Greek and Romanian companies move business to Bulgaria

Bulgarian National Revenue Agency announced that the number of fully Greek-owned companies registered in Bulgaria increased significantly in 2011. 3781 companies with 100 % Greek capital paid taxes in Bulgaria last year compared with 2199 in 2010. This is an increase by more than 70 %. At first glimpse, the movement of capital to Bulgaria can be put down to the crisis that Greece has been ridden by for the last couple of years. Indeed, some small Greek entrepreneurs moved their investments to Bulgaria because it is safer but crisis is not the only reason for choosing Bulgaria for their investments. This is proved by the fact that the number of Romanian companies also increased by more than 50 % during last year. read more

EU Laws & Cryptocurrencies – Trading Rules & Legislation

As of 2021, more and more European and world virtual currency traders choose Bulgaria for their headquarters of cryptocurrency business. There is still no law on virtual currencies based on blockchain technology, neither in Bulgaria, nor in the EU, nor in any other developed country, although cryptocurrency trading (Bitcoin, Ethereum, etc.) has been flourishing for years. Supervisory authorities in various EU countries issue sporadic guidelines, recommendations and warnings, but this has nothing to do with creating a legally regulated framework for crypto trading to adhere to, let alone uniform legal requirements. read more

Cross-border mergers & acquisitions – move an EU company to Bulgaria

EU limited liability companies are free move from one Member State and establish themselves in another EU Member State and EU laws provide 3 legal options such cross-border merger – by registering a branch, by registering a subsidiary or by one of the forms of company transformation (merger, consolidation). The subject of this article is the merger (by acquisition or formation of a new company) between foreign and Bulgarian companies – reorganisation and the related transfer of an EU company’s seat and activities from one EU country to Bulgaria – which procedure is regulated by Bulgarian Commercial Act and by Directive (EU) 2017/1132 of the European Parliament and of the Council of 14 June 2017 on certain aspects of company law, which replaced the old Directive 2005/56/EC.

First of all, only mergers and consolidations can be used as forms of transformation. Next, at least one of the companies being merged or consolidated must have its registered office in a Member State of the European Union or another State party to the Agreement on the European Economic Area (EEA), and the Bulgarian company involved must necessarily be an equity company (LLC or JSC). There is also a restriction under Bulgarian Commercial Act for a company with its registered office in Bulgaria that is to merge into or consolidate with a company with its registered office in another Member State – it must not own land.

The first step in the transformation procedure is the preparation and announcement of a so-called General Transformation Plan (GTP). This is done at the earliest one month prior to the adoption of the resolution on the transformation by the acquiring (or newly formed) and the transforming companies. It must be in writing and signed by all the representatives of the transforming companies. This plan shall contain information on the manner in which the transformation will take place. The requisites concerning the general plan are contained in Bulgarian Commercial Act. The GTP must be accompanied by a report on the transformation drawn up by the management body of each of the transforming companies, a draft memorandum or articles of association of the newly established company (in the case of a merger) or amended or supplemented memorandum or articles of association of the receiving company (in the case of a consolidation), as well as the annual accounts, the balance sheet and a detailed list of the companies involved in the transformation, containing basic information about them and the rules for the protection of their creditors in their country. The reorganisation report shall contain the legal and economic justification for the overall plan as well as the impact that the reorganisation will have on the shareholders of the companies. The report shall also be made available to the employees of the companies being transformed.

The second step in the transformation procedure is the appointment, by decision of the management bodies of the transforming companies, of a so-called special auditor, who draws up a report following the audit of the transformation. This step could be omitted if there is a written agreement to that effect by all the partners or shareholders.

The most important point in the whole procedure is the adoption of the resolution to transform by the General Meeting of each of the transforming companies – i.e. we have several (two or more) separate resolutions. These resolutions also approve the overall plan of transformation. An interesting stage in the procedure for registration of the company transformation is the point at which a certificate of the legality of the transformation in respect of the foreign company (or companies) is requested from the Commercial Register (or its equivalent) in another Member State.

Where a Bulgarian company is merged into or consolidated with a foreign company, once the relevant foreign registry enters this fact and issues the relevant notification, the deletion of the relevant company in Bulgarian Commercial Register shall also take place. A characteristic feature of the transformations is that after the actual entry of the transformation in the relevant register, all rights and obligations of the transforming companies automatically pass to the newly established legal entity or the receiving company.

The registration of the transformation may be challenged by any shareholder or member of the companies involved in the transformation if certain material and expressly provided for breaches of the legislation have occurred, such as: there is no contract, draft contract or plan of transformation, or even if they are present they are invalid at the time of the transformation, or the resolution on transformation contravenes a mandatory legal provision or the articles of association of the transforming companies, etc. The challenge can only be made before the registration of the transformation.

After registration, a claim for invalidity of the newly established company may be filed under Article 70 of Bulgarian Commercial Act. Another option for shareholders or partners who feel aggrieved in some way is the claim for monetary compensation provided for in Article 263p, in the event that the exchange ratio adopted in the contract or plan of transformation is not equivalent. Where it cannot be defended also by way of an action, the shareholder aggrieved by the transformation shall have the right to leave the company and the right to be paid the monetary equivalent of the shares or company shares held by him before the date of transformation. The shareholder may do so within 3 months of the registration of the transformation by written notice to the company.

How to leave a Bulgarian company and resign as shareholder or director (manager) by sending a notice of withdrawal

Participation (membership) in a Bulgarian limited liability company (LLC, LTD) is always set up in a specific order, namely by the will of the partners (shareholders), who are involved in the company incorporation, or in case of acceptance of a new shareholder after the incorporation of the company, by the will of the partners holding shares at the time of acceptance of a new shareholder. This kind of decisions are made at the General Meeting of the Shareholders, which is the only competent body on these matters.

That is not the case, however, when a partner decides to leave the company voluntarily. Shareholders may request to terminate their participation in the limited liability company any time. Quite naturally, in most cases, a shareholder who wants to leave the company may not find support from other partners about his withdrawal and they could disagree with the leaving partner. But that does not mean that one person must be bound with a company in Bulgaria forever.

Termination of participation in a Bulgarian limited company is a potestative right of each shareholder, that is, a partner always has the right to leave a company. This is a unilateral act, which does not need to be preceded by a special permission given by the General Meeting of Shareholders. The partner can exercise this right by submitting a written request for termination of his participation in the company, the peculiarity being that the request should be filed at least 3 months before the date of the withdrawal. This request plays the role of a notice of withdrawal and the expiration of the three-month period has an automatic terminating effect of the shareholding.

In order to produce the necessary effect, the resignation request should come to the knowledge of the company. The best way to ensure this is to send it in the form of a notary invitation, as the date of the delivery of this invitation is duly certified by a public notary.

Upon the expiration of the resignation notice period, and after the partner loses his/her capacity of a shareholder, the company has the obligation to record accordingly the change in the circumstances in Bulgarian Commercial Register.

In case the partner who has left the company has been also a manager (director) of the company, the General Meeting of the Shareholders should appoint a new manager, because it is not possible for a Bulgarian limited company to remain without a managing / representing person. Moreover, if a company remains without a registered manager for more than 3 months, a liquidation procedure may be initiated for this company by a Bulgarian prosecutor.

It is therefore undisputed that regarding the internal relationship between the partner and the company the partner ‘s withdrawal takes effect from the moment of the expiration of the 3-month period. That is not the case, however, regarding third parties who are not part of the company. For them any changes in respect of the company have effect from the moment of their entry in the Commercial Register as third parties cannot monitor the processes within the company. For that reason, it is to the best interest of the leaving partner, his withdrawal to be registered in the Commercial Register as soon as possible. Although the law does not contain explicit provisions in this regard, the permanent court practice accepts that the leaving partner has the right to request the announcement of his/her leaving himself, in case the company does not do so.

Relocating to Bulgaria or move business after Brexit

Relocating to Bulgaria after Brexit is an option considered by more and more Britons. Moving business to Bulgaria is another option which more and more European and worldwide businessmen are taking advantage of.

Bulgaria is an EU member since 2007. Continued financial stability, lowest corporate income tax in Europe (10%), lowest cost of labour force combined with highly educated work force are only a few of its credits. That is why it is not a surprise why UK and other EU companies already started to study the opportunities to use Bulgaria as a safe harbour for relocation of their business.

The EU is the UK’s largest trade partner. Free movement of goods within the EU is one of its best achievements – no border control, no duties, no VAT payable on import. Brexit puts too much uncertainty about how UK export-import companies will be affected. Some are optimistic that new trading arrangements will be achieved allowing Britain to continue to benefit from free trade even after Brexit but largest European member states already implied that such scenario is unlikely to happen. That means that UK trading companies and manufacturers could face significant difficulties and it may happen that they will not be able to run their European businesses from the UK. Relocating to Bulgaria a working business is not an easy job, that is why most businessmen prefer to wait and monitor the consequence of events before making a decision. Waiting is not a wise option as any last minute relocation could result in negative due diligence reports and decline in reputation; some top corporate UK solicitors and consultants already advised that relocating to the EU should be considered in the wake of Brexit as moving will allow such companies to get round potential trade barriers.

Most uncertain is the statute of regulated companies, such as financial institutions, transport companies, investment brokers, etc. Now most global regulated companies do business in the EU through their UK based companies using the right to passport their service in other member states. For example, largest Forex brokers are UK based and London is the largest Forex trading hub in Europe. According to statistics over 40 % of foreign exchange trading volumes worldwide are generated in London. Large market makers will definitely relocate to other big financial centres such as Frankfurt, Dublin or Paris but for a medium Forex broker Bulgaria is the perfect relocation option. A number of new emerging brokers already chose Bulgaria for their licensing even before Brexit mainly due to the low cost of the initial investment for the licensing and low cost of the post-licence support. Bulgaria also offers perfect conditions for haulage companies licensing as well. Procedures are fast and insurance and guarantee are much cheaper as compared to the UK. Now UK transport companies use one licence of the Community which allows them to carry cargo across the EU. The negative impact of Brexit is expected to be most severe for trucking companies, not only because of the EU regulations but due to the fact that 80 % of the truck drivers in the UK are immigrants and shortage of workforce is forecasted as inevitable, if not now, surely in a few months or years.

Bulgaria is still not among the top relocation jurisdictions for big corporations but its advantages for small and medium sized businesses are unquestionable and perspicacious entrepreneurs have already noticed the chance to insure their business future by setting up a Bulgarian company. Having companies in both the UK and Bulgaria is a wise business decision for many reasons, the main of which is the fact that the initial company setup is very cheap and then running a dormant company costs a couple of hundred euros per annum. A Bulgarian dormant company can be quickly turned into an active commercial company at any time if its owner(s) decide to start doing business in Bulgaria – and this would then be a company with business history, although it has been dormant for that time. Some have already moved their whole businesses in Bulgaria while some have only cloned their businesses – moving only 10-20% of their business activities just to see how well they will perform while keeping their main business activities in the UK. In any case setting up a Bulgarian company is definitely beneficial to British businessmen, no matter what exactly the business consequences of Brexit will be.

E-commerce in Bulgaria – online store requirements

Running an online e-store and selling goods or services worldwide while paying the lowest corporate tax in the world? If this idea has already come up to your savvy business mind please search no further – Bulgaria is the place for setting up a limited company and conducting EU based e-commerce activities while paying only 10% tax, no matter where you are selling / shipping goods / services to!

Just like anywhere around the world, setting up an online web shop in Bulgaria does not require the availability of an offline store although you still have to register a Bulgarian company which will receive payments, issue electronic invoices, etc. The e-store is a computer software that provides the merchant (trader) with the opportunity to easily and quickly publish information for his goods on the Internet – and respectively sell goods / services and make profit. Although most legal requirements for traditional offline commercial activities apply for e-trade, some special rules need to be implemented. Applicable are mainly Bulgarian E-commerce Act and The Consumers Protection Act as well as other laws.

When making a decision to start or simply move an e-business in Bulgaria you should keep in mind the following:

Any Bulgaria based e-merchant / provider of services on the Internet shall be registered as a Bulgarian company. It could be a limited liability company with only 1 (one) Euro capital! Once duly formed, this company will be the operator of the online store.

According to Bulgarian law it is obliged to provide to the consumers and to the competent authorities direct and permanent access to the following information: the name of the merchant; the seat and the registered address; the address where the activity is performed; correspondence details – telephone numbers, e-mails, etc.; Unique Identification Code of the trader; information for the supervising authorities; information for VAT registration – if any; another information required by Bulgarian laws. The online trader is also obliged to inform whether all web shop advertised prices include taxes, fees and other expenses.

Another requirement demands the online trader to make a registration in accordance with Bulgarian Protection of the Private Data Act or to provide special options before the consumer.

As for advertisement – the advertisement messages have to be: easily recognized as such; to identify unanimously the addressee; to provide understanding about the characteristics and the conditions of the advertised product. Should you decide to send unsolicited messages you are obliged to clearly and unanimously provide the identification of these commercial messages as unwanted.

During the process of concluding of an online contract some EU requirements shall be met. They concern: the technical steps that shall be undertaken for the conclusion of the contract; the back up of the contract; the means of searching and correction of any mistakes; the languages that can be used for concluding the contract.

General terms and conditions to the e-contracts shall be also be presented and made publicly available.

According to Bulgarian and EU laws by concluding the e-contract, the buyer becomes legitimate owner of the purchased goods. One should bear in mind that according to the Bulgarian Protection of the Consumers Act, the client may cancel the contract, within a 14 day period, without stating any reason and having the right to a full refund. In this case the goods shall be returned back to the merchant and then the said trader shall refund the price that has been paid by the client.

Bulgarian property laws in the business environment in Bulgaria

Bulgarian property lawyers and real estate solicitors legally advise and act on behalf of foreign investors who might have any needs or legal issues regarding property law in Bulgaria – construction of production units, purchase or lease of office premises, etc. Bulgarian property law consists of many different acts and regulations, some of which unfortunately not fully synchronized with European legislation or even one with each other. This brings the necessity of very careful examination of all relevant laws.

We have much experience in the field of Bulgarian real estate law and help our business clients with their property transactions of any kind (real estate acquisitions, property resales, etc.) as well as all relevant legal actions (permits, licences, BULSTAT and other registrations, tax returns, etc.). Our lawyers are absolutely independent as we have never worked for anyone else but for our corporate and individual clients. We never take commissions from third parties, we do not recommend real estate agents or sellers, we just make sure that a property deal is simply legally perfect.

In the property acquisition process we are thoroughly checking whether our clients are buying exactly what they want to. Our conveyancing solicitors are making all necessary checks in relevant institutions to make sure that the clients will get a real estate that is not burdened and free of encumbrances. Property lawyers of our legal team can also negotiate the clauses of any contract in order to make sure that your rights are protected even if something goes wrong the rights and interests of our business clients will be fully protected.

Business for sale in Bulgaria – benefits and risks

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.

Property transactions through a Bulgarian limited company

Bulgarian property legislation consists of many different acts and regulations, some of which unfortunately have not been synchronized with European legislation. All property transactions are registered by Bulgarian Registry Agency and made in a notary form by a notary public.

Furthermore, buying real property as a company asset requires knowledge not only of property laws but also of accounting and tax regulations. Therefore property transactions of any kind (sales, purchases, rent, lease, etc.) by legal entities (i.e. companies) must be handled by experienced real estate solicitors working independently from real estate agencies and property developers.

If you are considering buying real property in Bulgaria through a limited company, here are a few things you should have in mind.

To begin with, be sure that the company has enough finance ‘on paper’ to buy the property. Many businessmen mix their personal assets with the assets of their company. Before making the deal, consult with your accountant and ask how much money exactly your company has as per the ledgers. If finance is not enough, you cannot just pay from your personal savings or from the bank account of another company you have. Passing money from one pocket to the other can be made legally by signing a loan agreement at interest not less than the minimum prescribed by law.

In most cases payment of purchase price must be made by bank transfer. Cash payments in property transactions are forbidden unless the price is under BGN 15000. Of course bank transfers are recommended even in low cost deals as cash payments are risky. Actually it is recommended an escrow account to be used, usually a special account of the notary public who will witness the deed. This is the most secure way of payment.

Acquiring real property through a limited company definitely has its advantages: you will make deductions for any expenses for renovation, furnishing, you will deduct depreciation of asset every year, etc. On the other hand, companies pay higher annual property tax and waste fee, and you should think carefully about your company credit status. If the business goes down and company has creditors or becomes insolvent, the property could be lost.

If you are the company owner, but you have another person appointed as manager, you should know that it is actually the manager who has the power to complete the any property deals and sign title deeds and lease contracts. Generally it is possible to restrict the powers of the manager by including special limitation clauses into your Company’s articles. In such cases, consulting with your corporate lawyer before undertaking any serious property investment is absolutely mandatory.