According to Bulgarian law shares may be transferred by means of common methods of acquisition (purchase, gift, exchange) as well as by succession (succession, company restructurings).

The legal framework for the succession of shares in the Bulgarian Sucession Act ("SA") and the Bulgarian Commerce Act ("CA") is scarce and is subject to multiple interpretations. By succession a person acquires the property (a set of rights and obligations) remaining after the death of another person (the settlor). The fact that succession is governed by the general rules of the SA means shares can be inherited both by law and by will.

Shares are included as part of the estate according to Art. 31 SA. A share confers on its proprietor material and nonmaterial rights. Nonmaterial rights are limited to the right to vote, right of management, the right of shareholders to elect and be elected to the governing bodies, the right to information, right to appeal the decisions of the company’s bodies. Property rights confer on the holder of the shares the right to dividends, the right to a liquidation share in the event of winding up of the company, the right to acquire a part of new shares corresponding to their share capital prior to the increase (Art. 194 CC), preferred shares confer the right to additional or guaranteed dividends (Art. 182 CC).

The type and features of the shares as well as the rights they confer should be consistent when considering the relevant succession procedures.

I. Succession of shares by law in Bulgaria

The estate is opened for distribution at the time of death, at the last residence of the deceased, according to Art. 1 SA. The circle of successors is determined in accordance with the provisions of Art. 5-12.

1. Of available shares
Unless otherwise provided in the articles of association of the joint-stock company (JSC), the successor becomes a shareholder of the JSC upon adoption of the succession. In order for the adoption of the succession to take effect, it is necessary that it be recorded in the register of shareholders (Art. 179 CC). The successor legitimises their identity before the JSC by providing an identity document and a certificate of succession.

2. Of dematerialised shares
According to Art. 178 (2) CC, the company may issue dematerialised shares. Issue and disposal of dematerialised shares is carried out in the manner established by law. Arrangements for dematerialised shares are outlined in the Bulgarian Public Offering of Securities Act ("POSA"). The Act does not contain specific provisions on succession of dematerialised shares. Art. 127 (1) POSA applies in such cases, which governs the transfer of dematerialised shares: “The issue and disposal of dematerialised securities shall become effective only after they have been registered at the Bulgarian Central Depository JSC.

Successors by law acquire rights over dematerialised shares not from the moment of opening or adoption of the succession, but from the time of their registration as shareholders at the Central depository, i.e. only the registered holders of dematerialised shares are entitled to shareholder rights opposable to the company. (in this sense, Decision № 38 / 11.06.2010 of the Court of Appeal - Burgas). Entry into the Central Depository is carried out by an investment intermediary acting as registration agent. The succession procedure for dematerialised shares is covered in detail in Art. 172-172b of the Rules of Procedure of the "Central Depository" JSC and is the following - according to Art. 172 (1), the registration agent shall submit an instruction to the CD for the registration of a transfer of financial instruments by means of succession by law upon provision of:

1. a certificate of succession, respectively an equivalent foreign document with a certified translation and legalisation – an original or a notarized copy;
2. a request for provision of a statement of the financial instruments owned by the legator signed by all of the successors or persons authorised by them;
3. an agreement for voluntary sharing-out between all successors listed in the certificate of succession with a notarized certification of the signatures. On the basis of the statement under item 2, the agreement must cover all financial instruments subject of the succession, apart from the ones which are the subject of a testamentary succession;
4. an order for the transfer of the relevant financial instruments from the account of the legator to the relevant accounts of the successors, signed by all of the successors or the persons authorised by them. The order shall be signed only by the successors receiving a succession share under the agreement for voluntary sharing-out;
5. a document certifying the ownership of the financial instruments subject of the succession – an original. In case that the successors do not possess such a document, a declaration to that effect shall be presented by the persons under item 2;

After a verification of the above documents, the registration agent shall (para. 2):

1. submit to the CD a request for provision of a statement under paragraph 1, item 2 for the financial instruments held by the legator and for their blocking;
2. provide the statement issued by the CD to the successors;
3. register the successors receiving a succession share under the agreement for voluntary sharing-out as clients and open the relevant client accounts.
4. in compliance with the agreement for voluntary sharing-out among the successors, the RA shall order the transfer of the relevant financial instruments on the basis of the order instruction under paragraph 1, item 4 from the account of the legator to the relevant accounts of the successors. For the transfer to the account of each successor, a separate message shall be submitted.

Upon receipt of the instruction for transfer, the CD shall (para. 3):

1. open client accounts of the successors with the RA and debit ex-officio the relevant accounts by crediting the account of the legator;
2. in the cases where the legator is not a client of the RA, upon receipt of a request under paragraph 2, item 1, together with the blocking of the financial instruments subject of the succession, the CD shall register the legator as a client of the RA by assigning him/her an official client number;
3. submit a message to the relevant member holding accounts for financial instruments subject of the succession which have been transferred ex-officio under item 2.

In case that the successors fail to voluntarily sharing-out, the registration agent shall submit an instruction to the CD for transfer of the financial instruments for the purposes of succession by law upon provision of an application form enclosing (Art. 172a of the Rules):

1. a certificate of succession, respectively an equivalent foreign document with a certified translation and legalisation – an original or a notarized copy;
2. a request for a statement of the legator`s financial instruments signed by the successor or an authorised person;
3. a document evidencing the ownership of the financial instruments subject of the succession – an original. In case the successor does not possess such a document, a declaration to that effect shall be presented;
4. conclusive evidence of the succession share with regard to the registration of the acquired financial instruments individually:
   a) an effective court deed for establishment of successor rights and/or
   b) another document defining the number of financial instruments to be acquired by the successor by succession;
   c) a declaration form of consent for registration of the succession share;
5. an instruction for account opening and transfer of the financial instruments corresponding to the succession share from the account of the legator to the account of the successor.

The registration agent may require from the applicant the provision of additional data and documents with regard to the transfer registration. After a verification of the documents the registration agent shall:

1. submit to the CD a request for a statement of the legator`s financial instruments and their blocking;
2. provide the successor with the statement issued by the CD;
3. register the successor as a client and open a client account with the CD;
4. in accordance with the documents under paragraph 1, order the transfer of the respective share of the financial instruments on the grounds of the instruction under paragraph 1, item 5 from the account of the legator to the account of the successor.

The registration is performed by opening an account of the successor with the CD and registering therein respective number of dematerialised financial instruments corresponding to the share of the successor.

In the event that the financial instruments subject of succession are stored in a client account with a CD member other than the registration agent, who has submitted an order for registration of transfer, the CD shall inform the member of the requested procedure after receipt of the request for issuance of the above reference.

Within five working days of receipt of the message, the member of the CD where the financial instruments of the testator are stored, shall make all reasonable efforts to verify the registered information about the testator - account holder of financial instruments.

The registration agent who has submitted an order for registration of succession shall send to the CD scanned copies of the documents provided under the procedure in the following cases:

1. where the total nominal value of the financial instruments subject of succession exceeds BGN 10 000 (ten thousand);
2. where a succession procedure of a foreign person has been opened.

The CD shall send the documents received by the registration agent to the relevant member where the financial instruments of the testator are stored, and shall refer to the Electronic Information System for Civil Registration and Administrative Services (CRAS) at the Bulgarian Directorate-General "Civil Registration and Administrative Services", subject to the conditions for granting CRAS with the data for the testator-account holder of the financial instruments. The members of the CD participating in the registration procedure shall be notified of the outcome of the inspection, in order to take the necessary action in accordance with the regulatory framework.

II. Succession of shares by will in Bulgaria

Succession of shares by will in Bulgaria is governed by the provisions of Art. 13-22 SA. The successor legitimates before the JSC by representing the will and on the basis thereof is entered in the Register of Shareholders. The successor must also have acquired protocol of announcement thereof. To be the subject of a will, shares must meet certain conditions:

1. at the time of opening of succession the shares must be part of the patrimony (estate) of the testator. Depending on the type of shares and the mode of transfer thereof, the following features can be pointed out:
   a. available shares
   - bearer shares – if the testator was its first owner, the same must be transferred thereto. The transfer is   carried out after full payment of its nominal or issue value;
   - registered shares – the testator should have paid the relevant part of their contribution to the JSC. Possession of registered shares is evidenced by the name of the testator on thereon, or where one can make the unambiguous conclusion, judging by the continuous line of endorsements, that the testator is its endorsee.
   b. dematerialised shares – the testator must have received a depository receipt by the CD certifying the holding of the share(s).
2. at the time of opening of the succession the shares must belong to the testator, i. e. at the time of opening of the succession the shares must actually be part of the estate in accordance with Art. 31 SA (the possession of dematerialised shares is evidenced by the fact that the name of the testator has an open account for dematerialised shares in the CD).

The registration procedure for succession by will / testament of dematerialised shares is covered in detail in Art. 173 of the Rules of Procedure of the "Central Depository" JSC and is the following - a registration agent submits an order to the Central Depository for registration of the transfer of financial instruments by succession will / testament after requesting:

1. a certificate of succession - an original or a notarized copy;
2. a notarized copy of a handwritten testament or a notary testament drawn up in the format required by the Act on Succession with all needed requisites;
3. a statement by a notary regarding the announcement of the testament.

After a verification of the documents the registration agent shall:

1. submit to the CD an application for issuance of a statement and for blocking of the portfolio of financial instruments of the legator.
2. upon receipt of the statement on the legator`s portfolio, registration agent shall notify the successor who has requested it, only the portion of the financial instruments held by the legator to be inherited by the successor according to the will/testament.
3. in compliance with the will/testament, the registration agent shall instruct the transfer of the relevant inherited portion of the legator`s financial instruments from his/her account to the relevant accounts of the successors requesting the succession procedure.

A separate notice is sent for the transfer to the account of each successor.

Outstanding matters are governed by the provisions for the registration of legal succession.

By bequeathing shares the reserved share of legal heirs may be impaired. In such case is applied the restitution of reserved shares (Art. 30-37 SA).

The author of this article, Ms. Irina Konstantinova, is a legal associate at Law Firm Ruskov and Coll. in Sofia.