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Company incorporation - Bulgaria

After Bulgaria's EU membership in 2007 it is considered a perfect opportunity for companies to enter the market of the European Union. The country enjoys NATO membership since March 2004.

Bulgaria is one of the most stable and predictable business and political environment in South-East Europe whereas it has the lowest operating costs in a European market economy. Industrial goods are traded duty free between Bulgaria and the EU, EFTA, CEFTA and Turkey. The corporate tax rate is just 15% and as low as 0% in areas of high unemployment. There is VAT exemption of equipment imports for investment projects over €5 million. The annual depreciation rate is 30% for machinery & equipment & 50% for software and hardware.

Another asset is the opportunity to buy land through a company registered in Bulgaria with up to 100% foreign ownership. The subsidies for infrastructure investment projects over €50 million. There are 55 treaties signed for avoidance of double taxation while there are 52 agreements on mutual protection and promotion of foreign investment. There are opportunities of highly skilled, English-speaking work force at competitive cost.

A limited liability company (with the suffix OOD)

  • - At least 1 shareholder is needed to set up the company. The shareholders may be individuals or companies.
  • - The minimum share capital is BGL 5,000, with the minimum nominal value of BGL 10 a share.
  • - At least 70% of the capital must be paid up before registration.
  • - The owners of the company are liable only for the amount of capital invested.
  • - An annual shareholders' meeting must be convened at least once a year.
  • - A director must be appointed for the company.

The Bulgarian Commercial law allows for the following types of business organizations:

  • - an unlimited (general) partnership
  • - a limited partnership
  • - a private limited company
  • - a public limited company (joint stock company)
  • - a public limited partnership
  • - a sole trader
  • - a joint venture
  • - a branch
  • - a holding
  • - a co-operation
  • - a representative office

The most appropriate types of companies for carrying out business in Bulgaria are: a private limited company, a public limited company, a single-person private limited company, a holding, a branch, and a representative office. All of these (with the exception of a representative office) have to be entered into the commercial register kept with the relevant district court.

Private Limited Company - Limited Liability Company - OOD (Druzestvo s ogranichena otgovornost - DOO)

It is a commercial company with share capital owned by its members whose liability is limited to the amount of the capital subscribed. A private limited liability company may be founded by one or more persons, including foreign natural or legal persons. The minimum foundation capital is Leva 5,000 divided into shares with nominal value of Leva 10 each and at least 70% of the capital must be paid upon foundation. Contributions to the foundation capital may be paid in cash or in kind. The statutory bodies of the private limited companies are the general meeting of shareholders, which must be held at least once a year, and the managing director or board of directors. A single-person private limited liability company is called "EOOD". It is owned by a natural or a legal person. The sole shareholder exercises the powers of the general meeting and the managing director or board of directors is appointed to run the company. A private limited company must prepare a balance sheet and financial statements each year.

Here is a general explanation of what is needed to set up a private limited company in Bulgaria:

  • - produce articles of association (Memorandum of Association - in the case of a single-person private limited company); the Law on Commerce stipulates the obligatory provisions of the articles
  • - appoint a managing director (or board of directors)
  • - paid up at least 70% of its authorized capital, including at least one-third of each member's contribution

This information together with details of the management is recorded in the commercial register and promulgated in the State Gazette.

Public Limited Company - joint stock company - AD

It is a commercial company with share capital owned by its members whose liability is limited to the amount of the capital they subscribe. A joint stock company can be founded by two or more persons, including foreign natural or legal persons. The only exception to this rule is when the State is the only founder and, therefore, the sole owner of the whole capital of the company - in this case we have a single person public limited company (EAD). The minimum capital of a joint stock company is Leva 50,000, increasing to Leva 100,000 if the capital is raised by a public offer. In the general case of a registration of a public limited company, contributions to foundation capital may be paid in cash or in kind, in which case an independent valuation is required, and at least 25% of the capital must be paid upon foundation. A joint stock company may issue either registered or bearer shares. The general meeting of shareholders is the highest body of the company, and must be held at least once a year. The shareholder's meeting elects a board of directors (a one-tier management structure) or a board of directors and a supervisory board (a two - tier management structure). A public limited company must prepare a balance sheet and financial statements each year. Special statutory instruments provide additional requirements to the foundation of banks, insurance companies and investment funds in the form of joint stock companies.

Here is a general explanation of what is needed to set up a public limited company in Bulgaria:

  • - produce articles of association (Memorandum of Association - in the case of a single-person private limited company); the Law on Commerce stipulates the obligatory provisions of the articles
  • - have adopted articles of association
  • - have all of its authorized capital fully subscribed
  • - have paid up at least 25% of its authorized capital
  • - have elected a board of directors, and
  • - have met any other legal requirements

Details of the official business name and registered office of the company, its management bodies, and other facts related to its incorporation, existence and winding-up are recorded in the commercial register and promulgated in the State Gazette.

Holding

It is a public limited company, a public limited partnership or a private limited company with the purpose to participate in whatever form in other companies or in their management. At least 25% of the capital of a holding has to be entered directly in subsidiaries. A subsidiary means a company in which the holding owns or controls directly or indirectly at least 25% of the stocks or shares, or can appoint directly or indirectly more than 50% of the members of the managing body. The Law on Commerce explicitly names the activities, which a holding is allowed, and those not allowed to perform.

Branch

Foreign legal entities registered abroad, as well as foreign natural persons and entities that are not legal persons, can register a branch in Bulgaria provided they are registered as commercial entities in accordance with the relevant legislation in their home country. No authorized capital is required to found a branch. A branch is not a legal entity, it is part of the company - founder. Branches are obliged to maintain accounts as an independent company. A branch of a foreign company must prepare a balance sheet.

Representative Office

It is regulated by the Foreign Investment Law. Foreign persons who are entitled to engage in business activity under the legislation of their own countries may set up a representative office which is registered with the Bulgarian Chamber of Commerce and Industry. Representative offices are not legal persons and may not engage in economic activity.

A liability company with a single shareholder (with the suffix EOOD)

  • - This is an OOD company owned by one individual, who may be a foreign resident.
  • - The single shareholder may serve also as a director of the company.

A consolidated company (with the suffix AD)

  • - At least 1 shareholder or more is required to set up the company.
  • - The minimum share value is BGL 1.
  • - The company must have a minimum registered capital of BGL 50,000. For banks, the minimum capital requirements are BGL 10 million.
  • - At least 25% of the registered capital must be paid up before registration.
  • - The company is managed by a board of management, or at two levels by 'a supervisory board' and a 'board of management'.

A consolidated company with a single shareholder (with the suffix EAD)

  • - The company is owned and controlled by a single shareholder.
  • - It is compulsory to file an annual balance sheet with the tax authorities.

Signature of the Articles of Association before the Notary: €800,00
Drafting of the Articles of Association (to be drafted by a lawyer): €600,00
(Notary certified consent with a specimen of the signature of the company director, notary certified Articles of Incorporation and notarized Appendix to Articles of Incorporation, indicating that a general meeting agrees on the appointment of the director)
Power of Attorney: €200,00
Getting initial name clearence at the "IS": €100,00
Opening an account for the share capital to be deposited: €300,00
Court Fee: €300,00
Registering in the Commercial Register: €100,00
(Sofia District Court, 5-6 days to be registered)
Publication in the State Gazette: €100,00
Registration with the "BULSTAT": €100,00
Acquisition of a Tax Registration Number with the respective Tax Authority)
Company Seal (text in both Bulgarian and English): €100,00

The above mentioned services for company incorporation may require up to 30 days.

Additional services:
Registering with the Tax Authorities: €180,00
Registering for VAT: €200,00
Registering with the Regional Social Security Institute: €150,00
(within seven days of court registration)
Cost of each certified copy of the Articles of Incorporation: €50,00
(minimum 2 copies required – one to submit to the court and one for opening a bank account)
Translation of the documents from Bulgarian into English: €30,00
(per page of 250 words)
Total Incorporation Cost: app.€4.000

In general

  • - Share capital minimum 5.000 leva (€2.500) and has to be deposited upon signature of the Articles of Association.
  • - The company may be incorporated by using any registered address, which may be changed at a later stage; no lease agreement is initially required for the registration of the company.