New form of company in Bulgaria
Variable Capital Company (VCC)
In August 2023, Bulgaria introduced the Variable Capital Company (VCC) through amendments to the Bulgarian Commercial Act, aiming to provide a more flexible and streamlined corporate structure for startups and small businesses.
Key Features of the VCC:
• Dynamic Capital Structure: Unlike traditional companies, the VCC does not require a fixed initial capital. The capital amount is determined annually by the General Meeting of Shareholders based on the company’s financial performance.
• Simplified Share Management: Shares can be transferred through formal agreements without the need for notary verification, provided the Articles of Association permit it. This facilitates easier entry and exit of investors.
• Flexible Governance: Founders can choose between appointing a single director or forming a board of directors, allowing for tailored management structures that suit the company’s needs.
• Investor-Friendly Provisions: The VCC accommodates venture capital mechanisms such as rights of first refusal, drag-along and tag-along rights, convertible loans, and employee stock ownership plans (ESOPs), making it attractive to investors.
Limitations:
The VCC is designed for small and medium enterprises and must convert to a traditional company structure (e.g., LLC or JSC) if it exceeds any of the following thresholds:
• More than 50 employees
• Annual turnover exceeding BGN 4 million
• Asset value exceeding BGN 4 million
If these thresholds are surpassed, the VCC is required to transform into another company type by the end of the year following the general meeting that acknowledged the exceedance.
Implementation Timeline:
As of December 15, 2024, the Bulgarian Company Registry has enabled the registration of VCCs, allowing entrepreneurs to establish this new form of company.
Timeline registration: one day remotly.
The VCC offers a modern and flexible corporate structure tailored to the needs of startups and small businesses in Bulgaria, facilitating easier capital management, investor engagement, and corporate governance.
