In recent weeks, there has been much discussion about whether Bulgaria is ready to join the Eurozone. Last year, a law was adopted regulating the introduction of the Euro in the Republic of Bulgaria. Along with information on the principles of currency conversion and rounding, and price labelling, the Introduction of the Euro in the Republic of Bulgaria Act (ERBA) also addresses issues related to the capital of commercial companies. Why this is important is explained below.
Although it is currently unclear whether the Euro will be officially adopted at the beginning of 2026, it is advisable for every owner of a commercial company to familiarize themselves with the specifics of the changes that will occur in the company’s capital after the adoption of the Euro. On the other hand, when establishing new companies, it may be considered to set a capital that will not require additional changes or actions subsequently. This can save both operational costs and company resources for compliance with new requirements.
Rules of Currency Conversion and Rounding
The conversion from levs to euros is carried out by dividing the numerical value in levs by the full numerical value of the official exchange rate, expressed with six digits including five decimal places.
The official exchange rate is 1.95583 levs for 1 euro. The official exchange rate is not rounded or truncated during the conversion.
The resulting amount is rounded to the second decimal place based on the third decimal place according to the following mathematical rounding rule:
- If the third decimal place is less than five, the second decimal place remains unchanged;
- If the third decimal place is five or greater, the second decimal place is increased by one unit.
An exception to this rule regarding the decimal place based on which rounding is performed is allowed only when the Law on the Introduction of the Euro in the Republic of Bulgaria or another EU legal act stipulates rounding to a different decimal place.
Preserving the Rights of Shareholders
A key element of the law is the protection of the rights of shareholders and partners during the capital conversion from levs to euros. The process is designed so as not to affect the proportional participation of existing investors in the company’s capital. This ensures that no shareholder or partner is disadvantaged by the currency change.
Conversion of Capital and Nominal Value of Shares
The nominal value of one share is converted from levs to euros by dividing the nominal value of the share in levs by the full numerical value of the official exchange rate, and the result is rounded according to the rounding rule to the second decimal place.
Once the nominal value of the share is determined, the nominal value (registered) of the capital will be calculated. The capital of a joint-stock company and a limited partnership with shares in euros will be formed from the nominal value of one share, determined in euros multiplied by the number of shares.
For example, if the minimum allowed capital of a joint-stock company under the Commercial Law is 50,000 BGN, which is distributed in 50,000 ordinary registered shares each with a nominal value of 1 lev, the capital in euros would be:
- Nominal value of 1 share: 1 / 1.95583 = 0.51 euros
- Capital: 50,000 x 0.51 euros = 25,500 euros.
The difference between the value of the capital obtained by applying the conversion rule and the value of the capital obtained by the above formula is reflected as undistributed profit/ uncovered loss from previous years. This aspect is an important accounting issue that should be discussed with the servicing accountant.
Capital of a Limited Liability Company
The capital of a limited liability company is converted from levs to euros by dividing the registered value of the capital in levs by the full numerical value of the official exchange rate, and the result is rounded. The size of the share in the capital of each partner in a limited liability company is calculated by distributing the converted size of the capital among the partners according to their participation in the capital before the conversion.
With a capital of 5,000 BGN and two partners: one with 75%, and the other with 25%, the converted capital and share participation would look like this: 5,000 / 1.9553 = 2,556.46 2,556.46 * 75% = 1,917.345 2,556.46 * 25% = 639.115
As we can see, whole shares are not obtained. There will be a number of such cases.
There is no explicit text for rounding the shares. It is also not clear whether the rule for joint-stock companies and the recording of the difference in capital due to conversion will apply to limited liability companies. In cases where it is necessary to preserve the rights of partners in a limited liability company when converting their shares in the capital, the change in the converted capital can only be up to 5 percent of the registered capital and should be made according to the procedure for amending the company agreement. In this case, the rules of the Commercial Law for increasing and decreasing the capital do not apply.
The application of these rules must be reflected in all corporate documents, which must be updated and registered in the Commercial Register in accordance with legal requirements.
All companies will be required to file updated articles of association or partnership agreements within 12 months of the adoption of the euro. The requirement is to submit certified copies of the respective document by the representatives. Although it is not explicitly stated from the provision for amending the partnership agreement for an LLC when there is a need to change the capital to preserve the rights of the partners, we can conclude that in other cases the amended act may be certified only by the representative of the company without the need to hold a meeting or to make a decision by the sole owner. This corresponds to the principle of efficiency and economy. At the same time, it can create quite a few uncertainties with the registry procedure, for which practice will first be established.
It is important to consider that although 12 months are provided, the announcement must be made simultaneously with the submission of the first subsequent application for registration, deletion, or announcement in the Commercial Register. No state fee is due for the announcement of the acts, similar to the financial statements.
Automatic conversion in the Commercial Register
On the date of the introduction of the euro, the registered size of the capital of a limited liability company, a joint-stock company, and a limited partnership with shares, as well as the registered nominal value of the shares in a joint-stock company and in a limited partnership with shares, are automatically replaced with the values in euros and euro cents. The conversion is performed ex officio by the Registration Agency.
New Rules for the Minimum Capital of Companies
The law itself provides for amendments to the Commercial Law regarding the minimum sizes of the capital of commercial companies.
The capital of a limited liability company cannot be less than 1 euro. It consists of the shares of the partners, which cannot be less than one euro cent. The capital and the value of the shares are determined in euros, respectively in euro cents. The minimum value of the capital of a joint-stock company is 25,000 euros. The minimum nominal value of one share is one euro cent. Addressing these changes efficiently will help protect shareholder rights and ensure compliance, minimizing both operational costs and administrative burdens. Proactive engagement with these legal changes will ensure a smoother transition and maintain business continuity in the new economic landscape.
