Business for sale in Bulgaria – benefits and risks

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If you are interested in doing business in Bulgaria and you search the web for an overview of potential investment opportunities, you will notice a large number of offers for businesses for sale in Bulgaria, including many listings of hotels, bars and restaurants at Bulgarian seaside or in mountain ski resorts.

The reason for that abundance of hotels and restaurants for sale is simple. The boom in both construction and tourism a few years ago led to thousands of new hotels and developments in the resorts. Most of the developments, however, were financed by bank loans and mortgages. Due to the global financial crisis some of the investors were not able to pay their credits to the banks any longer and facing the option to lose everything they chose to sell the entire business or some part of it.

Investors looking to acquire an operating business in Bulgaria by merging or purchase should be very careful though, as this type of investment is more risky than setting up a new company in Bulgaria. For example, if one chooses to buy a newly built hotel at the seaside, it is of crucial importance to make sure beforehand that the hotel has all necessary permits to operate as such and to let rooms to tourists and that all construction and finishing works match the requirements of Bulgarian standards.

In any case, it is always recommended for the buyer, if possible, to purchase only the premises, i.e. the real estate, and not to buy the company. Buying an operating company definitely carries more risks because all obligations and liabilities of the company under sale are transferred to the new shareholder. Those risks can be minimized if a thorough investigation by professional commercial lawyer is conducted before the transaction takes place. Liabilities to the government and banks are relatively easy to be tracked down, but sometimes outstanding liabilities to third parties could be covered up and even a good business lawyer will not be able to discover them. In such cases, the form and stipulations of the sale-purchase contract arranging the transfer of shares is of crucial importance.  It is highly recommended that the contract is made by legal professional that knows all legal mechanisms to insure the buyer against any future possible claims by third parties or any other hidden liabilities that an unfair vendor may try to conceal in a business transaction.

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