Incorporation of company in Bulgaria
 
Law restrictions for foreignersForeigners can buy buildings, the right to build and other land related rights such as the right of use and passage but cannot buy land. Acquiring property in Bulgaria, excluding land, is made easier by the new Foreign Investment Act (1997) which lifted the requirement to seek prior approval of the Ministry of Finance to conclude such purchases.The way foreigners could acquire landForeign judicial and physical persons can however acquire land via a Bulgarian registered company. The legislative intention is to provide this opportunity to foreign persons who intend to engage in commercial activity in Bulgaria. In case you intend to buy land in Bulgaria, the purchase is registered against the company and you are the sole owner of the shares, respectively of the land. Limited Liability Company as the most popular choice for acquiring land in BulgariaThe Bulgarian Foreign Investments Agency reports that the most popular form of engaging in business in Bulgaria is via a Limited Liability Company (OOD). Therefore, we have prepared an overview of registration process and requirements of OOD.A foreign or Bulgarian person (judicial or physical) can form a Limited Liability Company. The person/persons will be liable for the company's obligations to the value of his/hers share in the company's registered capital. Documents for incorporation of Limited Liability CompanyNecessary documents for the company incorporation at the submission of registration application to the district court, where the company will be based: 1. Application to the registration court; 2. Minutes of the incorporation meeting of the company; 3. Articles of incorporation of the company; 4. Memorandum for appointment of Director/ Directors. Declarations of the persons, who shall manage and represent the company that they are not conducting on their own or on behalf of somebody else a commercial activity; that they are not participating in partnerships or any other limited liability companies; they do not hold a seat in management bodies of another companies and they are not declared insolvent; 5. Notary certified specimen/s and consent to manage the company of the Manager/s; 6. Bank certificate that at least 70% of the capital is paid up; 7. Certificate that the proposed name of the company is unique; 8. Evidence/bills that all registration fees and fees for promulgation in the State Gazette are paid. The future shareholders conduct preliminary discussions on the commercial activities they intend to engage in. Based on their agreement, Articles of Incorporation are prepared and signed by all shareholders. Articles of IncorporationContent of articles of incorporation include the trade name, the seat and address of management of the company; the purposes and the time period for which the company is being set up; the names or, respectively, the trade names of the shareholders; the registered capital. Where the full amount has not been paid at incorporation, the articles shall set the time periods and terms for payment. The term of final installment of the whole size of the capital cannot be longer than two years from the registration of the company, respectively from the increase of the capital. In the articles of incorporation is also included the number of shares taken by each shareholder; the management and manner of representation; the privileges of the shareholders, where agreed upon and other rights and obligations of the shareholders. CapitalDedicated bank account is opened to collect all share capital. The minimum capital is 5,000 levs. Shareholders at time of registration must have paid at least 1/3 of their respective shares. It is required that at least 70% (3,500 levs) of the capital is raised at time of registration. Company RegistrationThe company is added to the Commercial Register of the district court of where the company will be based. Publication of the company entry in the Commercial Register does not complete your company formation. It announces to the general public the act of formation by publication of the register entry in the Bulgarian State Gazette. Costs for incorporation of Limited Liability CompanyCosts include the minimum capital that you need to raise prior to registration ? the 70% of the share capital, which amounts to 3,500 levs. Administrative costs (payable to the state and registration court) are about 250 levs. The expenses include the fees for the services of a lawyer for the incorporation, which may vary slightly. Limited Liability Company BasisThe Limited Liability Company may have one or more shareholders, who are liable to the extent of their contribution in the capital. The minimum capital required by law is BGN 5 000 (five thousand). The decision-making bodies of the company are the General meeting and one or more Managers. There is no limitation regarding the number of shares, but each share cannot be less than BGN 10 (ten) and shall be dividable to 10. The shares can differ in their size. The annual financial statements need not be audited by a CPA unless the company happens to meets certain requirements under the Bulgarian Accountancy Act. According to the Accounting Act, the reporting period is January 1 to December 31. Step by step guide of incorporating Limited Liability Company (OOD)1. Decide on your company name and check in the current registers if it is available. If yes, then reserve that name for your company and keep your confirmation slip. 2. Compose your articles of association. 3. Form your company share capital of minimum 5000 Bulgarian Leva, a little less than 2500 Euros. 4. Obtain your bank deed confirmation that at least 70% of the registered capital has been paid. 5. Appoint your management body. 6. Obtain your registration in the commercial register from the relevant district court. 7. If needed, get a permit for your activities: some activities require issuance of a permit from competent government bodies before entering your company in the register (investment brokerage for example). 8. Wait for a publication of the court decision in the State Gazette. 9. By now, the company registration is complete. Still, there are a few more steps to complete: 10. Register at the National Statistical Institute and receive your BULSTAT number. This must be done within three days after the registration of the company otherwise you will have to pay a 50 leva fine. 11. Register at the territorial division of the National Social Security Institute (NOI). 12. Register at the territorial tax office within 14 days after registration. Fines will apply if you do not. 13. This is it ? by that time you should have a fully functional company. Things you should be aware of:1. Normally, this whole process takes about 20-30 working days. 2. We would recommend that you hire a local lawyer or a consulting company, familiar with such issues, to register your company with you. There is some paperwork involved and sometimes simple omissions (like a Xerox copy of your passport) could cause delays. Market rate for this service is about 700 Euros. 3. We strongly recommend that you use the services of a local accountant, familiar with Bulgarian regulation, to keep track of your company?s books and meet other government requirements that may not otherwise be familiar with. Joint Stock Company (AD)The other popular legal form for carrying out business in Bulgaria is a joint stock company (AD). It has to be registered with the district court, which is a process that usually takes 2 or 3 weeks. The joint stock company also restricts the liability of the shareholders to the amount of their share in the capital of the company, which means that the AD and the OOD are the most preferred forms for doing business by both locals and foreigners. Step by step guide of incorporating Joint Stock Company (AD)1. Call a constituent assembly for the company. 2. Make a decision for the establishment of a joint-stock company. 3. For a single member joint-stock company only: Adopt your articles of association. 4. Elect your supervisory board of directors and appoint your management 5. Subscription of the capital stock ? minimum of 50,000 Bulgarian Leva (about 25,000 Euros) 6. Opening of a bank account by the management for collecting the cash installments. 7. Get a bank certificate for the installments paid ? at least 25% of the nominal value of subscribed stocks. 8. Prepare the documents for the court registration. 9. Get your entry in the commercial register. Make sure that the registration is performed within three months after the constituent assembly of the company. 10. By then the company registration is complete. But you are still not done and there are a few more steps to complete: 11. Wait for the publication of the court?s decision in the State Gazette. 12. Register at the National Statistical Institute and receive your BULSTAT number. This must be done within three days after the registration of the company otherwise you have to pay a 50 levs fine. 13. Register at the territorial division of the National Social Security Institute (NOI). 14. Register at the territorial tax office within 14 days after the registration of the company. Fines will apply if you do not. Things you should be aware of:1. Normally the whole process takes about 20-30 working days. 2. We would recommend that you hire a local lawyer or a consulting company, familiar with such issues, to register your company for you. There is some paperwork involved and sometimes simple omissions could cause delays. Market rates for this service are about 1300 Euros. 3. We strongly recommend that you use the services of a local accountant, familiar with Bulgarian regulation, to keep track of your company?s books and meet all the government requirements that you would not otherwise be familiar with. Joint Stock Company BasisThe shares of a joint stock company are not individually named and can be sold or transferred without informing the court. A joint stock company may issue registered, bearer's and preference shares. Both paper-backed and book-entry shares may be issued. The joint stock company ensures the anonymity of shareholders and allows for raising funds through issuance of bonds or shares on the stock exchange. A joint stock company is managed by the general meeting of shareholders, and the board of directors or supervisory board and management board. According to the Accounting Act, the reporting period is January 1 to December 31. Source: Invest Bulgaria |
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