The types of commercial companies and organisations most commonly used for establishment of foreign business in Bulgaria are a limited liability company (LLC), a joint stock company (JSC), a branch and a trade representation office (TRO).
Limited Liability Company
The LLC is preferred by investors because of the minimum capital requirements and the simplicity of its corporate structure. A LLC can be established by one or more local or foreign individuals and/or legal entities.
The minimum share capital required by the Commercial Act for incorporation of a LLC is BGN 2 (approximately EUR 1), distributed in shares with a value of not less than BGN 1 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 Registry Agency.
The corporate structure of an LLC consists of a general meeting of the shareholders and one or more general managers who manage the company and represent it before third parties. Under Bulgarian law only an individual (a shareholder or a third party) may be appointed as manager of the LLC. There are no restrictions for a foreigner to be appointed as manager of a LLC.
The registration of the LLC in the Commercial Register takes 4 business days and the state fee for registration is BGN 80 (approximately EUR 40).
Joint Stock Company
The simple procedure for share transfer and the lack of statutory required personal engagement of the
shareholders in the operation of the company make the JSC also preferred vehicle for making business in
Bulgaria. A JSC may be established by one or more Bulgarian and/or foreign individuals and/or legal entities.
The minimum registered capital required for establishment and operation of a JSC is BGN 50,000 (approximately EUR 25,000). However, special legislation may require higher minimum share capital for carrying out certain types of activities, such as banking, investment brokerage or insurance activity. The share capital of a JSC is distributed in shares with a nominal value of not less than BGN 1 each. At the time of incorporation of the company at least 25% of the nominal value of each share must be paid in and the rest of total amount of the capital shall be paid in within two years. The contributions to the capital can be cash and in-kind.
The shares of a JSC may be: (i) registered or bearer shares; (ii) common or privileged shares, (iii) materialised or book-entry form shares.
Registered shares are transferred by endorsement, whereas bearer shares are transferred by mere delivery. The transfer of shares in the JSC is not subject to registration in the Commercial Register. The transfer of registered shares must be entered into the book of shareholders of the JSC to have effect against the company.
The corporate structure of a JSC consists of a general meeting of shareholders and a board of directors (in the case of a one-tier governance system), or a supervisory board and a managing board (in the case of a two-tier governance system).
However, the Commercial Act sets forth statutory rules for the formation of a reserve fund, distribution of profit and minority shareholders rights.
The registration of the JSC in the Commercial Register takes 4 business days and the state fee for registration is BGN 230 (approximately EUR 115).
The incorporation of a branch is one of the alternatives to a foreign company to do business in Bulgaria.
A branch of a foreign company is registered in the Commercial Register. It is required to keep commercial books as a separate business establishment and prepare a separate balance sheet. However, as the branch is not a separate legal entity, its assets and liabilities are considered as assets and liabilities of the parent company. The branch is managed and represented by a general manager. From a tax point of view a branch of a foreign company is considered a “permanent establishment” and it could trigger corporate income tax liability in Bulgaria for the parent company.
The registration of a brunch in the Commercial Register takes 4 business days and the state fee for registration is BGN 215 (approximately EUR 107.5).
Trade Representative Office
A foreign entity can register in the Bulgarian Chamber of Commerce and Industry a trade representative office in Bulgaria. TRO is not a separate legal entity and it may not carry out business activities. Its role is to promote the principle’s business, to carry out marketing and advertisement campaigns, to contact potential clients and partners, to participate in exhibitions, to organise trainings, etc. In general TRO does not generate income and is not subject to corporate income taxation in Bulgaria.
The fee for registration of TRO in the Bulgarian Chamber of Commerce and Industry is EUR 120.