The adopted amendments to the Commerce Act (CA), which entered into force on 27.09.2024, include several new opportunities for businesses in the area of transformations and amendments easing the administrative burden on businesses, bringing our legal framework closer to that of our European partners.
Change of seat
One of the highlights of the new texts is the ability for a company to transform by moving its seat address and adopting a legal entity form of the relevant EU Member State. This hypothesis is regulated for the first time in our legislation and is in line with our integration into the EU market. The change affects only equity companies – limited liability companies, joint-stock companies and limited share partnerships.
The amendments are covered by an entirely new chapter of the CA regulating forms of transformation into a company from another EU Member State. The chapter is also applicable to the reciprocal hypothesis – when a company established in another Member State moves its registered seat address to the Republic of Bulgaria and adopts the legal form of an equity company under Bulgarian law.
The possibility of transformation under this procedure is precluded by certain conditions, including:
- One of the companies involved in the transformation has its registered office outside the EU or the European Economic Area;
- The national law of the Member State applicable does not permit such transformation;
- The company involved in the conversion is an open-ended investment company.
Cross-Border Spin-Off
The latest amendments to the Bulgarian Commercial Act (SG No. 82/2024) expand the scope of cross-border transformations by introducing the cross-border spin-off, which was previously not possible. This change aligns Bulgarian law with EU Directive 2017/1132, allowing a Bulgarian company to transfer part of its assets and liabilities to a newly established company in another EU/EEA member state or vice versa.
The transformation becomes effective upon registration in the respective commercial registers, with mutual recognition between member states facilitated by the EU register interconnection system. This ensures a streamlined legal process, providing greater flexibility for corporate restructuring while maintaining protections for shareholders, creditors, and employees.
Upcoming Regulatory and Technical Implementation of Cross-Border Transformations
To enable cross-border transformations, including cross-border spin-offs, in addition to the legal amendments, the following additional measures are expected to be adopted and implemented:
- Within 6 months (March 2025): The Council of Ministers must adopt amendments to Tariff No. 1 under the State Fees Act to define the fees applicable to the new procedures. The Ministry of Justice must issue or align the regulations related to the Commercial Register.
- Within 1 year: The Registry Agency must ensure the technical capability to implement the new rules in the Commercial Register, including coordination with the National Revenue Agency and the National Social Security Institute. The start date for implementation will be determined by the Minister of Justice through Commercial Register dedicated ordinance.
Protection of shareholders in cross-border transformation
There is also protection for shareholders who have voted against the transformation. Detailed information on the planned monetary compensation of these shareholders constitutes a mandatory component of the transformation plan and the report of the management body of the company being transformed. The information must include the amount of the compensation, the time limit for its payment and the method of its determination.
