The capital of a company may be increased when additional funds need to be raised for investment or to expand its activities. Increasing the capital helps to strengthen the confidence of clients and creditors. The increase may also be used for accounting purposes, such as improving the indicators in the company's balance sheet. This may be achieved by capitalising undistributed profit from previous years or by converting loans granted and additional contributions into capital.

The capital of a sole-owner limited liability company (EOOD) and a limited liability company (OOD) may be increased through cash or non-cash contributions. In the case of non-cash contributions, a prior valuation by three experts appointed by the Registry Agency is required in order to determine the value of the contribution. The value may not exceed the amount determined by the experts. Real estate, motor vehicles, machinery, trademarks and other assets may be contributed in kind as non-cash contributions.

Procedure and Methods for Increasing the Capital of an EOOD and OOD

Under the Commerce Act, the capital of an EOOD and OOD may be increased in the following ways:

  • By increasing the value of the company shares: In this case, the nominal value of each share is raised, and the amount is paid into the company's account. For example, the value of the shares may be increased from BGN 1 to BGN 100. The partners or the sole owner of the capital pay the increased value of the shares into the company's current account.
  • By subscribing new company shares: Under this option, the partners or the owner of the capital acquire additional shares. In the case of an OOD, the new shares are distributed in proportion to each partner's previous participation in the capital. For example, if two partners each hold 10 shares and the capital is increased by 20 new shares, each of them will acquire 10 new shares. The articles of association may, however, provide that participation in the increase will not be proportionate to the previous shares.
  • By using accumulated and undistributed profit: The new company shares may be formed from profit for previous years. In this case, all partners must participate proportionately, without exclusion.
  • Through loans and additional cash contributions: Loans and additional contributions from partners are subject to a prior valuation by experts in order to confirm that the funds have actually been provided to the company. This is a mandatory condition for entering the increase in the Commercial Register.
  • Through the admission of a new partner: The increase in capital may involve the subscription of new shares by a new partner, which entails two parallel procedures – one for the admission of the partner and one for the increase of the capital. The value of the new shares may be paid in as money or property, and where real estate is contributed, a valuation by experts is required.
Capitalisation of Profit and Own Funds

In practice, it is possible to increase the capital of an EOOD and OOD using the company's own funds, for example by capitalising undistributed profit from previous years or funds accumulated in the "Reserve" fund. Unlike joint-stock companies, where the decision to increase must be taken within three months of the approval of the annual financial statements, no such requirement exists for an EOOD and OOD. The sole owner or the general meeting of partners may decide to increase the capital at any time, using the undistributed profit.

Should you require additional information, assistance or advice in connection with increasing the capital of an OOD or EOOD, please contact us on telephone 0887550706 or by e-mail: [email protected]