Most often, the right of ownership over a business enterprise, as a set of rights, obligations and factual relations, is transferred by a Sale and Purchase Agreement. However, it is also possible the transfer of an enterprise to be made through another legal transaction and method. For example, by donation contract, in-kind contribution, transfer of company shares or merger.
According to the Bulgarian Commercial Law the term “business enterprise” includes:
- all rights (assets) – property rights and limited real rights over real estate and movables, receivables, shares and stocks, trademark rights, etc.
- all obligations (liabilities) – loans, credits, collateral for the benefit of third parties, liabilities under contracts with customers, suppliers and employees, etc.
- factual relations – trade secrets, know-how, clientele, distribution channels, etc.
First of all, it is of importance to note that an enterprise may be transferred only if all due remunerations, compensations, compulsory social security contributions have been paid to the employees, including to employees whose employment relationships have been terminated up to three years prior to the transfer of the enterprise. However, the enterprise may be transferred without the payment of such liabilities, only if the parties expressly agree that the transferee of the enterprise will pay these obligations.
Secondly, the seller must submit a notification under Art. 77 of the Tax and Social Insurance Procedure Code to the territorial directorate of the National Revenue Agency governing the registered office of the company.
The National Revenue Agency issues a certificate of completed notification within 60 days of the notification receipt date.
Thirdly, we highly recommend an expert appraisal to be made in order to define a market price of the transferred enterprise. Thus, the seller will avoid disputes with the tax authorities. Keep in mind that the sale of a business enterprise is not a supply of goods or services within the meaning of the Bulgarian VAT Act. Therefore, no VAT is added to the price.
Fourthly, the seller and the buyer shall conclude a Sale and Purchase Agreement, having the signatures and contents thereof notarised simultaneously.
The next step of the transfer of business enterprise is the submission of an application to the Commercial Register. In order to become effective, the Sale and Purchase agreement must be registered with the Commercial Register. The documents can be submitted by both the seller and the buyer. When the documents are submitted by an attorney-at-law only 50% of the state fee is due.
The necessary documents for the registration of the transfer of business enterprise are as follows:
- a standard form application, sample V1;
- a Sale and Purchase agreement for transfer of a business enterprise;
- a standard form affidavit under Art. 264, para. 1 of the Tax and Social Insurance Procedure Code by the seller – in case where the enterprise includes a real estate as an asset;
- a standard form declaration under Art. 16, para. 2 in connection with Art. 15, para. 4 of the Commercial Act by the seller that there are no unpaid payable wages, compensations and statutory social security contributions of workers and employees and employees, including to workers and employees whose employment relationships have been terminated up to three years prior to the transfer of the enterprise;
- Resolutions of the General meeting or the sole owner of the capital regarding the transfer;
- a Certificate under Art. 77 of the Tax and Social Insurance Procedure Code issued by the National Revenue Agency;
- a standard form affidavit that the circumstance to be registered with the Commercial Register are true and genuine;
- a Power of attorney;
- a bank receipt evidencing the payment of the statutory fee.
Depending on the specific case, it might be necessary to present additional documents. For example, certificates of good standing, invitations to convene a General meeting, etc.
The transfer of an enterprise is recorded in the Commercial Register simultaneously on the files of the transferor and of the transferee. In case where the business enterprise includes real estates or rights in rem over immovable properties, the Sale and Purchase agreement is subject to entry into the Property Register. If the enterprise includes trademarks and patents, the contract have to be registered with the Patent Office as well.
After that, the seller must notify all creditors and debtors of the effected transfer. Unless otherwise agreed with the creditors, the seller is jointly liable with the buyer up to the amount of the received rights. Creditors with due payables shall first address the transferor of the enterprise.
Moreover, the buyer must manage separately the transferred enterprise for a period of 6 months from the date of registration of the transfer with the Commercial Register. Bear in mind that according to Art. 124, para. 2 of the Bulgarian Corporate Income Tax Act the transferee incurs solidary liability for the tax liabilities of the transferor up to the extent of the rights received. The rights received are valued at market prices.
If you want to sell or buy a business enterprise in Bulgaria, our team will support and advise you at every stage of the process. We also offer competitive prices with no hidden fees.
For more information or legal assistance please do not hesitate to contact us by e-mail: email@example.com or call us on: +359 2 851 72 59.