Main company merger-related legislation:
Types of mergers
Merger by amalgamation (absorption): absorption occurs when one existing enterprise (acquiring) absorbs all the assets of another enterprise ceasing trading without winding up.
Merger by incorporating a new enterprise: in this case, the assets of two or more enterprises are amalgamated into one new entity, which becomes their assignee. The enteerprises involved also cease trading without being wound up.
The Competition Protection Act (ZZK) determines the cases where mergers constitute a business concentration: any operation conducted among independent enterprises that leads to a permanent change in the control over participant enterprises.
Forms of concentrations:
- merger or absorption of two or more independent enterprises;
- acquisition of sole or joint, direct or indirect control over other enterprises or shares of enterprises;
- formation of a joint enterprise permanently exercising all functions of an economically independent entity.
This act also states three exceptions, where acquiring control does not constitute a concentration of enterprises:
- when the acquired securities from the enterprises whose inherent business activity consists of transactions and operations with securities. and if the securities are held only temporarily;
- when control is acquired from a person who, by power of current legislation, carries out enterprise cessation-related functions (liquidators, receivers);
- when control is acquired from finance holdings, though only when the acquired control is exercised only to maintain the full value of the investments.
Operations are not regarded as concentrations under the law if they do not result in a permanent change in the nature of the control exercised over an enterprise. Mergers, absorptions or acquisitions among enterprises from the same economic grouping constitute an intra-group restructuring rather than a concentration.
There are special rules for mergers or absorptions of enterprises engaged in supplementary pension insurance activities. They require prior permission for the transformation from the Financial Supervisory Commission, in accordance with the Social Security Code (KSO).
Buying an existing company, with an already established structure, can be a good way of expanding your business.
All enterprises intending to merge their business activities must notify the Competition Protection Commission.
A business concentration should be notified to the Competition Protection Commission if it comes under the scope of the Competition Protection Act (ZZK), unless it is within the competence of the European Commission or the EC Merger Regulation.
Concentrations are subject to notification to the Competition Protection Commission if the total turnover amount of the participating enterprises in Bulgaria exceeds BGN 25 million for the previous financial year, or the turnover of at least two of the enterprises participating in the concentration is over BGN 3 million, or if the target enterprise's turnover in Bulgaria is greater than BGN 3 million.
Enterprises must inform the Commission of the concentration after having concluded an agreement, publicly announced an invitation to tender, or acquired control, though prior to any real steps are taken to implement the transaction.
Notifications of concentrations must be submitted jointly by the enterprises being merged or absorbed, jointly established or acquiring joint control, and by persons acquiring sole control.
Measures to assess a concentration are launched within three days of the notification's receipt at the Competition Protection Commission, or after the complete documentation has been submitted to the Commission.
The notification is published on the Commission's e-register, allowing any interested parties to submit information or their opinions on the effect the concentration will have on the market.
Once set up, the administrative body of the newly-created enterprise shall apply for registration with the Commercial Register.
When applying, you must provide the transformation agreement and the decision made by the participants. Depending on the enterprise's business activity, you may also be required to submit additional documents as indicated in the Trade Act (TZ). Registration takes place at least 14 days after submitting the application.
Any merged entity that has been liquidated needs to calculate its closing balance as of the date of the transformation, and every newly formed entity needs to calculate its opening balance as of the same day. This is based on a fairly-priced balance assessment of the assets and liabilities acquired during the transformation.
Mandatory registration under the VAT Act (ZDDS) is required of any person acquiring goods and services from a registered person as the result of:
- The transformation of a commercial enterprise as per the Trade Act (TZ).
- The transfer of an enterprise as per the Trade Act (TZ).
- Making a non-monetary contribution to a commercial company.
The registration date is the date the details are entered in the Commercial Register.
Transferring ownership of an business entails fees and taxes, including VAT.
You can find more information about mergers on the website of the Competition Protection Commission.