Participation is a commercial company implies various rights to the shareholders, the main being the right to dividend. According to Bulgarian Commercial Act shareholders in a Limited Liability Company are entitled to receive part of the profits in the form of dividends. Distribution of interim dividends (based on current year profits) is prohibited. Companies are allowed to distribute only accumulated profits from past fiscal years.
In the common practice the balance profit is distributed among the shareholders in proportion to their shares. In other words, if in a limited liability partnership there are two partners each holding 50 %, that means that they will receive equal share from the profit, unless otherwise agreed. “Unless otherwise agreed” is a key phrase here, as it gives opportunity to shareholders to stipulate different shares of profit. These stipulations shall be made in writing on the company’s Articles or Operating Agreement. So, practically there are no legal limitations to disproportional distribution of profits in a Limited Liability Company, in case all shareholders agree on that. In all cases, in order to be effective and legally binding, the decision for distribution of profits in the form of dividends should be taken by the General Meeting of Shareholders and duly recorded in writing in the company’s documentation. read more
