In a previous article, we examined the question of when a company’s obligation arises to declare a change in its ultimate beneficial owners – from the moment of signing the share transfer agreement or from the moment of its registration with the Commercial Register.
Read the previous article here: “We recently transferred company shares – is it a breach of legislation if we do not update the ultimate beneficial owners on the company’s account with the Commercial Register within 7 days of the transaction?”
In Theory
In theory, the transfer of shares takes effect between the parties from the moment the agreement is signed in the legally required form – with notarisation of both signatures and content, performed simultaneously. Registration with the Commercial Register has only a declarative and protective effect vis-à-vis third parties.
Accordingly, the date of the agreement is the point from which the 7-day deadline begins for declaring a change in the beneficial owners (Art. 6(2) of the Commercial Register and Non-Profit Legal Entities Register Act – “any person required to apply for the registration of circumstances or to present acts in the Commercial Register shall do so within 7 days from the occurrence of the circumstance, respectively from the adoption of the act”). Registration itself does not create new rights or obligations but only provides publicity.
This view is also reflected in prevailing case law, which reasons that if the deadline for declaration started from the registration of the transaction, the obligation could never actually be breached, since compliance would depend on the action of the obligated party itself.
Therefore, the courts hold that a delay arises if the company waits for registration and more than 7 days pass from the date of the share transfer agreement. In such cases, there is a violation of Art. 63(1) of the Measures Against Money Laundering Act in connection with Art. 6(2) of the Commercial Register Act.
What Often Happens in Practice
In practice, interaction with the Commercial Register often diverges from this legal logic.
Just last week, our team worked on a client case in which we filed a Б7 application to declare changes in beneficial owners within the 7-day deadline, immediately after the execution of the share transfer agreement.
Meanwhile, the share transfer had also been filed for registration but not yet registered due to peculiarities in the power of attorney issued in Israel. Israel is one of many jurisdictions where there is no concept of notarisation of a signature, only of content, making it practically impossible to comply with the requirement for simultaneous notarisation of signature and content. Nevertheless, the registrar held that the form had not been complied with, thereby “blocking the way” to subsequently recording the change of beneficial owners.
Our approach was legally consistent – first an A4 application for the change in ownership, followed by a Б7 application for the change in beneficial owners, on the basis that the two deadlines run in parallel from the date of the agreement, rather than sequentially.
Although registration of the share transfer was refused, the key point was that the beneficial owner application was filed on time.
Why Filing a Б7 Matters Even if the Transfer is Pending
The Б7 application should be viewed as an independent obligation of the company, entirely separate from the registration of the share transfer by A4. Even if it is later refused, filing the Б7 on time:
- formally fulfils the statutory requirement;
- demonstrates the company’s good faith and intention to comply;
- minimises the risk of sanctions by the Financial Intelligence Directorate (ДАНС), which may range between BGN 1,000 and 5,000.
In other words, filing a Б7, even if followed by refusal, costs the company a state fee of BGN 15 but shifts the responsibility to the Registry Agency. For businesses, this is far more advantageous than facing the potential risk of a fine.
Conclusion
Administrative practice does not always align with legal logic. Yet for businesses it is critical to act promptly and with full awareness. Filing a beneficial owner declaration within the 7-day period – even where a share transfer is pending or has not yet been registered – is evidence of good faith and compliance with statutory obligations. It is also the most reliable way to significantly reduce the risk of sanctions for non-compliance.
The article above is for information purposes only. It is not a (binding) legal advice. For a thorough understanding of the subjects covered and prior acting on any issue discussed we kindly recommend Readers consult Ilieva, Voutcheva & Co. Law Firm attorneys at law.
