By the latest amendments to the Commerce Act, promulgated in Official Journal No. 66 of 2023, a new commercial company – the variable-capital company (DPK) – was introduced. This legal form quickly attracted the attention of people with innovative business ideas, start-up projects and entrepreneurs seeking opportunities to finance their development. In addition, the DPK aroused interest among existing EOODs and OODs as well, since the law permits their transformation into a variable-capital company.

Advantages of the DPK and why it is so attractive?

The DPK is characterised as a hybrid form between an OOD and an AD. Compared with an OOD, this form offers considerably greater flexibility, facilitates management, reduces the administrative burden and provides greater freedom for the partners. At the same time, it provides sufficient legal mechanisms to protect both the partners and potential investors.

The DPK – a temporary company in the view of the legislator

It is important to note that under Bulgarian law the DPK is conceived as a "temporary company". The idea is that once a start-up business reaches a certain level of development, the classic forms of commercial company, such as the OOD or the AD, will be more suitable for it. Therefore, once certain financial and organisational parameters are reached, the variable-capital company is obliged to transform itself into an OOD or an AD.

Comparison between the DPK and the OOD

The choice of a suitable legal form of commercial company is key to the development and success of any business. The following lines set out the main differences between the DPK and the OOD:

  • Minimum capital – An OOD requires a minimum capital of BGN 2, whereas a DPK has no minimum capital requirement.
  • Minimum size of the company share – In an OOD it is BGN 1, while in a DPK it may be as little as 1 stotinka.
  • Registration of the capital and changes to it – In an OOD every change in the capital must be entered in the Commercial Register, whereas in a DPK this is not necessary.
  • Capital subscription account – An OOD requires such an account to be opened, whereas for a DPK this is not necessary.
  • Registration of the partners in the Commercial Register – In an OOD every partner is entered, whereas in a DPK this is not mandatory.
  • Liability of the partners – In each of the two forms, the partners are liable up to the amount of the contribution they have made to the capital.
  • Valuation of non-cash contributions – In an OOD the valuation of non-cash contributions is carried out by three independent valuers appointed by an officer of the Registry Agency. In a DPK the same procedure is carried out by valuers designated by the manager or the management board of the company.
  • Management – In an OOD, management is exercised by a manager, who must necessarily be a natural person. In a DPK, management may be exercised either by a manager or by a management board comprising natural and legal persons.
  • Protection of the company in the event of changes of control – In an OOD there is no special legal framework for protection in the event of a change of control or for introducing mechanisms such as the "right of first refusal" and the "right to join" ("tag along"). In a DPK, however, these mechanisms are expressly regulated.
  • Transfer of company shares – In an OOD the transfer of shares requires a contract with notarial certification of the signatures and the content, whereas in a DPK the transfer may be effected by a contract without notarial certification, or with notarial certification of the signatures only.
  • Free transfer of shares to third parties – In an OOD this is not possible without the consent of the other partners, whereas in a DPK the partners may freely transfer their shares to third parties.
  • Inheritance of company shares – In an OOD the heirs may become partners only with the consent of the General Meeting, whereas in a DPK they have the right to decide for themselves whether to join the company.
  • Contracts for the acquisition of shares by employees ("option pools") – An OOD does not allow the conclusion of such contracts, whereas in a DPK they are regulated and can be used as a tool for attracting and retaining key personnel.
  • Convertible loans – An OOD makes no provision for convertible loans, whereas a DPK permits the use of this financing instrument.
  • Remote holding of the General Meeting – In an OOD the law makes no provision for remote voting, whereas in a DPK it is permitted.
  • Duration of existence – An OOD has no limit in time. A DPK may exist for as long as it meets the criteria for a small enterprise – an average number of staff below 50 and an annual turnover or value of assets below BGN 4,000,000.

The choice between the OOD and the DPK depends on the specific needs of the business. The DPK offers more flexibility, especially for start-up companies and firms seeking investment, but it has its limitations, since it is conceived as a temporary company. The OOD, for its part, is more suitable for companies planning long-term stability and traditional management.

If you need legal advice or assistance in connection with the incorporation of a variable-capital company, contact us on 0887550706 or by e-mail: [email protected]