The Bulgarian public limited company is a corporate entity (in accordance with Art. 158 Commerce act). The capital is divided into shares, which, unlike company shares, are always equal and represent a security.
Shares have a nominal value and an issue value, whereby the issue value may not be lower than the nominal value. Consequently, the two values are at least equal. The Commerce Act specifies several types of shares:
- available – such as registered shares;
- non-available shares, which are not securities;
- ordinary shares and preference shares. The articles of association may provide for the issue of shares with a redemption clause under the conditions and in the manner specified therein.
It is also important to note that a public limited company may only acquire its own shares in the cases expressly provided for by law.
The sum of the subscribed shares constitutes the company's capital. The shares are indivisible but may be jointly owned by two or more persons. The minimum value of a share may not be less than one euro cent and there is no restriction on the maximum value of a share. Upon incorporation, all shares in the capital must be subscribed and at least 25% of their value must be paid up.
Bonds
Bonds are loans granted to the company by bondholders. Bonds can only be issued by a public limited company. Bonds of the same issue with the same nominal value grant the same claim. Bonds are securities that contain a total of two claims – the principal debt and the interest. The bondholder is not a member but a creditor of the company. They do not participate in its management and are not liable for the consequences of its business activities.
Establishment
A public limited company is founded by at least two persons. An exception is a single-member public limited company, which has only one founder. The founders can be both natural and legal persons. Founders are all persons who have subscribed to shares at the general meeting. All founders are jointly and severally liable to third parties for liabilities they have incurred in their own name prior to the formation of the company. If shares have been subscribed prior to registration, the shareholders are obliged to make a down payment. The formation process is complicated and consists of several phases. The first step is to hold a formation meeting at which all persons subscribing for shares are present or represented. Pursuant to Art. 163(3) of the Commerce Act, the formation meeting shall pass the following resolutions:
- on the establishment of the company;
- approves the articles of association, the content of which is specified in Art. 165 of the Commerce Act;
- determines the amount of the formation expenses;
- appoints a supervisory board or a board of directors, depending on the management system.
The final requirement for the formation of a public limited company is entry in the commercial register. This requires that:
- the articles of association have been approved;
- all shares of the capital have been subscribed, which must be evidenced by a list of persons who subscribed to the shares at the time of incorporation, certified by the supervisory board or management board;
- the contribution provided for in the articles of association has been paid in at no less than 25% of the share value; Founders who do not make the agreed contributions on time are liable to pay interest, unless the articles of association provide for a contractual penalty. In the event of default on a non-monetary contribution, compensation for the actual damage may be demanded.
- A supervisory board or management board has been appointed.
- the other legal requirements have been met.
Rights and obligations of shareholders
Here, rights and obligations can be divided into material and immaterial. A further distinction is made between individual and collective rights and obligations.
Intangible rights:
- Management rights, which consist of participation in the activities of the general meeting and voting rights;
- Control rights;
- Voting rights – As a general rule, each share grants one vote. Voting rights arise upon payment of the contribution, but this is a discretionary provision and the articles of association may stipulate otherwise. Voting rights may be exercised in person or by a proxy, who must be authorised by an express written power of attorney. If the share is jointly owned, the voting rights are exercised jointly by all owners or by their representative ( ). In certain special companies, more specific requirements apply to proxies.
- Collective rights (minority rights) – these are rights that exist not in favour of a shareholder but in favour of a legally defined share of capital. These include, for example: a) the right of shareholders who own at least one-fifth of the capital value to add items to the agenda of the general meeting after it has been announced or after the invitations have been sent out – Art. 223 of the Commerce Act; b) the right of shareholders who own at least one-fifth of the capital value to convene the Annual General Meeting; c) the right of shareholders representing one-tenth of the capital value to select an auditor.
Substantive rights:
- Right to a share in profits, whereby there may be a right to an additional or guaranteed share in profits. This right is irrevocable and is subject to the following conditions: a completed financial year, profits, an approved financial report and a resolution by the general meeting on the distribution of profits;
- Right to a liquidation quota;
- Right to payment of interest on contributions made, if such a right is provided for in the articles of association;
- Preferential right, which consists of the shareholder being able to subscribe for an equal share of newly issued shares;
- The right to subscribe to a proportional share of the new shares in the event of a capital increase.
Obligations
Shareholders are not personally involved in the management of the public limited company, but are obliged to pay the contributions for the subscribed shares in accordance with Art. 188 of the Commerce Act. The law stipulates a maximum period of two years for this, which cannot be extended by the articles of association. Failure to make the payment will result in compensation or even the exclusion of the defaulting shareholders who do not pay the amount claimed within the one-month grace period granted to them. The consequence of this is either a reduction in capital or an offer to sell new shares of the same value. The articles of association may also include a provision for the deposit of securities for the unpaid portion of the contributions.
Management structure
There are two types of management bodies for public limited companies – the single-tier system (board of directors) and the two-tier system (supervisory board and executive board). Both systems have in common that a member of the board of directors can be a competent natural person. If the articles of association permit, a member may also be a legal entity. In this case, the legal entity appoints a representative to perform its duties. The legal entity is jointly and severally liable with the other members of the body for the obligations arising from the actions of its representative. The members of the board of directors or the management board represent the company jointly, unless the articles of association provide otherwise. The bodies have a quorum if at least half of their members are present in person or represented by another member of the body.
Another permanent body of the company is, of course, the general meeting, which does not, however, play a leading role in the management of the company.
Annual general meeting of shareholders
The general meeting of the stock corporation consists of all shareholders who have voting rights. Shareholders may participate in the general meeting either in person or by proxy. The general meeting makes decisions by a majority of the shares present. For some resolutions, entry in the commercial register is required for them to take effect.
Management
There are two types of management bodies for public limited companies – the single-tier system (board of directors) and the two-tier system (supervisory board and management board). Both systems have in common that a member of the administrative board can be a competent natural person. If the articles of association permit, a member may also be a legal entity. In this case, the legal entity appoints a representative to perform its duties. The legal entity is jointly and severally liable with the other members of the body for the obligations arising from the actions of its representative. The members of the board of directors or the management board represent the company jointly, unless the articles of association provide otherwise. The bodies have a quorum if at least half of their members are present in person or represented by another member of the body.
Another permanent body of the company is, of course, the general meeting, which does not, however, play a leading role in the management of the company.
Annual financial statements
Profits can only be distributed among the shareholders after the annual financial statements have been prepared. The annual financial statements are prepared in the form of an annual report, which consists of a balance sheet and a profit and loss statement.
Dissolution of the public limited company
Art. 252 of the Commerce Act lists the conditions for dissolution in detail.
A special feature is that a single-member company is not dissolved by the death or resignation of the sole capital owner.