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?

Yes, the JSCo is a separate legal person.

(Maximum) period of existence

There is no maximum period of existence of the JSCo. It can be established for a definite or an indefinite period.

Governing document(s)

The main governing document of a JSCo is the Articles of Association (AoA).

Liability of incorporators / shareholders

The shareholders in a JSCo are not personally liable for the obligations of the company. They are only liable up to the amount of their contribution to the capital of the JSCo.

(Governing) bodies

The main governing bodies of a JSCo with a one-tier management system are the General Meeting of the Shareholders (General Meeting) and the Board of Directors, whereas in a JSCo with a two-tier management system these would be the General Meeting, the Supervisory Board and the Management Board.

Other particularities

In cases when a JSCo has only one shareholder it is generally referred to as Sole Owner of the Capital (sole owner). The sole owner is the governing body in such JSCo which decides on the matters within the competence of the General Meeting.

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.)?

Yes, the JSCo can be involved in such international transactions. With regard to international mergers – the JSCo can be involved only in mergers with entities which have their registered seat in another Member State of the European Union or in a Contracting Party to the Agreement on the European Economic Area.

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

Yes.

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

Yes, it is possible to use a JSCo 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 JSCo are:

• Articles of Association – a document executed by the shareholders (or the sole owner of the capital in cases of a sole-owned JSCo), which establishes the main parameters of the company, as well as the rights and obligations of the governing bodies;
• Resolution of the Constituent Meeting of the shareholders/Resolution of the sole owner for the incorporation of the company, the adoption of the Articles of Association and the appointment of a management body/bodies;
• Declaration of consent and eligibility from the members of the management body/bodies - this document needs to be notary certified;
• Specimen of the executive members’ signature – this document needs to be notary certified;
• Declaration for non-compete activity of the members of the management body/bodies;
• Declaration from the founding shareholders for not being insolvent;
• List of the founding shareholders subscribing shares with indication of the number and value of shares;
• Resolution of the respective management body to appoint executives;
• License for the specific activity the company will execute – only in cases where the company is in a regulated sphere such as banking, insurance, etc. and need the prior approval of the relevant regulating authority;
• Declaration for the purposes of registration in the company register.

Involvement of notary, company register, governmental authorities

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

A Notary Official is only involved in the certification of the declaration of consent and eligibility of the members of the management board and the specimen of the executive member's signature.

Timing (estimate)

The registration process in the Commercial Register from the date of filing the application until the registration of the JSCo 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 company must be set forth in the AoA and listed in the company file in the Commercial Register. However, under Bulgarian law companies are generally not limited to operate only within their specified scope of activity.

The only exception to this rule is for companies in regulated markets such as banking, insurance, medical entities, etc. which have an obligation to include a specific scope of activity and to operate only within its limits.

Minimum number of incorporators / shareholders and residency requirements

The minimum number of shareholders is one which will be the case of a sole-owned JSCo. There are no residency requirements for shareholders.

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

In the cases of a one-tier management system the governing body of the JSCo would be the Board of Directors. The minimum number of directors is three and the maximum number is nine.

In a two-tier managed JSCo the governing bodies are a Supervisory Board and a Management Board. The minimum number of members of the Supervisory Board is three and the maximum number is seven. The minimum number of members of the Management Board is three and the maximum number is nine.

There are no residency requirements for the members of the management bodies of the JSCo. However, if none of them is a resident of Bulgaria, the company shall appoint a local contact person under the anti-money laundering regulations.

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

The minimum capital of a JSCo is BGN 50 000 (approx. EUR 25 000). At least 25% of the capital has to be paid in at the time of filing the application for registration and the rest not later than 2 years thereafter.

If the company’s scope of activity is in a regulated business such as banking, insurance, etc. the specific legal acts regulating this activity provide for a particular minimum capital requirement.

The capital can be deposited by the shareholders either with a cash or with an in-kind contribution. If the contribution is cash, it should be deposited in a special fund-raising bank account.

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

No, it is not required for the purposes of incorporation.

However, the presence of members of the management board might be required within the KYC process by the bank for the purposes of opening a fund-raising bank account.

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

A Unified Identification Code (UIC) is assigned automatically to each company 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:

• Company name;
• United Identification Code of the company;
• Legal form of the entity;
• Seat and registered address of the company;
• Scope of business activity of the company;
• The amount of the capital and the amount of the paid-in capital, the type and amount of in-kind contributions;
• Information about issued bonds;
• Term of the company (if any);
• Information on the management – type of management system, information on the members of the respective board - full names and nationality, manner of representation;
• Information on the procura holders (if any) – full names, nationality and rights under the procura;
• Information on the beneficial owner of the company (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 company;
• Annual financial statements of the company;
• Liens and encumbrances on the company enterprise;
• Information regarding insolvency or liquidation of the company;
• Information regarding the company’s merger, division and/or transformation;
• Information regarding transfer of company’s enterprise.

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

For one-tier management, JSCo, the governing body is the Board of Directors. The members are called directors and the executive members are called Executive Directors. Their main duties are to manage the company and represent it before all third parties.

In a two-tier managed JSCo the governing bodies are a Supervisory Board and a Management Board. The functions of the Supervisory Board are to represent the company but only in its relations with the Management Board.
The main duties of the Management Board, on the other hand, are to manage the company and act on its behalf with third parties.

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

The members of the Board of Directors in one-tier management system and the members of the Supervisory Board in two-tier management system are appointed, dismissed, and replaced with a resolution of the General Meeting.

The members of the Management Board in the two-tier management system are appointed, dismissed and replaced with a resolution of the Supervisory Board.

Yes, it is possible for an entity to be a director but only if this is expressly provided for in the Articles of Association of the company.

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

Yes, it is possible for an entity to be a director but only if this is expressly provided for in the Articles of Association of the company.

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?

There is no such requirement per se.

However, in the one-tier management structure there is rule that the executive members of the Board of Directors cannot be more than the non-executive members, respectively it is required to have non-executive members as well. Both executive and non-executive members serve together in the Board of Directors.

In a two-tier management system, the members of the Supervisory Board are non-executive directors as the Supervisory Board does not take part in the management of the company. The members of the Management Board, on the other hand, take part in the management and are therefore executive members.

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 body of shareholders is the General Meeting of the shareholders (General Meeting). Generally, the most important decisions for the functioning of the company are in addressed at the General Meeting.

The General Meeting can amend and supplement the Articles of Association, pass resolutions that decide on the following: increases or reductions of the capital; transformation and dissolution of the company; elect and recall the members of the Board of Directors or of the Supervisory Board, as the case may be; determine their remuneration and discharge them from liability; on the issuing of bonds; approve the annual financial statement and decide on distribution of dividends, etc.

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

The Commercial Act contains a specific quorum requirement only for few resolutions: amending and supplementing the Articles of Association, an increase or reduction of the capital and transformation and dissolution of the company may be adopted only if at least 50% of the capital is represented at the General Meeting. The Articles of Association may provide for a larger quorum requirement or envisage a quorum for other decisions.

In the absence of quorum (when such is required), a new session of the General Meeting may be scheduled no sooner than fourteen days after the first one, and the session at such latter date shall be valid regardless of the capital represented.

General Meeting resolutions must be passed by a majority of at least 50% of the shares represented, unless the law or the Articles of Association provide otherwise.

There is a special majority requirement for resolutions for amending and supplementing the Articles of Association, for increase or reduction of the capital and for dissolution of the company, namely - a majority of at least 75% of the represented capital. The Articles of Association may provide for another, larger majority for these cases.

Where the law or the Articles of Association stipulate that voting should occur class by class, quorum and majority rules shall apply separately to each class of shares.

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

Yes, there are special regimes for joint-stock companies which are publicly traded as well as for joint-stock companies whose business activity is in a regulated market.

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

Every JSCo 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 JSCo must establish the availability and value of the assets and liabilities of its enterprise by means of an inventory at least once a year in order to present them fairly in the financial statements. Enterprises whose net sales revenues do not exceed BGN 200 000 (approx. EUR 100 000) for the current reporting period do not carry out mandatory inventory.

The JSCo must summarise the results of its business activities based on the entries in the accounting books and the inventory, drawing up an annual financial statement and, where necessary, the relevant accounting references. The annual financial statement must be certified by a registered auditor in the cases provided for by law.

The annual financial statement of the JSCo must be approved with a resolution of the General Meeting and must be registered in the Commercial register together with an annual activity report.

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 JSCo must be audited by registered auditors in any case, unless the company is a micro enterprise (i.e. reaching at least two of the following three criteria: asset value of BGN 700,000, net turnover of BGN 1,400,000 or 10 employees).

The auditors must be elected by the General Meeting before the end of the calendar year. In case no auditors were elected in due period, they must be appointed by a registration officer of the Registry Agency at the request of the Board of Directors, the Management Board, the Supervisory Board or an individual shareholder.

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

No, there are no such requirements for joint-stock companies.

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

Shares.

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

Yes, it is possible to have different classes of shares – for example ordinary and preferred shares. Ordinary shares provide the basic rights under the Commercial Act – a voting right, a dividend right and a liquidation quota right. In addition to the rights under the ordinary shares, preferred shares may provide a guaranteed or additional dividend or a share in the company's assets on liquidation, as well as other rights provided for in the Commercial Act or in the Articles of Association; or preferred shares may be non-voting. Such different classes of shares must be stipulated in the Articles of Association.

What documentation is required for the transfer of ownership interests?

Shares shall be transferred by endorsement attached to the share certificate. The Articles of Association may provide for other conditions for the transfer of shares as well.

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

Yes, the endorsement together with the share certificate must be physically handed over to the purchaser. Also, the executed transfer must be registered in the shareholders book of the company in order for the transfer to be effective towards the company.

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

No, there are no such stamp duties.

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

Shares in a joint-stock company can be issued by an emission of new shares, by increasing the nominal value of already issued shares or by converting bonds into shares.

The capital of a JSCo can be increased with a resolution of the General Meeting which must be adopted by a 75% majority of the shares represented at the meeting. The Articles of Association may provide for a larger majority, as well as for additional conditions. Where shares of various classes exist, the resolution must be adopted by the shareholders of each class.

In order for the capital increase to be registered in the Commercial Register at least 25% of the nominal value of the subscribed new shares must be paid and the difference between the nominal value and the issue price of the new shares must be deposited. A list of the persons who have subscribed the new shares, certified by the respective managing body, must be presented to the Commercial Register.

The other possibility for increasing the capital is by converting bonds into shares. When a resolution is passed at a General Meeting to issue such convertible bonds, it must also specify the procedure for the conversion.

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?

Yes, it is possible to have non-cash contributions in the capital of a JSCo. When such contributions are made, the Articles of Association must contain the name of the contributor, a full description of the contribution, its monetary valuation and the basis of its rights.

The value of the contribution must be assessed by 3 independent experts appointed by the Registry Agency who draw a written report of their evaluation. The report must contain a full description of the contribution, the method of valuation, the valuation obtained and its correspondence to the amount of the capital share or the number, nominal and issue value of the shares subscribed by the contributor. The expert report must be submitted to the Commercial Register together with the application for incorporation of the JSCo / increase of the capital.

Premium share contributions cannot be made without the issue of shares or increasing the nominal value of existing shares.

Yes, they are permitted up to 25% of the share nominal value. Each shareholder is obliged to pay or contribute his share in the manner specified in the Articles of Association but no later than two years after the incorporation of the company / increase of the capital has been registered in the Commercial Register.

If a shareholder fails to pay or contribute his share within the specified time, he shall be liable for interest and damages. In addition to that, if the shareholder does not pay after a one-month notice has been given to him, he shall be deemed expelled from the company and his shares shall be forfeited.

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

Cancellation of shares can be done on two occasions - compulsorily or by redemption of shares after the expiration of certain term in which the shares were not acquired by a shareholder.

Compulsory cancellation of shares is permitted only if it is expressly provided for in the Articles of Association and the respective shares were issued subject to the condition that they can be compulsorily cancelled. The Articles of Association must lay down the conditions and the manner in which the cancellation must be executed.

The redemption of shares is admissible in a limited number of cases specified in the Commercial Act.

The capital of the JSCo can be reduced with a resolution of the General Meeting which must be adopted with a majority of 2/3 of the presented capital (with a quorum requirement of 50% of the capital). The resolution must state the purpose of the reduction and the manner in which it will be carried out. The reduction can be done by:

• reduction of the share nominal value;
• cancellation of shares.

The resolution on reduction of the capital must be published in the Commercial Register so that the company's creditors who do not agree to the reduction can satisfy their claims by way of execution or security.

Any requirements with respect to distributions to shareholders?

Joint stock companies are required by law to set aside 10% of the profits made in a Reserve fund until the Reserve fund reaches 10% of the registered capital of the company.

If these prerequisites are met, the General Meeting may resolve to distribute and pay out dividends.

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

Yes.

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 JSCo can vary depending on the specific activity of the company, its size and the revenue it generates so there is no definitive answer. However, the usual costs that a JSCo would have are for: accounting and audit 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).

The profits of joint-stock companies are taxed with a corporate income tax. The applicable tax rate is 10 %. Local JSCos are taxed for their profits and world-wide income.

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 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 a managing or controlling body of the company 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 are lifted. The revocation of the restrictions shall be declared explicitly, indicating the specific circumstances under which it has been executed.

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.