The primary legal act governing the types, corporate structure and governance, as well as the requirements for the establishment of commercial companies in Bulgaria is the Commercial Act 1991.

The new Commercial Registry Act 2008 regulates the requirements and procedure for registration in a centralized electronic-based registry of commercial legal entities operating under Bulgarian law as well as changes in the corporate status of such entities.

Bulgarian law allows for the establishment of entities with foreign participation. There is no limitation on the share participation of foreign legal entities and individuals.

Bulgarian law recognizes the following types of commercial companies extensively listed in the Commercial Act: (i) general partnership (sabiratelno druzhestvo – SD); (ii) limited partnership (komanditno druzhestvo – KD); (iii) limited liability company or solely-owned limited liability company (druzhestvo s ogranichena otgovornost – OOD or ednolichno druzhestvo s ogranichena otgovornost – EOOD); (iv) joint stock company or solely-owned joint stock company (aktsionerno druzhestvo – AD or ednolichno aktsionerno druzhestvo – EAD); and (v) company limited by shares (komanditno druzhestvo s aktsii – KDA).

All of the above organizations are recognized as separate legal entities. Regardless of the nationality of its founder(s), each company registered in Bulgaria is considered as a Bulgarian legal entity and should be governed in compliance with the effective Bulgarian laws and regulations.

In addition to the five types of commercial companies mentioned above, business may also be conducted in one of the following organisational forms: (i) sole trader; (ii) holding; (iii) branch; (iv) trade representative office (“TRO”); and (v) co-operative.

Under Bulgarian law, sole traders, partners in general partnerships and unlimited partners in limited partnerships and in companies limited by shares have unlimited personal liability to the company’s creditors. On the other hand, the shareholders’ exposure in limited liability companies and joint stock companies, as well as the liability of limited partners in a limited partnership and in a company limited by shares is capped at the amount of their shareholding in the company’s capital.

The procedure for incorporation of a company in Bulgaria does not differ when local or foreign persons participate in its establishment. Under Bulgarian law there are no restrictions as to the size of the foreign participation in the capital of a Bulgarian company and, therefore, up to 100 % of the registered capital of a local company can be held by foreign persons.

As of 01 January 2008, all types of commercial companies and all branches of foreign commercial companies are incorporated by way of registration in the Commercial Registry, administered by the Registry Agency, developed under the authority of the Ministry of Justice. This is a one-stop shop registration, upon which the registered company shall obtain a Unified Identification Code (“UIC”), which shall serve for all commercial, tax, social security, statistics and other public purposes. The company shall be identified by the UIC throughout its entire existence. The incorporated company or branch becomes a capable legal entity as of the date of its entry in the Commercial Register.

Although a local company or a branch should register its scope of activities, it is free to conduct any type of activities not prohibited by law, even if the respective activity is not expressly included in its registered scope of activities (under Bulgarian commercial law, there is no applicable ultra vires rule in this respect). Where a license or permit is required by virtue of special laws for the performance of a specific activity, such activity may be performed after obtaining the respective license or permit. By way of example, activities subject to licensing/permit regime include banking, insurance, investment funds, management companies, investment intermediaries, gambling, trade in medicines, trade in tobacco, etc.

A foreign person may be appointed as manager of a company. The manager does not have to be a Bulgarian resident either. A common solution in this case is to manage the company by way of a detailed power of attorney, given by the foreign manager to a local employee.

The type of business organization most commonly used in Bulgaria is the Limited Liability Company (OOD). The shareholders’ liability is limited to the amount of their contribution into the capital. By contrast, general partnership partners are liable to creditors with their entire property.

The limited liability company is the type of business organization most widely used because of the minimum capital requirements and the simplicity of its corporate governance structure. The OOD avoids the higher publicity requirements and the complex incorporation procedures applicable to a joint stock company (AD). Because of its advantages, the majority of foreign-owned companies are organized in this legal form. The Bulgarian OOD resembles the German and Austrian “GmbH”, the French “Sarl.” and the English private company limited by shares.

OOD can be established by one or more persons, individuals and/or legal entities. As a type of OOD, the solely owned OOD is subject to the same regulation as the OOD, with certain exceptions relating to its specific structure of shareholding. Possible shareholders in an OOD are Bulgarian and foreign individuals as well legal entities.

The minimum amount of share capital required by the Commercial Act for incorporation of an OOD is BGN 2 (two Bulgarian Leva) (equal to appr. EUR 1 (one Euro)) and distributed in shares with value of not less than BGN 1 (one Bulgarian Lev) each. The shareholders can make both cash and in-kind contributions. The in-kind contribution is subject to mandatory evaluation by three independent experts, appointed by the Bulgarian Registry Agency.

The corporate governance structure of an OOD consists of (i) a general meeting of the shareholders; and (ii) one or more managers who manage the company and represent it vis-a-vis third parties. Under Bulgarian law only an individual may be appointed as manager of the OOD. The manager can be a partner, as well as a third person and there are no restrictions for a foreign person or non-resident to be appointed as manager of an OOD.

One of the key features of the OOD is related to the transfer of the shares. The transfer of shares from one shareholder to another is unrestricted but transfer to a third party is subject to a more complex procedure. The new shareholder has to be admitted by the general meeting of shareholders. A transfer of shares contract has to be concluded and certified by a Notary Public. The contract is then registered at the Registry Agency. At least once a year a general meeting of the shareholders has to be held (annual general meeting). Shareholders are entitled to receive dividend in proportion to their shares, unless otherwise agreed.