By its nature, the transfer of shares in a Bulgarian limited liability company (OOD, here for more understanding LLC) is a legal transaction involving subject membership of a particular shareholder, which includes certain rights and obligations of the partner to the company. Because of these special characteristics these transactions are subject to a special procedural regulation, which is dealt with in this article.

I. Requirements for realization of share transfer

This regulation is mainly provided within Chapter 13 of the Bulgarian Commercial Act (Art.113-157) and particularly in Art. 129 and Art. 130 of the Commercial Act. Art. 129 regulates the principle possibility that a certain proportion of the shares could be transferred and inherited. On the other hand, however, the law provides requirements, depending on whether the shares are transferred to an individual who is already a shareholder at the company or to a third party. Therefore, both options shall be treated individually.

A. Share transfer to a shareholder

According to this hypothesis, the law provides that the transfer could be executed freely without the necessity for obtaining of approval from the General Assembly of the company. The only necessary condition is compliance with the requirement of Art. 129, paragraph 2 of the Commercial Act, namely that the transfer takes place on the basis of a contract with simultaneous notarial certification of the signatures and the content. But the latter is not enough, whreas the registration of this contract within the Bulgarian Commercial Register is also required, which means that the registration in this case has a constitutive effect and without its realization the contract cannot provoke its legal consequences.

B. Share transfer to a third party

Here, the law provides additional requirements as a consequence of the circumstance that the person who will acquire the shares does not yet have the capacity of a partner in the company. Therefore, the compliance with the requirements for the admission of a new shareholder is compulsory, whereby the admission can take place solely and only by resolution of the General Assembly of the company – Art. 137, para. 1, p. 2 of the Commercial Act. It is necessary to have a resolution taken by the General Assembly regarding the admission of new shareholder and the granting of their approval for the transfer of the share to the new member. This decision shall comply with the majority of the requirements. According to Art. 137, para. 3 these resolutions shall be taken by a majority of more than three quarters of the share capital. It is necessary to comply with another legal requirement – Art. 137, para. 4 provides drafting of a protocol with simultaneous notarial certification of the signatures and the content for these resolutions. However, this rule is not mandatory, in case the articles of association provide that these resolutions could be taken just in a simple written form. For this purpose, however, this shall be explicitly provided within the articles of association. Otherwise the requirement for notarial certification must be complied with, because in the event of their violation the decisions will be void and will not have any legal effect – Art. 137, para. 5.

The new shareholder is admitted by the General Assembly after his written request in accordance with Art.122 of the Commercial Act, whereby his consent with the terms of the articles of association is needed. The resolution for his admission is entered in the Commercial Register. In accordance with Art. 140, para. 4 of the Commercial Act, the admission of a new shareholder enters into force since the resolution thereto has been entered within the Commercial Register.

In case of admission of a new shareholder, in addition to the requirements already specified, the aforementioned requirement of Art. 129, para. 2 shall be also met, namely: the business share transfer agreement shall be concluded with the simultaneous signature and content notary certification.

C. New changes related to the Bulgarian labor law

Amendments of the Bulgarian Labor Code as of December 2017, led to amendment of certain provisions of the Commercial Code related to the share transfer. Therefore, through State Gazetta № 102/2017, the content of Art. 129, para. 1 of the Commercial Act was amended, whereby an additional requirement for the share transfer being added. There shall be no unpaid labor remunerations, social security contributions and/or and compensations of employees of the company, which rule applies to both current employees and those, whose legal relationship with the company ended up to three years prior to the share transfer. Due to a legislative gap concerning the way this will be certified, the Registration Agency issued special instructions as of 04.01.2018. According to these instructions, the certification of lack of such obligations shall be carried out through a declaration, signed by the company’s manager. The declaring of false data is criminalized and in such case the manger bears criminal liability according to the Criminal Code.

D. Liability during the transfer

The provision of Art. 130 of the Commercial Act should be mentioned - in the event that share capital contributions are due at the time of the transfer, a solidary liability with regard to their payment arises between the legal predecessor and the legal successor. This should be taken into consideration, because the payment of a share capital contribution is one of the main obligations of the shareholder according to Art. 124 of the Commercial Act. The default of this obligation is a reason for the exclusion of the shareholder who has not paid his share within a certain period of time. In this case he owes statutory interest and compensation for the incurred damages – Art. 121, para. 1 of the Commercial Act. If the shareholder cannot pay his share or cannot sell it to another person, the other shareholders will be required to pay the shortage in proportion to their shares or to reduce the share capital by that amount, according to Art. 121, para. 2 of the Commercial Act.

II. Procedure for registration of the share transfer

The registration procedure is regulated by the Commercial Register and the Register of Non-Profit Legal Entities Act, which entered into force as of 01.01.2018, whereas the detailed procedure is provided by Ordinance № 1/2007 on the management, safekeeping and access to the commercial register and to the register of non-profit legal entities. The registration is being executed through an application to the Commercial Register, which provides distant access for filing of the applications.

The share transfer of a limited liability company in Bulgaria constitutes a change of circumstances concerning this company, whereby the necessary documents for the registration of similar changes within the Commercial Register are expressly regulated by Art. 21 of the Ordinance.

The necessary documents are:

-application for a change of circumstances and a bank receipt proving the payment of the state fee;

-resolution of the General Assembly for the share transfer;

-a copy of the articles of association, containing the amendment, certified by the managing body of the company;

-a copy of the articles of association, where the personal data, other than those required by law, is deleted;

-declaration by the company's manager for the authenticity of the circumstances, whose registration is requested;

-application for the admitting of a new shareholder, resolution of the General Assembly and/or the sole proprietor for his admission, share transfer agreement with simultaneous notarial certification of the signatures and its content;

-document, establishing the existence of the company-shareholder and which establishes its managing bodies (only for a company-shareholder which is not incorporated under Bulgarian law or a company-shareholder which is registered neither in the Commercial Register nor in the register of non-profit legal entities);

-Resolution of the managing body of the company-shareholder for participation at the limited liability company;

With regard to the deadline for pronouncing on the application it shall be noted, that the registration officer shall rule his decision immediately after the expiry of three working days as of the submission of the application within the register, unless another period is provided ex lege.