responsible to the shareholders’ meeting. In the two-tier system, day-to-day management is carried out by the executive board, but that board is responsible to the ‘supervisory board’, which in turn answers to the shareholders’ meeting. Only a joint-stock company may offer its shares to the public.
In common with other Member States, Bulgarian law allows for the formation of a European Company. the European Economic Interest Grouping (EEIG) and the European Cooperative Society.
The opening of a branch is one of the alternatives to the establishment of a Bulgarian company. Foreign companies registered abroad, as well as foreign individuals or persons that do not qualify as legal entities, may register a branch in Bulgaria, provided that they are properly incorporated and/or entitled to conduct business under the national law of their home country. A branch of a foreign company is established by means of registration in the Commercial Register. After its proper registration according to Bulgarian law, the branch of a foreign company, although not a separate legal entity, has a certain degree of independence from the parent company. Thus, it is required to keep commercial books as a separate business establishment and prepare a separate balance sheet. However, as the branch is not a separate legal entity, its assets and liabilities are deemed to be assets and liabilities of the parent company. Therefore, the branch is not required to comply with capital-registration requirements or to have separate by-laws or a distinct management structure, except for a manager. From a tax point of view a branch of a foreign company is considered a ‘permanent establishment’ and it triggers corporate income tax liability in Bulgaria for the foreign parent company.
Source: Guide, Moore Stephens Bulgaria Audit OOD