A variable capital company (VCC) may be established by one or more individuals and/or legal entities. This type of company is quite new to Bulgarian business. It is particularly suited to start-up companies developing innovative and high-technology products and services.
A variable capital company may only be an enterprise that simultaneously meets 2 conditions:
- average number of staff fewer than 50 persons
AND
- annual turnover and/or total assets not exceeding EUR 2,045,167.52
If either of these conditions ceases to be met, the company must be converted into an LLC (OOD) or a joint-stock company (AD).
Unlike an LLC and a joint-stock company, in the case of a variable capital company:
- there is NO requirement to open a special bank account for the capital;
- the capital amount is NOT registered in the Commercial Register;
- there is NO minimum capital requirement;
- the shareholders are NOT registered in the Commercial Register;
- non-cash contributions to the capital are made faster and more easily.
Capital and Company Shares
The key difference from an LLC and a joint-stock company relates to the capital. The company’s capital is variable. It is NOT subject to registration in the Commercial Register. The amount of the capital is established by resolution of the regular annual General meeting convened to consider the annual financial statements. That resolution states the amount of the capital as at the close of the financial year and its change compared to the preceding financial year.
The minimum value of one share in the capital is 1 eurocent (EUR 0.01) as of 01.01.2026.
The capital may, however, consist of shares of different classes (similar to a joint-stock company). In that case the value of shares in each separate class may differ. For example, in Class A it may be EUR 0.01, and in Class B it may be EUR 100.
Shareholders may pay up the value of their shares in cash or by way of a non-cash contribution. Unlike an LLC and a joint-stock company, the value of the non-cash contribution is determined by 3 experts appointed by the manager or the management board, and not by the Registry Agency.
As with a joint-stock company, a variable capital company may issue company shares with special rights (privileges). All shares carrying the same rights form a separate class.
The privileges may include:
- the right to more than one vote at the general meeting of shareholders;
- the right to a guaranteed or additional dividend or liquidation share;
- the right to redemption of the company shares;
- the right of veto in the adoption of resolutions by the general meeting;
- other rights provided for in the articles of association.
The articles of association may provide that privileged shares carry no voting rights.
Shareholders are issued a certificate stating the size of their interest, any privileges, etc. This certificate is NOT a security.
Transfer of Company Shares
The transfer of company shares is affected by a contract with notary certified signatures.
The articles of association may, however, provide that notarial certification is not required.
It is also possible to agree that a specific procedure or conditions must be observed upon transfer. For example:
- the shares must first be offered to the remaining shareholders;
- a prohibition on disposing of company shares for a specified period;
- the right of one or more shareholders to preferential purchase of shares offered for sale by a shareholder, etc.
A transfer of company shares in breach of the articles of association is unenforceable against the company and third parties, unless the General meeting of shareholders resolves otherwise.
By resolution of the General Meeting, a right to acquire shares may be granted to persons employed by the company, regardless of the type of contract or legal relationship. This right may only be exercised through the transfer of the company’s own shares. In that case, a written agreement for the grant of a right to acquire shares is concluded between the company and the relevant employee. The total number of shares acquired upon exercise of the right to acquire shares by persons employed by the company may not exceed 15% of all shares.
The right to acquire shares may not be transferred to other persons. It may, however, be inherited.
Inheritance of Company Shares
Upon the death of a shareholder, their shares are inherited. All or some of the heirs may take over their shares. They must declare their wish to join the company within 3 months of the opening of the succession. If the heirs do not wish to become shareholders, the company pays them the value of the deceased’s company share as at the date of death.
The articles of association may provide that heirs may NOT become shareholders. In that case, the company will pay them the value of the deceased shareholder’s share as at the date of death.
The heirs of the person in whose favour a right to acquire shares was granted may exercise that right within 6 months of the date of death. The conditions for exercising the right must, however, have arisen by the date of death.
Management of the Variable Capital Company
The General Assembly comprises all shareholders. It has competence to resolve the following matters:
- amendment and supplementation of the articles of association;
- issuance of new shares, determination of the manner of taking them up, cancellation of shares and exclusion of shareholders;
- transformation and dissolution of the company, appointment and dismissal of a liquidator, determination of their remuneration and the liquidation period;
- appointment and dismissal of the manager or members of the management board, determination of their remuneration and discharge from liability;
- adoption of the annual financial statements;
- appointment and dismissal of a registered auditor, where an audit is mandatory or a resolution has been passed to carry out an independent financial audit;
- distribution and payment of profit;
- acquisition of own shares;
- other matters placed within its competence by the law and the articles of association.
The General Assembly may be convened by the following means:
- by written notice published in the Commercial Register at least 15 days before the date of the meeting;
- by written notice sent to each shareholder;
- by notice sent by electronic means with an explicit acknowledgement of receipt, received at least 7 days before the date of the general meeting.
The General Assembly is held at least once a year and no later than 30 June.
The articles of association and/or the notice convening the general meeting may provide for the possibility of the general meeting being held and/or a shareholder participating by means of electronic communication in the following ways:
- live transmission of the general meeting;
- two-way real-time communication enabling shareholders to participate in the discussion and adoption of resolutions at the general meeting from a distance;
- a mechanism for voting before or during the general meeting, without the need to appoint a proxy to attend the general meeting in person.
The variable capital company may be managed by:
- one or more managers;
- a management board.
There is no requirement for a minimum number of management board members. A management board member may be a legally capable natural person, as well as a legal entity.
The duration of their mandate is determined in the articles of association. They may be re-elected without limitation.
The management board elects one or more executive directors from among its members to represent the company.
We can assist you with the establishment of a variable capital company in Bulgaria. For more information please do not hesitate to contact us by e-mail: office@kgmp-legal.com