Registration of a Limited Liability Company (OOD)

The formation of a limited liability company (OOD) is one of the most effective ways to commence business activity in Bulgaria. This offers a number of advantages for entrepreneurs who wish to operate in a legal form that provides limited liability and clearly regulated rules of management.

Principal advantages of registering an OOD:

• A fast procedure: The registration of an OOD in the Commercial Register is exceptionally fast. Following submission of the documents, the company is usually entered on the next working day.
• Low minimum capital: The law provides for a minimum amount of capital for the registration of an OOD – a mere BGN 2.
• Corporate tax: The company’s profits are taxed at 10% corporate tax.
• Low tax on dividends: The distribution of profit as a dividend is subject to 5% tax, and no social security contributions are due on the distributed dividends.
• Low social security contributions: Partners may insure themselves for only certain social risks and have the option of contributing on a minimum income.
• Self-insurance of the manager: A manager who is a partner may opt for self-insurance, thereby reducing his social security costs.
• Business expenses: An OOD may make use of a range of expenses that reduce taxable profit and, accordingly, its tax liability.
• Limited liability: The partners in an OOD are liable for the company’s obligations only up to the amount of the capital contributed by them, which protects them from personal liability.

Preparation for the registration of an OOD

Before proceeding with the registration of an OOD, it is advisable to obtain a consultation with a legal and accounting specialist. This will help you avoid mistakes that may lead to financial penalties and problems in the future. For example, it is important to give proper consideration to the amount of the capital. If it is too small, this may give rise to a need for additional financing through loans or cash contributions from the partners, which has legal and tax consequences.

In addition, the choice of the company’s management address is of essential importance, since an incorrectly chosen address may create inconveniences, especially if the activity is carried out in another town.

Documents for the registration of an OOD

Both natural and legal persons may be partners in an OOD. In the event that a partner is a company, its rights are exercised by its representative or by an authorised person. The following documents are required for the registration of an OOD in the Commercial Register:

• Application, form А4
• Minutes of the Constituent Assembly
• Articles of association (with a copy in which personal data not required by law have been redacted)
• A notarised specimen of the manager’s signature (specimen)
• Declarations under Articles 141 and 142 of the Commerce Act, signed by the manager
• Declarations under Article 13 of the Commercial Register Act
• A certificate from a bank for the contributed capital
• A payment order for the State fee paid
• A power of attorney (if the documents are filed by an authorised representative)

If another commercial company participates as a partner, a decision of its competent body for participation in the incorporation of the OOD is required. The partner may be represented at the constituent meeting by a notarised power of attorney.

Management of an OOD

The partners in an OOD may elect one or several managers. They may represent the company jointly or severally. The manager need not necessarily be a partner, but this must be carefully considered and recorded in the articles of association.

It is important to take into account possible future situations, such as the death or departure of a partner, the admission of new partners and other significant matters relating to the management of the company. The clauses in the articles of association must be drafted precisely in order to avoid future disputes between the partners.

Filing of documents with the Commercial Register

The registration documents may be filed at the offices of the Registry Agency or by electronic means with an electronic signature, in which case there is a 50% discount on the State fee. The application and the documents may be filed in person by the manager or by an authorised representative holding an express notarised power of attorney.

If the company has more than one manager, they may file the documents jointly or severally, depending on the manner of representation.

State fees and time limit for registration

The State fee for the registration of an OOD is BGN 110 where documents are filed on paper and BGN 55 where filed electronically. Registration is usually carried out within one working day, but in some cases there may be a delay of 3 to 5 working days.

In the event of missing documents or errors, the official will issue instructions which must be complied with within a period of 3 days. If the omission or error cannot be remedied, registration will be refused, and the refusal is subject to appeal within a 7-day period from service of the refusal, before the regional court at the registered seat of the OOD. The appeal is filed through the Registry Agency.

This procedure ensures a fast and reliable way to start a limited liability business with clear rules of management.

In the event that you require further information, advice or assistance with the registration of an OOD, contact us by telephone: 0887550706 or by e-mail: [email protected]