What is the main source of law authorising this entity form?

Commercial Act (CA) (Targovski zakon - TZ)

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

No, the Branch is not a separate legal person. It can participate in business deals but all rights and obligations stemming from them will arise for the foreign entity.

(Maximum) period of existence

There is no maximum period of existence of the Branch.

Governing document(s)

The governing documents of the Branch are the Articles of Association of the foreign entity and the resolution of the foreign entity for the establishment of the Branch.

Liability of incorporators / shareholders

The foreign entity is liable for the obligations of the Branch as the Branch does not posses a separate legal personality.

(Governing) bodies

The governing bodies of the Branch are the Principal (the foreign entity) and the manager of the Branch.

Other particularities

The advantage of the Branch is that it is dissolved without liquidation proceedings, but only with an application to the Commercial Register. For tax and accounting purposes, the Branch is considered a separate entity and is subject to the general tax and accounting rules.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

No

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

No.

Can this type of entity be used for a non-profit or charitable organization?

Yes, it is possible to use a Branch for non-profit or charitable activities.

However, there are specific entity forms for such activities, namely - the foundation (fondatsiya) and the association (sdruzhenie). They are more commonly used for such purposes given certain benefits and tax privileges provided for in the law.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

The main documents required for the incorporation of a branch of a foreign entity are:

• Articles of Association of the Principal company;
• Certificate of existence / Excerpt from the respective foreign commercial register with respect to the foreign entity certifying its existence, its management and manner of representation;
• Resolution of the Principal for the incorporation of the Branch and the appointment of a manager;
• Power of Attorney (PoA) by virtue of which the Principal authorizes the manager to manage and represent the Branch - this document needs to be notary certified;
• Declaration of consent from the manager and specimen of the manager's signature – this document needs to be notary certified;
• Declarations for the purposes of registration in the company register.

Involvement of notary, company register, governmental authorities

The Branch must be registered in the Commercial Register and Register of Non-Profit Legal Entities (the Commercial Register), which is maintained electronically. The Branch comes into existence from the moment of its registration in the Commercial Register.

A Notary Official is only involved in the certification of the declaration of consent of the manager and specimen of the manager's signature and the PoA.

Timing (estimate)

The registration process in the Commercial Register from the date of filing the application until the registration of the Branch takes 1 business day.

Main costs, including registration and similar fees (excluding legal fees)

The main administrative and notary costs, usually amount to EUR 150 (no translation costs included).

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

Yes, the scope of business activity of the Branch must be listed in the Branch file in the Commercial Register.

Minimum number of incorporators / shareholders and residency requirements

The Branch must be incorporated by one foreign entity (Principal).

There is no residency requirement. The foreign entity must be registered to carry out business activities under its national law.

Minimum number of directors (or other applicable officers) and residency requirements

The minimum is one manager.

There are no residency requirements. However, if the manager is not a resident of Bulgaria, the company shall appoint a local contact person due to anti-money laundering regulations.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

The Branch does not have its own capital.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

No, it is not required

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A Unified Identification Code (UIC) is assigned automatically to each entity upon its registration in the Commercial Register.

What is the title of the applicable company registry?

The title of the applicable company register is Commercial Register and Register of Non-Profit Legal Entities. It is maintained by the Registry Agency – a governmental agency with the Ministry of Justice of the Republic of Bulgaria.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

The following information must be filed in the Commercial Register and is publicly available:

• Branch name;
• United Identification Code of the Branch;
• Legal form;
• Seat and registered address of the Branch;
• Scope of business activity of the Branch;
• Information on the management – number of managers, their full names and nationality;
• Information on the Principal – name, legal form, seat, representatives and manner of representation; liquidators and syndics; register in which the company is registered and the respective registration number, the law applicable to the foreign entity (if it is not the law of a member state of the European Union); information about the Principal’s termination and liquidation or insolvency proceedings.
• Information on the beneficial owner (if registered; subject to additional registration) –full name, nationality, nature of the rights held, companies through which direct or indirect control is exercised;
• Articles of Association of the Principal and all amendments thereto, concluded after the registration of the Branch;
• Annual financial statements of the Principal.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The executive body of the Branch is the manager. The main tasks of the manager are to manage the Branch, operate its activities and represent it before all third parties.

How are the members of the executive body appointed, dismissed and replaced?

The manager must be appointed, dismissed, and replaced with a resolution of the Principal.

Is it possible to appoint corporate directors or must all directors be natural persons?

No, the manager must be a natural person.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, there is no such requirement.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The title of the foreign entity which operates through the Branch is Principal.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

There are no specific requirements in that regard.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

No, there are no such special regimes for branches of foreign entities.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

The Branch must maintain trading books and a balance sheet as an independent trader. As such it is obliged to carry out current accounting for all business transactions that result in changes in their assets, financial position, financial performance, cash flows and equity in chronological order.

The Branch annual financial statements must be approved with a resolution of the Principal and must be registered in the Commercial register.

Each annual financial statement of the Principal, after being entered or submitted in accordance with its national legislation, must be entered in the Commercial Register file of the Branch. There is an exception to this rule in cases where the Principal is registered in a member state of the European Union and the information has been obtained through the system of interconnection of Member States' registers.

Is the entity permitted to determine its own financial year?

No, in Bulgaria the financial year is identical for all entities and coincides with the calendar year.

Is the entity subject to any statutory (external) auditor obligations?

The annual financial statements of the Branch must be audited only in limited cases provided by law.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

N/A

Are different classes of ownership interests possible? If so, what are some examples of different classes?

N/A

What documentation is required for the transfer of ownership interests?

N/A

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

N/A

Are there any applicable stamp duties imposed when transferring ownership interests?

N/A

How are shares issued? (including information on payment obligations, registration requirements)

N/A

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

N/A

Any requirements with respect to share cancellation, share repurchase and other capital reductions

N/A

Any requirements with respect to distributions to shareholders?

N/A

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

N/A

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

The typical annual maintenance costs for a Branch can vary depending on the specific activity of the branch, its size and the revenue it generates so there is no definitive answer. However, the usual costs that a Branch would have are for: accounting services, remuneration of the management, expenses for its registered office, administrative fees for the registration of circumstances and the announcement of company acts in the Commercial Register when provided for by law, etc.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

For tax purposes the Branch is considered a permanent establishment and its profits are taxed with a corporate income tax. The applicable tax rate is 10%.

Summary of any specific matters, e.g. recent or prospective major legal developments

Variable Capital Company

A novel legal entity called a variable capital company (VCC) was introduced on 1 August 2023 pursuant to amendments to the Commercial Act. The primary focus of the VCC is to provide Bulgarian start-ups with greater flexibility and accessibility in their establishment and management, thereby attracting more investments. At the end of 2024, the necessary legislative amendments were adopted, and the Registry Agency ensured the required technical infrastructure. As a result, any interested party may now establish a VCC.

A VCC can be an enterprise classified as a small or micro enterprise according to the Small and Medium Enterprises Act and its key characteristic is its variable capital. Unlike the other existing company types,  the capital of a VCC shall not be registered in the Commercial Register and there is no minimum capital requirement for this entity.

Further specific features of a VCC include the flexibility in determining the number, composition, functioning, and authority of the governing bodies – shareholders can choose between a manager and a management board; the authorization of the VCC to acquire its own shares; as well as the right for employees or other people hired by the VCC to obtain up to 15% of all shares in the company.

Restrictions on the managers and members of management bodies of companies

Under the Commercial Act a manager / member of a managing or controlling body may not be a person who has been declared insolvent, or be a person who has been a manager/ member of managing or controlling body of the company that has been declared insolvent during the last two years preceding the date of the court order declaring insolvency, if there are any creditors with unsatisfied claims.  The prohibition is limited in time. With the expiration of a period of five years from the date of declaring a person insolvent/ the dissolution of the company due to insolvency, the restrictions will be lifted. The revocation of the restrictions shall be declared explicitly, indicating the specific circumstances under which the revocation is being made.

Implementation of the Euro in Bulgaria

Bulgaria is on the path to entering the Euro Zone, thus will replace the Bulgarian lev with the Euro. The final steps in the process, namely a vote by the European Parliament during its plenary session in Strasbourg and a decision by the Economic and Financial Affairs Council in Brussels, are scheduled to take place on 08.07.2025. Once these steps are completed, the procedure will be considered finalised and the official date for the adoption of the euro will be announced. As of now, the expected date is 01.01.2026, from which point Bulgaria will adopt the euro as its national currency. The parliament has already adopted a specific legislative act introducing the regime for conversion to euro and specific rights and obligations of the business, consumers and banks in this regard (the Introduction of the Euro in the Republic of Bulgaria Act), which will start to apply.

The introduction of the euro will facilitate future trade and investments. At the same time, it will require businesses to implement certain changes, including the conversion and dual display of prices (both in BGN and EUR) for goods and services, the redenomination of company capital into euro and the corresponding adjustment of shareholdings, etc.©2025 Multilaw. All rights reserved.