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

The Commercial Act (CA) (Targovski zakon - TZ)

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

Yes, the LLC is a separate legal person.

(Maximum) period of existence

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

Governing document(s)

The main governing document of an LLC is the Articles of Association (AoA).

Liability of incorporators / shareholders

The shareholders in an LLC 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 LLC.

(Governing) bodies

The main governing bodies of an LLC are the General Meeting of the Shareholders (General Meeting) and the Manager(s).

Other particularities

In cases when an LLC has only one shareholder he is generally referred to as Sole Owner of the Capital (sole owner). The sole owner manages and represents the company personally or through a manager appointed by him. The sole owner is the governing body and decides on the matters which are to be decided by the shareholders at 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 LLC can be involved in such international transactions. With regard to international mergers – the LLC 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?

No.

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

Yes, it is possible to use an LLC 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 LLC are:

• Articles of Association – a document executed by the shareholders (or the sole owner of the capital in cases of a sole-owned LLC), which establishes the main parameters of the company, as well as the rights and obligations of the governing bodies;
• Resolution of the General Meeting of the shareholders/ the sole owner of the capital for the incorporation of the company and the appointment of (a) manager(s);
• Declaration of consent from the manager(s) and specimen of the manager's signature with notary certification;
• Declaration for non-compete activity and eligibility of the manager(s);
• Documents evidencing the deposition of the capital (bank certificate – for cash contributions; evaluation expert report – for in-kind/non-monetary contributions);
• Declaration for the purposes of registration in the company register.

Involvement of notary, company register, governmental authorities

The LLC must be registered in the Commercial Register and Register of Non-Profit Legal Entities (the Commercial Register), which is maintained electronically. The LLC 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 of the manager and specimen of the manager's signature.

Timing (estimate)

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

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

The main administrative and notary costs usually amount to EUR 100 (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 established 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 LLC. There are no residency requirements for shareholders.

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

The management body of the LLC is the manager. The minimum number is one manager. It is up to the shareholders to decide whether they will appoint more than one manager in which case they need to specify whether the managers have sole or joint representative powers.

There are no residency requirements for the manager. However, if the manager is not a resident of Bulgaria, an obligation for the company to appoint a local contact person will arise under the anti-money laundering regulations.

Another governance officer in an LLC is the controller. The Articles of Association may provide for the election of such controller, however, it is not mandatory to appoint one. There are no residency requirements for the controller.

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

The minimum capital for an LLC is BGN 2 (approx. EUR 1). If the registered capital of the LLC will be equal to the statutory minimum, it must be deposited in full before filing for its registration in the Commercial Register. In case the company is registered with a capital higher than the statutory minimum - at least 70 % of the capital must be paid in.

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 the manager 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? For examples

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;
• Term of the company (if any);
• Information on the management – number of managers, 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 shareholders / the sole owner of the capital – number of shareholders, full names, nationality and the amount of their shares in the company capital;
• 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 shares 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?

The executive body of an LLC is the manager. The manager organizes and manages the activities of the company in accordance with the law and the resolutions of the General Meeting/ sole owner of the capital. The manager represents the LLC before all natural and legal persons as well as before governmental and court bodies. There are some decisions that the manager cannot make, which are otherwise determined by a resolution voted on at the General Meeting/ sole owner of the capital.

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

The managers are appointed, dismissed, and replaced with a resolution of the General Meeting of the shareholders / the sole owner of the capital of the LLC. The resolution must be executed with notary certification of the contents and signature, unless otherwise provided in the Articles of Association, and must be registered in the Commercial Register.

The appointment of the first manager of the LLC shall be incorporated in the resolution for establishment of the Company.

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

No, only natural persons can be managers of a LLC.

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 body of shareholders is the General Meeting of the Shareholders (General Meeting).

The General Meeting can amend and supplement the Articles of Association, admit and expel shareholders, give consent for the transfer of shares to a new shareholder; distribute the profit; pass resolutions that decide on an increase or reduction of the capital; appoint/dismiss the manager(s), fix their remuneration and discharge them from liability; initiate proceedings against the manager; pass resolutions that decide on additional cash contributions, opening/closing of branches, participation in other entities; acquisition and disposal of real estate.

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

There is no express requirement for a quorum for the General Meeting. The quorum requirement can be derived indirectly from the majority rules for decision-making as majority is calculated from the total amount of capital.

The majority requirements for decisions of the General Meeting differ depending on the type of decision. The general rule is that resolutions are adopted by a majority of more than 50% of the capital, unless the Articles of Association provide a greater majority.

However, there are exceptions to this rule. The decisions for amending and supplementing the Articles of Association, admitting and expelling shareholders, giving consent for the transfer of shares to a new shareholder and resolutions on additional cash contributions are adopted by a majority of more than 75% of the capital. Additionally, resolutions on an increase or reduction of the capital are adopted unanimously by all shareholders.

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

No, there are no special regimes for limited liability companies.

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

Every LLC 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 LLC 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 LLC 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 LLC must be approved with a resolution of the General Meeting/ sole owner of the capital 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 LLC must be audited only in limited cases provided by law – e.g. medium and large enterprises; enterprises of public interest; small enterprises reaching certain thresholds for asset value, turnover and number of employees, and others.

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 limited liability 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?

No, it is not possible. However, in the Articles of Association the shareholders may establish certain privileges for specific shareholders – e.g. bigger dividend.

What documentation is required for the transfer of ownership interests?

The transfer of shares in an LLC must be executed through a share transfer agreement.

The transfer of shares in an LLC from one shareholder to another may be carried out without the need of any additional documentation. However, if they are transferred to third parties, the new shareholder shall be admitted by the General Meeting upon his written application, and the General Meeting shall give its approval of the share transfer with a resolution.

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

The share transfer agreement must be executed with notary certification of the signatures and the contents and must be entered in the Commercial Register.

In cases when the consent of the General Meeting is required, the resolution must be executed with notary certification of the contents and signature, unless otherwise provided in the Articles of Association, and must be registered in the Commercial Register.

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

No, there are no specific stamp duties. However, notaries may calculate the notary fee for the notary certification based on the purchase price of the shares.

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

New shares in an LLC can be issued by increasing the capital pursuant to a resolution of the General Meeting adopted unanimously by all shareholders. The resolution must be executed with notary certification of the contents and signatures, unless otherwise provided in the Articles of Association, and must be registered in the Commercial Register.

There can be both cash and in-kind payments and the shareholders must pay or contribute them within the timeframe and manner specified in the resolution of the General Meeting.

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 LLC i.e., the so-called in-kind contributions. 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 to be subscribed by the contributor. The expert report must be submitted to the Commercial Register together with the application for incorporation of the LLC/ 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 in certain cases and up to 70% of the share nominal value where the capital of the LLC is higher than the statutory minimum. Each shareholder is obliged to pay or contribute his share in the manner specified in the Articles of Association, but no later than 2 years as of incorporation/capital increase.

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, the non-payment shall be considered grounds for expulsion of the shareholder from the LLC. In case the share cannot be paid by the shareholder, and it is not possible to sell it to another person, the remaining shareholders are obliged to either pay up the shortfall in proportion to their shares or to reduce the company's capital by the unpaid amount.

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

No cancellations or redemption of its own shares by the LLC are permissible.

The capital of the LLC can be reduced with a resolution of the General Meeting which must be adopted unanimously. 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 value of the share in the capital;
• return of the share to the shareholder who has terminated his participation;
• exemption from the obligation to pay the outstanding part of the share of capital.

The resolution on reduction of the capital must be submitted to the Commercial Register and must be published so that the company's creditors who do not agree to the reduction can satisfy their claims by way of execution or security. From the moment of announcement of the decision in the Commercial Register until the expiration of 3 months, the creditors may express their disagreement with the reduction in writing, and if they do not - they shall be deemed to have agreed to the reduction of the capital.

Any requirements with respect to distributions to shareholders?

Limited liability companies are entitled to distribute profits if:

• they have made an accounting profit in the past calendar year and this is reflected in the annual financial statement adopted by the General Meeting of the company; and
• the net asset value reduced with the profit to be paid out is not less than the amount of the company's registered capital and the company’s funds (if any – LLC are not required by law to establish Reserve Fund).

If these prerequisites are present, the General Meeting of the LLC may resolve to distribute and pay dividends to the shareholders.

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 LLC 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 LLC 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).

The profits of limited liability companies are taxed with a corporate income tax. The applicable tax rate is flat 10 %. Local LLCs 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.