If you are a foreign national, permanently living abroad, and you have already appreciated the big benefits of doing business by running a Bulgarian company, then maybe you have already asked yourself the question whether it is possible to incorporate a company in Bulgaria and then run it from abroad or you still have to come to Bulgaria personally.

Presently, investors need to visit Bulgaria personally while setting up their business in Bulgaria. This is mandatory only for the initial registration and bank account opening.

This, of course, does not mean to prepare all required paperwork and other required documents personally. It means that you will have to sign all related documents that someone, usually a trustworthy Bulgarian business lawyer, has already drafted on your behalf. If all documents have already been exchanged by post or e-mail and certainly approved by the owner/s or respectively shareholder/s, then the latter will only have to sign the documents, some of which before a notary public. All this takes from a couple of minutes to an hour.

Following the Bulgarian company registration process successful end, owners or shareholders start actively doing business in Bulgaria (as this what they have established the company for after all).

The first question in this regard is related to the scope of business activities of commercial companies in Bulgaria. They can do virtually any kind of business they wish. Or do no business at all – something that is not prohibited but even allowed. In the latter case the company pays no taxes, nor any other sort of contributions to the state. The only expenses on account of the LLC or other type of corporate body are the accounting and / or legal charges which are due annually for filing nil returns.

Upon registration Bulgarian companies declare their business activities with the Trade Register. But are they restricted with the exact activities that they have stated at the time of initial incorporation? No, they are definitely not. Even if a company, at the time of the business start-up, declares production of some sort of goods, later on it can start doing other type of business in Bulgaria, EU or around the world, e.g. dealing with distribution of goods even if this is not explicitly mentioned in the official companies register. But aren’t there any limitations after all? Yes, there are limitations for doing business in Bulgaria of course but they are related to some sectors which are monopolized by the state – e.g. military production, etc. Some other specific commercial activities could be subject to initial licensing – for example production of drugs, etc.

To summarize things up – almost all of the things described above can be done either personally by foreign businessmen who are doing business in Bulgaria or from abroad via proxies – trustworthy lawyers, managers, etc. Many things can also be done over the internet – e-banking, real time business monitoring, etc. Having in mind this, may foreign investors have already developed a successful business in Bulgaria without their physical presence in the country.

Residence permit in Bulgaria for trade representatives

Trade representative office in Bulgaria can be registered and operated by any foreign company according to Bulgarian legislation. Representative offices are different from branch offices. They can be used only for marketing and advertising of products or services of the mother company. They are not allowed to trade on their own account, any sales are made directly by the mother company, but they can hire staff and keep their own accounting records. All expenses for the maintenance of the representation are also covered by the mother company.

Registration of trade representative offices is made with Bulgarian Chamber of Commerce and Industry in Sofia or its local divisions. The application cannot be filed online; it must be submitted either by a legal representative of the company in person or by an authorized attorney. The application must be accompanied by official documents for the status of the mother company (such as certificate of good standing, certificate of incorporation, etc.), documentation regarding its activities, financial status, expansion plans, etc. as well as information about the physical person/s appointed for representatives. Before filing the documents, they must be duly notarized and legalized, translated into Bulgarian and certified for authenticity by Bulgarian Ministry of Foreign Affairs. The whole procedure, inclusive of preparation of legal documentation can be completed within a month. The trade representative office should have real address in Bulgaria so a rental contract must be presented to the registration authority as well.

If you want the representatives of the TRO to get a D visa and long-term residence in Bulgaria , the foreign company should match the following criteria:

1. The foreign company must have history for more than 2 years
2. It must be active and in good financial state
3. Annual financial statements and tax return of the company are required and must show minimum annual turnover of 51130 euro for each of the last 2 years.
4. A business plan for the company expansion in Bulgaria is required
5. The trade representative office needs a real office in Bulgaria

Bulgarian trade representative office registration is a standard method of promoting and expanding a business in another country. But apart from expansion, the registration of a trade representative office of a foreign company in Bulgaria has another benefit. The establishment of a representative office is a method of obtaining a long-stay residence permit in Bulgaria (for up to one year) for non-EU citizens. Up to three persons, appointed as representatives, can obtain visa type D and long stay permit card through the establishment of one representative office.

Once the trade representative office registration is completed, the physical person/s appointed for representative/s in Bulgaria can apply for visa type D. The application is filed with the Bulgarian embassy in the country of current citizenship of the applicant. The basic requirements for the applicants are to have clean criminal record, to have accommodation in Bulgaria, a bank account and an insurance, proof of which is presented to Bulgarian authorities at the time of the application. The visa is usually issued within 3 months and is valid for six months. Only after obtaining the type D visa, the representatives can come to Bulgaria and apply for a residence permit (up to one year).

The holder of Bulgarian long stay residence permit card is entitled of multiple entries and stay in Bulgaria. The residence permit card must be renewed every year which is a relatively easy procedure and after five years the person can apply for a Bulgarian permanent stay residence permit. Another benefit is that the family of the representative (spouse and children under 18) can also move to Bulgaria based on his residence permit.

1. Providing payment services under the Payment Services and Payment Systems Act;
2. Issuing and administering other means of payment (travellers checks and letters of credit) as far as this activity is not covered by item 1;
3. Financial leasing;
4. Guarantee transactions;
5. Trading on your own account or for account of customers in foreign currencies and precious metals with the exception of derivative financial instruments on foreign currency and precious metals;
6. Currency brokerage;
7. Acquisition of credit claims and other forms of financing (factoring, forfeiting, etc.);
8. Issuing electronic money;
9. Acquisition of shareholdings;
10. Lending funds, that are not raised through public deposits or other repayable funds.

Financial institutions are subject to registration with BNB (Bulgarian National Bank) public register. A very important detail in this regard is that if there is a specific activity under a special law – the arrangements for licensing a Bulgarian financial institution are different. For example, a financial institution that issues electronic money should be registered and licensed under the Payment Services and Payment Systems Act.

The Credit Institutions Act sets out the following common requirements for the applicants:

1. To have a commercial registration in the Republic of Bulgaria as a limited liability company, joint stock company or a limited partnership with shares;
2. The scope of activity of the company shall not include services / activities different from those listed above;
3. Company’s own capital shall be in structure and in the amounts determined by Ordinance No 26 of 23.04.2009 for financial institutions, whereas only registered shares are allowed;
4. Main business activity shall be conducted on the territory of Republic of Bulgaria;
5. Managers and representatives of the company shall have the necessary qualification, experience and reputation, and the people who directly or indirectly hold the majority of the shares shall match certain criteria for reliability, financial stability and good reputation.

There are certain requirements to the person managing or representing a financial institution licensed in Bulgaria as well as natural persons who directly or indirectly hold a qualifying shareholding in the capital of a financial institution, beneficial owners, and persons who by law represent legal persons holding directly or indirectly a qualifying shareholding in the capital of a financial institution. Any such person shall:

1. Have a higher education;
2. Have at least 3 years of experience in economics, law, finance, IT;
3. Have not been convicted of a crime of general nature, unless rehabilitated;
4. For the last two years have not been a member of a management or supervisory body or a general partner in a company terminated due to bankruptcy in case unsatisfied creditors are left;
5. Have not been deprived from the right to hold responsible positions;
6. Have not been included in the list under art. 5 para. 1 of the Law on Measures Against Financing of Terrorism.

For registration and enlistment of a financial institution in the National Bank Register the capital of the company should be paid (in the form of cash contributions) in amount of BGN 1 000 000 (one million). The contributions to the minimum required capital must be paid in cash and should have been effected with own funds. A registered financial institution shall at all times maintain equity capital of not less than BGN 1 000 000. Equity shall be the sum of the registered and paid-up capital, the company’s reserves formed in accordance with Article 246 of the Commercial Law, retained earnings for previous years and current earnings as at the relevant reporting period, reduced by the loss for previous years and the current loss as at the relevant reporting period. In the case of repurchased shares, the company’s equity is reduced by the amount of the repurchased shares.

The administrative fee for processing the application and registration of financial institution and its entry in the register of the National Bank is BGN 3000 (three thousand). Additional fees are also payable for issuing certificates and making changes in the registered circumstances.

Court proceedings before the competent Bulgarian court are initiated either by a statement of claim (in performance claims) or by an application (in non-contentious proceedings). The subject of this article are the lawsuits in which there are 2 parties (plaintiff and defendant) and one of them wins the case and the other loses it (unless the claim is partially granted or the case is terminated before a judgment is rendered). In protective proceedings, there is only 1 party (the petitioner) who asks the court to make a particular judgment.

Claims in commercial and civil cases can be of 3 types:

1.         Performance. The most common type, where the plaintiff asks the court to order the defendant to do something, most often to pay a certain amount of money, e.g. repayment of a sum owed, payment of monetary damages, etc.

2.         Declaratory. In these actions, the sole purpose is to establish a fact of legal significance, e.g., a crime committed when the statute of limitations for criminal prosecution has expired.

3.         Modificational. In this type of action, the purpose is to effect some change in an existing legal relationship between plaintiff and defendant. If, e.g., the parties have concluded a contract for the sale of immovable property under Art. 19, par. 3 of the Obligations and Contracts Act, each of them may bring an action for a declaration of the preliminary contract as final, requesting that it be declared final, with the result that the purchaser under the preliminary contract will acquire the status of owner by virtue of the court decision, which is the constitutive effect. If, on the other hand, a property is acquired by deed, the transaction may be rescinded by a judgment, as a result of which the property reverts to the ownership of the seller, who in turn is obliged to refund the sale price received from the buyer.

Every lawsuit in Bulgaria starts with the filing of a statement of claim by the plaintiff. The only exception is the filing of an application for injunction (securing a future claim), which seeks the foreclosure of immovable property, seizure of bank accounts and other appropriate measures aimed at preventing the defendant from concealing or transferring property once he becomes aware of the proceedings against him. If the application is well-founded, the court first allows the injunction measures to be imposed, and only then does the claimant file his application and the court notify the debtor-defendant, i.e. the injunctions have already been effectively imposed when the defendant becomes aware of the proceedings against him and cannot harm his creditor by selling off or otherwise alienating his property. A lien may also be imposed after the filing of the complaint, but this is best assessed by an experienced Bulgarian litigation lawyer who represents the creditor.

The statement of claim should be filed with the district or county/city court (for claims with a claim value of more than 25 thousand leva, etc.) of the defendant’s domicile (this is the general rule of local jurisdiction, to which there are exceptions). It shall be accompanied by all documentary evidence and copies thereof for the defendant. A state fee is also payable, which is generally 4% of the material interest. If there are any defects in the statement of claim, the judge shall leave it without motion and give instructions to the claimant to remedy them, and if they are not remedied he shall discontinue the case and the stamp duty paid shall be forfeited. In view of the latter, it is advisable to instruct an experienced trial solicitor in Bulgaria to represent the claimant (or, as the case may be, the defendant) in the proceedings. The costs incurred for court fee, lawyer’s fees, etc. (e.g. expert reports) shall be awarded to the successful party and paid by the losing party.

If the court finds that the statement of claim is in order and the state fee has been paid, the court shall order that the statement of claim be served by a court officer (summons officer) on the defendant, who shall have 1 month (14 days in commercial cases) to file a response to the statement of claim. Failure to do so may have very serious consequences for the defendant, including so-called procedural default – the inability to perform certain acts at a later stage of the case. If, for example, the defendant fails to plead a statute of limitations which has expired, even if it has de facto expired, the court has no choice but to assume that the statute of limitations has not expired de jure. This is a very good illustration of how, even if the law and the evidence are entirely on the plaintiff’s (or defendant’s) side, the party may lose the case because he or she did not properly or timely exercise his or her rights.

It is also important to note that, even if the defendant cannot be found at his address, there are a number of statutory situations where the defendant is deemed to have been duly summoned, even though the statement of claim or notice of proceedings may never have been served on him. Many defendants believe that if they deliberately abscond so that they cannot be personally served with papers in a case, then they cannot be sued, but this is categorically untrue and it is therefore strongly advisable that if a defendant becomes aware or even merely hears that a case is being brought against him, he should immediately contact a solicitor who can even trace the exact case being brought against his client if the latter is unaware. It should also be noted that a party is summoned only once, and thereafter it is up to him to keep track of the progress of the case.

After the filing of a statement of defence (or after the expiry of the time limit if no statement of defence is filed), the court shall schedule the first public hearing in the civil action. In commercial cases, the so-called double exchange of documents applies – after the defence, the court gives the opportunity for a supplementary statement of claim and a supplementary defence. At the first hearing in open court, the parties should clarify their positions and make additional requests for evidence, if any. After the conclusion of this first hearing, the parties may neither allege new facts nor adduce any further evidence (unless newly discovered). Appearance of the parties is not compulsory, and it is common practice for their legal representatives – authorised civil litigators – to appear in their place with a power of attorney.

Almost always, at the first hearing, the case is adjourned to another date for the collection of evidence – experts’ reports, examination of witnesses, procurement of documents through court certificates, etc. If the defendant does not appear and has not filed a statement of defence, the court may issue a so-called default judgment, which is not subject to appeal and the plaintiff may immediately thereafter obtain a writ of execution against the defendant and file an enforcement action with the bailiff. The collection of evidence is usually carried out in several consecutive hearings of the case and in general it takes about 1 year to complete the case in each court instance, this time limit is indicative and varies according to the complexity of the case and the court’s workload (the busiest courts are in Sofia, then in Plovdiv and other large cities).

With the delivery of the judgement, the first instance proceedings come to an end. And the judge who issued the decision is no longer competent to rule, and if the parties are not satisfied with the decision, they can appeal it to the upper court. Exceptionally, the court may supplement (if it has omitted to rule on a request by the parties, e.g. on costs) or correct (in the case of a manifest error of fact) its own judgment, but not revise it. The court may give a single judgment, and all other acts it gives in the course of the case are called orders and directions and concern the development and progress of the case (e.g. admission of evidence, amendment or increase of the claim, etc.). Some of these acts are not subject to appeal, and for those that are subject to appeal, time limits apply, which the party must either monitor himself or authorise a civil or commercial lawyer in Bulgaria to conduct the case and take all necessary action to protect his client’s rights. Missing a deadline to appeal a judgment or order can irreparably harm a party’s chances of winning the case.

An appeal may be lodged either by the claimant or by the defendant (or both at the same time if the claim is partially upheld) if dissatisfied with the first instance judgment. It is filed through the court of first instance to the court of second instance (appeal), which is either a district court (or Sofia City Court) or a court of appeal. The state appeal fee is 2% on the material interest appealed against. For example, if the claim was brought for 100 thousand leva but was upheld to the amount of 70 thousand leva, one party would owe 1400 leva and the other 600 leva state fee for its own appeal against the first instance decision.

After the appeal has been filed and the appeal fee has been paid, the court of second instance sends the appellant’s appeal (appellee) to the opposing party (appellant), and the latter may file a response to the appeal. The appellate court then sets the date for the first public hearing, at which the parties may make further requests for evidence, which the court may in turn grant or refuse. If there is evidence to be gathered, the case is adjourned to another date, and if there is none, it is called for decision at the first hearing. Unlike the criminal court, in civil proceedings the court never announces its decisions immediately, but gives its decision within a time limit – by law 1 month, in practice the time limit is often 2-3 months. In cases of factual or legal complexity, or where there is a large volume of evidence, the time limit may be even longer.

After the second instance decision has been delivered, it is subject to cassation appeal. However, any party may obtain a writ of execution for the amount awarded by the appellate court and institute enforcement proceedings with the bailiff, even though the judgment may not be final and may subsequently be set aside by the Supreme Court of Cassation. Cases of lesser material interest (BGN 5 thousand for civil cases and BGN 20 thousand for commercial cases), as well as some other categories of acts in which the appeal judgment is final, are not subject to cassation appeal. The appeal is lodged through the Court of Appeal to the Supreme Court of Cassation, which is always the third and final instance in commercial and civil disputes in Bulgaria. The cassation appeal procedure is more complex and the appeal itself must be signed by a lawyer. Initially, a state fee of BGN 30 is payable, and if the cassation appeal is allowed, a 2% state fee is payable on the appealable interest.

With the exception of cassation appeals, the participation of a Bulgarian litigation lawyer in a court case is not mandatory and the party may personally carry out all necessary procedural actions. In the latter case, however, it is doubtful whether the party, especially if he has no legal education and knowledge, can succeed in the case and therefore, as a rule, parties in civil and commercial cases authorise competent lawyers to defend their interests in the best way.

Buy Bulgarian citizenship by investing in Bulgarian companies or mutual funds

Fast track Bulgarian citizenship

Following the 2021 amendments to the Foreigners in the Republic of Bulgaria Act and the Bulgarian Citizenship Act, adopted by the National Assembly, Bulgaria offers new options for obtaining citizenship by investment. These amendments allow non-EU citizens to practically buy Bulgarian citizenship by investing in the economy of the country. Current legislation offers four different types of investment:

1. Investment in shares of Bulgarian commercial companies traded on a regulated market or a multilateral trading system in the Republic of Bulgaria, at a market value of not less than BGN 2,000,000.
2. Purchase of shares or stocks in collective investment schemes (mutual funds) originating in the Republic of Bulgaria, with a value of not less than BGN 1,000,000.
3. Shares in alternative investment funds established in the Republic of Bulgaria with a value of not less than BGN 1,000,000.
4. Contribution to the capital of a Bulgarian commercial company in the amount of not less than BGN 2,000,000 for a priority investment project in Bulgaria implemented by the company.

Any of the above investments grants directly Bulgarian residence permit to the investor and to their families (spouses and children under 18). A second investment at the same value during the second year from obtaining the residence permit grants citizenship. Thus, a non-EU citizen can get an EU permanent ID card for less than 6 months and an EU passport for two-three years.

The investors are free to purchase shares from different issuers and to make an investment portfolio at their own discretion. Using the service and advise of a Bulgarian Broker who is well-acquainted with the specifics of the Bulgarian stock market is highly recommendable.

A further advantage of this fast-track Bulgarian citizenship option is that the applicant is involved with bureaucracy procedures at a minimum. Almost everything can be arranged from a distance via a power of attorney given to a Bulgarian immigration lawyer. The whole process from making the investment to obtaining Bulgarian citizenship requires no more than two-three trips to Bulgaria and a visit to a Bulgarian embassy depending on the applicant’s current residency. The fact that the procedure is consuming a little time and efforts on behalf of the applicant makes it a preferred option by well-to-do businessmen who don’t have time to spend in sluggish administrative procedures.

Applicants are required to have address in Bulgaria though, but this requirement is common for all countries which offer EU citizenship for sale. Bulgaria’s advantage is that rental prices of real properties are very low as compared to other European countries. Anyone can rent a decent apartment for approximately 200-300 Euro per month which definitely costs less than a night stay in a good hotel in Europe.

Positive features of the citizenship by investment program are that foreigners and their family members who apply under this program are not required to learn Bulgarian language or to stay physically in Bulgaria.

The procedure described above is simple and 100 % perfectly legal and secure but obviously there are only a few who can afford it. No doubt this is an expensive option but this was exactly the idea of Bulgarian authorities when they launched the program. The fast-track Bulgarian citizenship option is deliberately intended to wealthy investors, people from high societies from non-European countries who wish to have a second citizenship in the European Union for themselves or their families. Furthermore, we are bound to mention that this option is for people who can prove the origin of their funds and can show a clean criminal record and good reputation.

Last but not least, anyone who wishes to apply should be ready to keep the investment for a total period of 5 years.

If you match the above criteria, please do not hesitate to contact our immigration legal team.

Bulgarian debt collection proceedings are not completely codified which unfortunately leaves many loopholes and opportunities for various legal interpretations. Debt recovery proceedings in Bulgaria are officially conducted by bailiffs (public or private enforcement agents). Debt collection agencies in Bulgaria could also help but in the end the role of a debt recovery lawyer is frequently most important. The regulations in force, especially of the registration of real estates, has many imperfections which can be used to sabotage the entire debt collection process. An experienced Bulgarian debt collection lawyer can undertake an investigation and carry out a number of researches in many different institutions with the aim of discovering all assets of the debtor. If the assets are not enough, sold or burdened, the solicitor can undertake specific legal actions for the return of sold or donated property back to the ownership of the debtor and thus they can be used to cover all amounts on the creditor’s writ of execution.

On the other hand, sometimes Bulgarian debt collection lawyers represent debtors in civil or commercial execution proceedings because even if a debtor is completely conscientious and intends to pay all amounts due – he can still become victim of unfair legal techniques which can double his duties.

Bulgarian Civil Procedure Code provides that subject to enforcement are:

• Decisions and rulings of Bulgarian courts in force, suing decisions of Bulgarian courts of appeal, writs of enforcement which are subject to or on which a preliminary and immediate execution is admitted, as well as decisions of Bulgarian arbitrary courts or arbitrary agreements.
• Decisions, acts and court agreements of foreign courts, which are subject to execution in Bulgaria without any special procedure.
• Decisions, acts and court agreements of foreign courts on which execution in Bulgaria is admitted.

Property interdictions and other injunctions in Bulgaria are one of the most important aspects in the debt collection proceedings. In many cases Bulgarian debtors make attempts, some quite successful, to sell, donate, etc. most or all of their assets thus making the monetary satisfaction of the creditor(s) practically impossible or very hard to achieve. An experienced Bulgarian debt collection lawyer knows when and how exactly to secure assets of the debtor – which is of vital importance for the purpose of effective debt collection.

At any stage of the execution proceedings, before the distribution of the collected amounts is done, any other creditors of the same debtor may join the procedure. All joint creditors have the same rights in the execution procedure as the initial creditor. If the collected amounts are not enough to satisfy all creditors, the bailiff shall make a distribution, as first he shall separate amounts for payment of receivables that have the right of priority satisfaction. The remainder shall be distributed for the rest receivables proportionally.

Most popular methods for debt collection are execution over movable properties (chattel) or immovable properties (real estates). For these cases there are strict procedures for public auctions which are typically handled or closely monitored by Bulgarian debt recovery attorneys.

With the above in mind, small and individual players in the crypto market usually do not take any measures to comply with legislation, and this is somewhat justified because it requires additional costs. However, for slightly larger and medium-sized players in the virtual currency market, it is advisable to take preventive measures that can save them a lot of hassles with all sorts of government institutions in the future. Even if cryptocurrencies are not comprehensively and precisely regulated in the current Bulgarian and European legislation, this does not mean that e.g. Bulgarian National Revenue Agency (NRA) will not carry out a tax audit, within which it will establish by an audit act considerable income and therefore unpaid taxes on the part of the obliged person – crypto trader. Or the Financial Intelligence Unit will not knock on the door in connection with measures against money laundering, not taken even on paper. Or the Commission for Personal Data Protection (CPDP) for requesting from the obliged person documentation of compliance and fulfilment of legal requirements.

It is perhaps unnecessary to mention at all that the first mandatory step in this respect is the registration of a limited liability company (LTD) or a joint stock company (JSC), because according to Bulgarian Commercial Act (CA), persons who carry out commercial activities on a sole proprietorship basis, even if they have registered absolutely nothing, are presumed to be sole traders (sole proprietorship). And in the case of a sole trader, firstly, taxation is less favourable and, in addition, the trader is liable with all his personal assets for his obligations.

The next step is to map out the business model according to which the cryptocurrency trading activity will be carried out in practice. It is highly advisable to consult a lawyer and an accountant. The least advisable option is to try something out to see if it works and, once it is found to work flawlessly (only on the technical side, however), no further legal or accounting measures are taken, at least until the competent authorities come to visit and serve a prescription, administrative infringement, penalty notice or other act. A good compromise option is to test how something works from an individual account that is not subsequently used in the company business activity of crypto trading.

Bulgarian Measures Against Money Laundering Act (MAMLA) is the first piece of legislation to be complied with by cryptocurrency traders in their activities. It also contains the first attempt at a legal definition in Bulgarian legislation of the concept of virtual currencies – “a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily linked to a legal currency and does not have the legal status of currency or money, but is accepted by natural or legal persons as a medium of exchange and can be transferred, stored and traded electronically”. Under the most recent paragraphs of Article 5 of the MAMLA, persons who provide exchange services between virtual currencies and recognized currencies without gold backing on a professional basis, as well as wallet providers who offer custodial services (a natural or legal person or other legal entity that provides private cryptographic key custodial services on behalf of its clients for the holding, storage and transfer of virtual currencies) are obliged and therefore subject to sanctions under the law. Depending on the volume and complexity of the transactions carried out by the crypto trader, appropriate documentation should be prepared and made available upon request by the competent authorities.

The next act that should be complied with when trading in cryptocurrencies is the GDPR. It does not explicitly set out requirements for cryptocurrency traders, but they do arise from the activity carried out. Considering that even just email addresses without other accompanying data fall under the category of “personal data”, there is simply no way around the GDPR, even when it comes to trading with an accompanying high level of anonymization such as crypto trading.

Last but not least among the authorities controlling the trade with virtual currencies are the revenue administration authorities in the face of the NRA. In this regard, some would be surprised to know that there is a Regulation of the Minister of Finance, according to which there is a public register at the NRA, in which crypto traders should be registered. However, it should be borne in mind that it is not so important to be formally entered in this register as it is to “spell out” the business model and activities so that the tax administration has nothing to “catch” when exercising control over crypto traders. It is important to note that the registration in question should be carried out prior to the commencement of business.

The very first thing to mention in this relation is that from legal point of view there is no such legal term as ‘business address’. The official legal term, according to Bulgarian Commerce Law, is ‘seat and registered address’ but practically registered, business, fiscal, postal, etc. address in practice means one and the same thing.

The above mentioned local postal address is actually the company’s official business address. But what is the purpose of this official address one may ask? The main and maybe most important role is that this is the local address in Bulgaria where all official company correspondence is delivered. This is of utmost importance due to the fact that it may lead to monetary losses or even business closure. And here is one simple example in this relation – if someone, actually this could be anyone, is suing the company – all court summons are delivered to the official postal address of the Bulgarian company. And if there is no such company found at the address, then, according to Bulgarian laws, all papers are considered delivered and accepted and the company is not sought for the civil or commercial proceedings anymore. Which of course means that this company would bot for example be able to appoint a lawyer to defend its rights and best interest – and this in most cases leads to a lost case. And if it’s a big case then the company would suffer enormous losses and could even go bankrupt.

Having in mind the above, a common question of foreign businessmen who are living abroad is: Can I use the address of someone else in Bulgaria? And the answer is positive. There are companies in Bulgaria that offer registered address or even virtual office services. The first thing means that you are officially registering your company at the address in Bulgaria of a trusted person (e.g. lawyers, etc.) and then all correspondence is duly accepted by the authorized persons and then forwarded to the company owner/s or shareholder/s – usually scanned copies of the documents via e-mail over the Internet. The fee for this service varies but is usually in a very low amount, typically around 100 Euros per annum. The virtual office service is more expensive.

The definition of “private security activity”, the procedure for obtaining the licence and the necessary documents are specified in the Private Security Activity Act and the respective sub-legislation. Private security companies can provide any of the following services: physical security, security of individuals, protection of property, protection of events, protection of real estate, etc. It is important to note that if the company wants to provide more than one type of security services, it must have an explicit permit for each type of security activity separately. Security activities can be armed or unarmed. The company can be licenced to operate on the whole territory of Bulgaria or only within a specific area. Depending on the above listed options, the licensing fee is different.

Private security activities can be carried out either by registered Bulgarian legal entities (i.e. the first step towards starting this activity is the registration of a Bulgarian company) or such activity may also be performed by a company registered in any of the other EU member states.

The application for a private security licence is filed with the General Directorate “National Police” in Sofia. The application can also be physically filed in any of the Regional Directorates of the Ministry of Interior at the registered office of the company or electronically – with an electronic signature, but in any case, it will be processed and reviewed in the Headquarters in Sofia. Along with the application the applicant is required to present the compliance documentation, including various declarations, and certificates. Some of the compliance documents refer to the partners, for example, a criminal record and a medical certificate for lack of mental illness. Others apply to the company, such as: certificate of absence of tax liabilities, lack of insurance liabilities, etc.

A basic requirement for obtaining the licence is that all company shareholders and members of the management body of the applicant company should have a clean criminal record. Additionally, all of them should present a medical certificate showing that they do not suffer from any mental diseases that might prevent them from understanding the nature and significance of their actions, i.e. not to be “non-compos mentis” or under judicial disability.

Apart from the above, which applies both to directors and owners, the law sets further requirements for the managers/directors or executive. They must be at least 18 years of age, able-bodied, to be of Bulgarian, European or Swiss citizenship, not to have been convicted of a crime of a general nature (either by the prosecution or by private individuals through a lawsuit), to be clinically healthy. Those employed as guards should have a professional qualification of “Security Guard”. The manager of the security company can be an individual which has at least higher education, while security guards are required to have at least secondary education diploma.

Where the partners and the manager of the security company are foreign persons, all documents must be issued by the relevant authority in their country of residence, accompanied by apostille and official translation into Bulgarian.

A further prerequisite for obtaining a licence is to submit samples of service card, uniform and logo of the security company.

The licence fee must be paid to the moment of submitting the application. According to the type of security activity and according to the territory on which it will be carried out, the fee varies between BGN 500 and 6,000. Usually the application is processed within one month from its filing. However, if there are any incompliances with the legal requirements, the regulator will send a notification to the applicant giving the latter 45 days to correct the identified discrepancies.

The licence application can be filed either personally by the company manager or via an authorized licensing lawyer who can convey the whole procedure via a power of attorney.

The liquidation procedure (also known as winding up of a company) is different from the insolvency procedure, as it can be conducted only in case the company is solvent, while bankruptcy is associated with serious and insurmountable financial difficulties where company cannot pay its debts.

The voluntary liquidation is a legal consequence of the decision taken by the shareholders to cease business and close their company. If you are considering to stop active business, the procedure is recommended instead of keeping your company, because even a dormant company is subject to compliance – registrations, annual reporting, zero tax returns filing, etc. For foreign shareholding companies keeping a dormant company is even more expensive as they need to keep registered address and a point of contact in Bulgaria. The fact that a company does not operate does not mean that its obligations to third parties, incl. the state and the various state bodies are extinguished and no new ones will be generated in the future.

Compared to insolvency, the voluntary company liquidation in Bulgaria is easier in practice because the intervention of creditors and court authorities is much less intense. In most cases, the trader himself, personally or through qualified persons – lawyers, accountants or other specialists, settles all issues related to the liquidation of the company and termination of its activities and declares certain circumstances to the respective authorities. The liquidation of a limited liability company takes about 8 months, for a sole proprietor the term is much shorter. Most of the necessary announcements can be made by electronic signature, if the company does not work with electronic signature it can use an authorized commercial lawyer who can deal with the liquidation of the company on behalf of the shareholders.

The closure of a company should begin with a decision of the company’s bodies – general meeting or sole shareholder – by virtue of which a liquidator is elected and appointed. This is usually the manager of the company. The liquidator has two very important tasks – to collect the receivables of the company and to satisfy all creditors.

The company is obliged to inform the other participants in the turnover, in particular its creditors and the respective state authorities, that liquidation proceedings have been initiated. In view of the above, the company sends several notifications and announcement.  In the first place, the company announces a special invitation to its creditors, giving them a six-month term in which they can present their claims.

Voluntary winding up of a company is applicable only in case the company does not have outstanding public obligations. Therefore, the company notifies the National Revenue Agency (NRA) for the beginning of the liquidation. NRA makes a check whether the company has any liabilities to the state and if such are not found, the Agency issues a certificate to the Company which must be announced in the Commercial Register. If the company is VAT registered, it should be deleted from the VAT register before its liquidation and this de-registration can be made upon a tax audit of the company.

Another State Authority which needs explicit notification is the National Social Security Institute. If the company has or has ever had any employees during its existence, the closure of the company can happen only in case all files of the employees and payroll documentation has been handed to the NSSI.

Last but not least, at the end of the liquidation, the company distributes any assets left among its shareholders and announces final financial statements and balance sheet.

Upon the completion of the above steps, the company is terminated, struck off the Commercial Register and shall no longer exist as a legal entity.

There are examples of companies which try to conduct voluntary liquidation in the presence of preconditions for initiating insolvency proceedings and declaring insolvency. This is prohibited by Bulgaria legislation and there is an explicit provision in the Commercial Law, reading that even in case of initiated liquidation proceedings, if the the company turns out to be insolvent, it shall immediately change to insolvency proceedings.

In other words, it is inadmissible to close a company and distribute its property if there are unsatisfied creditors.

It is now expected by experts that due to the complex economic situation after the outbreak of the COVID-19 pandemic, some companies which have debts to customers or contractors will take this approach – to try to quietly liquidate their companies, hoping that their creditors will not notice this and will finally fail to file their claims. Therefore, if you are a creditor, it is advisable to keep a close eye on your debtors, and if they proceed to liquidation – to file your claims immediately.