The Bulgarian Commercial Act (CA) provides a legal definition of a limited liability company (abbreviated: LTD/LLC, in Bulgaria - OOD) in Art. 113 of the Commercial Code:A Limited Liability Company may be formed by one or more persons who are liable for the obligations of the company with the value of their shares in it. A variation of LLC is a single-member limited liability company (abbreviated in Bulgaria: EOOD ) formed by one partner holding the entire capital of the company. LLC may be established by natural or legal persons. Partners can be both local and foreign entities. According to Art. 115 CA LLC occurs upon entry in the Commercial Register and based on agreement of association (statutes for single-member LLC). The partnership agreement should be in writing (Art. 114 CC). The partnership agreement must contain:
- company name, headquarters’ address and registered office;
- line of business and the duration of the contract;
- the name (of natural persons) or firm/business name (of legal persons) and the unique identifier of the partners;
- amount of capital. When the full amount of the capital has not been paid, the partnership agreement shall contain terms and conditions for the full payment of the rest. The deadline cannot be longer than two years from the entry of the company in the Commercial Register;
- number of the units which a partner possesses ;
- LCC’s management and ways of representation;
- privileges of members if agreed;
- other rights and obligations of the partners.
The partnership agreement must be signed personally by the founders or by a representative with explicit power of attorney (Article 114, paragraph 2 CC). For the establishment of the company the following are needed:
- an entry in the Commercial Register;
- the initial capital to be deposited;
- a manager must be elected.
The manager is authorized to file the application for company registration in the Commercial Register. The name of the company must contain the words "Limited Liability Company" or the Bulgarian version of the abbreviation "LCC."(OOD in Bulgarian). If one person holds the capital, the name must contain the words "Single Member Limited Liability Company" or the abbreviation EOOD in Bulgarian (Art. 116 CC). Prerequisites for entry of the company in the Commercial Register (Art. 119 CC):
- the partnership agreement must be enclosed;
- a manager must be appointed;
- the statutory minimum capital of 2 lv. must be paid; if the company has capital that is higher than the minimum initial fund, a minimum of 70% must be paid.
The Capital of the Company consists of shares of the partners, which according to Art. CA 117 cannot be less than 1 lev. In connection with the guarantee function of the capital it is required for partner’s capital contributions to be fully paid and entered in the Commercial Register. To ensure the financial stability of the company and the interests of its creditors, the Bulgarian Commercial Act envisages mechanisms for changing the value of the company’s capital. The submitted capital must always correspond to the company’s property. Both forms of capital change (increase or decrease) require amendment of the articles of association and registration of those changes in the Commercial Register.
The limited liability company is structured in bodies/organs through which it participates in trade. According to Art. 135 of the Commercial Code, one Bulgarian LLC has two statutory bodies - the General Assembly and the Manager, and an optional body - the Controller. The General Assembly is the governing body, forming the will of the company. According to Art. 136 of the Commercial Code, the General Assembly consists of all partners who exercise its powers at meetings. Natural persons may be represented with written power of attorney. The competences of the General Assembly are listed in Art. 137 of the Act. These include changes in the articles of association; changes in capital and company; acceptance and exclusion of members; election of manager; profit sharing and more.
Rights and obligations of members
According to Art. 123 of the Bulgarian CA members have property rights such as right to dividend and liquidation quota, and moral rights like right to participate in the management of the company and to be elected as manager. Immaterial rights include also accessing company’s information and supervising the meetings of the General Assembly and etc. A pecuniary obligation is payment of contributions by the shareholders. Non-compliance with these obligations could result in exclusion of a partner. Immaterial liabilities include participation in the company's management, implementation of decisions taken by the General Assembly, protection of the company’s interests. Competition is prohibited for the partners and the manager.
Rights and duties of the Manager
The management and representation of the company can be assigned to one or more managers. The manager is the only representative body of the OOD and is elected by the General Assembly. His name has also to be entered in the Commercial Register together with a notarized consent signed by the Manager. The relationship between the manager and the company is settled by a management agreement not mandatory for the CR. The manager is not allowed to carry out trades on his own or for another as well as to participate in general partnership, limited partnership or Limited Liability Company or to be a member of the boards of any other companies when they exercise similar to the company's activities. However, the company may remove the prohibition of competition. The representative right of the manager may be terminated on the following grounds:
- legal incapacity or death of the manager;
- By decision of the General Assembly;
- at the request of the manager himself.
Liquidation of the company
The Liquidation of the limited liability company shall be carried out according to the rules in Art. 154 of CA. The general rules for the liquidation of companies also apply as well as some special rules. The limited liability company may be terminated by the court on the following grounds under Art. 155 of the Commercial Code:
- claim of shareholders whose shares represent more than one fifth of the capital if important reasons require it;
- application of the prosecutor, if the company is illegal,
- application of the prosecutor when the company has no registered manager for more than three months.
The liquidation can be processed on the common grounds listed above or at the request of the controller or by a partner with more than 1/10 shareholding. If you want to establish OOD in Bulgaria, it is necessary to consider the following matters:
- Name of the company;
- Line of business;
- Registered address;
- Amount of capital;