Legal form change. Transformation of a Bulgarian company.
The subject of this article is to explain the procedure of the legal form change of a Bulgarian company from a Limited Liability Company to a Joint Stock Company, as well as to provide an understanding on the basic procedure in the merger of companies, diving them and other forms of their legal change.
Transformation of Bulgarian company – from LTD to JSC
The most common changes in the legal form in Bulgaria is the transformation from an LTD to a Joint Stock Company. Usually, the reasons for this action are an improvement of the corporate status of the company, migration to anonymity, bond issue, a planned listing of the company on the Bulgarian stock exchange, etc.
The procedure of transformation of Bulgarian company:
The first step is to prepare a transformation plan which should be notarized. The plan is the description of how the transformation would be done, incl. how the LTD company will be transformed into a joint stock company. The plan shall describe the stocks that every shareholder will obtain in the future JSC. The plan must be submitted in the Trade register at least 30 (thirty) days before the planned date of the general meeting of the shareholders in the limited liability company.
This step can be avoided if the LTD company is owned by a single person.
After that, the company shall send a notification to National revenue agency and shall appoint an auditor in order to prepare a report which shall contain an assessment of the adequacy of the exchange ratio.
The next and most important step of the transformation process is the decision of the general meeting GM of the LTD company. The decision will be valid only if the shareholders who own at least three-quarters of the share capital vote in favor of the transformation of the company into a joint stock company in Bulgaria.
The final step is the registration of the changes in the Bulgarian Trade register.
Legal form change of a Bulgarian company
In the case of division, separation, and merger of companies, one or more existing or newly formed companies acquire whole or part of the rights and obligations of other company. All property of one or several commercial companies passes to another existing or newly established trading company, which by law becomes their legal successor and the transforming trading companies are terminated but without liquidation. All rights and obligations, as well as the actual relationships of the transforming companies, are also transferred to the existing or newly established trading company, which becomes their legal successor. The receiving company acquires in full the assets of the transforming companies. The shareholders of the transforming companies cease their membership and acquire stocks and shares in the receiving company.
- A Contract for the transformation is the first step towards successful change. A contract must be concluded between the receiving and the transforming company. The form is in writing and the signatures must be certified by a notary. The minimum requirement as the content of the contract covers the amount of the shares which will be received in the new company, what will be the amount of the cash payments, from which moment the participation in the acquiring / newly established company already entitles the respective share of the profit, etc.
- The next technical but very important step is the announcement of the contract or the transformation plan in the Bulgarian Commercial Register. This is done at least 30 days before the general meeting to decide for or against the transformation. At this time, all shareholders have time and opportunity to get acquainted with the reorganization plans in detail.
- The Commerce Act sets the strict requirement for a translation check to be carried out before it becomes reality. An inspection of each of the companies involved in the transformation is carried out. The verifier must be a registered auditor and set certain specific requirements for him. He has the right to full access to all the massive documentation and information of the companies. As a result of its activity, the auditor prepares a detailed report, which must meet certain legal requirements.
Before deciding whether or not to approve the planned transformation the shareholders have to revise the following documentation related to the future corporate structure transformation: Contract for the transformation, a report prepared by the management body, the auditor’s report, AFS for the last 3 financial years, balance sheet and a draft of the new statutes or resp. a company contract for each of the newly established companies
Submitting of the transformation into the Commercial Register is the final step of the transformation of a company.
To protect the creditors, for a period of just 6 months after the transformation the company has to make separate accounting in the acquired assets and obligations.
We, at Innovires, we do not only provide legal advice to our clients at every stage of the transformation, but we also draft and submit all the respective documents, incl. but not only: applications, transformation plan, minutes, declarations, powers of attorney, management agreements, articles of associations, etc. At the end, we, guarantee a successfully registered change in our Commercial Register.
Our lawyers from Innovires Legal can fully assist you in preparing all the required documentation to change the legal form of making a transformation in a commercial company in Bulgaria.
For more information and further assistance, do not hesitate to contact us!
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