The Bulgarian Trade Act (TZ) covers various forms of business acquisitions, both through transformation (by merger, absorption, divestment) and change of legal status.
Where acquisitions constitute a concentration of economic activity, the Competition Protection Commission investigates the concentration. A concentration has to be notified to the Competition Protection Commission if it comes under the scope of Article 24(1) of the Competition Protection Act (ZZK), unless it is within the competence of the European Commission, in accordance with the scope of Article 1 of Regulation No 139/2004.
Notifications of concentrations must be submitted jointly by the enterprises being merged, jointly established or acquiring joint control, and by the person acquiring sole control.
Measures to assess a concentration are launched within three days of the notification's receipt by the Competition Protection Commission, or after the complete documentation has been submitted.
The notification is announced through 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 in question.
Types of acquisitions
There are different ways you can acquire an existing company in Bulgaria. One way is through the privatisation of a state or municipal company. Another is by purchasing shares in a company, subject to certain conditions.
Share trading rules regulate the ownership of shares in companies publicly listed on the stock exchange. This type of trade is organised by the stock market itself.
Shares in a public company can be acquired through:
- an initial public offering and trading on the secondary shares market (the BFB-Sofia AD regulated market).
- Shares can be traded by accepting or making an offer if over 50 percent or over two-thirds of the votes at the general meeting have been acquired.
Stages of the acquisition process
Lease agreements allow for use of an object or building in return for payment. The leaseholder may acquire the object or the building upon expiry of the agreement. However, acquisition does not automatically take place when the agreement is made.
The lessee will have obligations under the Obligations and Contracts Act (ZZD).
The Bulgarian Trade Act (TZ) places no special requirements on franchise agreements. These agreements may take any form as long as they comply with the Obligations and Contracts Act (ZZD).
Taxation under franchise agreements is subject to the Corporate Income Tax Act (ZKPO). As with lease agreements, rights are transferred on payment. Franchises are subject to VAT.
An enterprise may acquire part of another through divestment. The procedure for transferring ownership depends on the type of business in question – sole trader, public company or holding.
Because divestments involve an enterprise re-forming, various conditions need to be met before some or all of the shareholders can make such a decision. An agreement to re-form an enterprise becomes effective when signed by the parties to the agreement.
Retiring business owners need to plan the transfer of their business in advance.
Some standard requirements to be completed when taking over a business are the same as when setting up a new business.
The Financial Supervision Commission approves registered offers to acquire shares in public companies in accordance with Article 148ж-157д of the Public Offering of Securities Act (ZPPTsK) and Regulation No 13 on the Auctioning of Shares for Sale and Exchange. The Financial Supervision Commission shall make a ruling within 14 days and the offer then can be published. When the documents have been submitted and the Financial Supervision Commission allows the offer to be published, the bidder must publish the offer in two national daily newspapers.
Persons acquiring goods and services from a registered person as a result of: the acquisition of a company; transfer of an enterprise; or making a non-monetary contribution to a company, must register for VAT as per the Value Added Tax Act (ZDDS).