Takeovers - Bulgaria

Updated 09/2011

Legal requirements

The Commercial Code (TZ) allows various forms of acquiring a company, both by re-forming (through merger, acquisition or division) and by changing its legal status.

Commercial Code (TZ)

Where the acquisition constitutes a concentration of economic activity, the Commission on the Protection of Competition (CPC) is required to investigate the concentration. A concentration has to be notified if it comes within Article 24(1) of the Competition Protection Act (ZZK), unless it is within the competence of the European Commission under 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.

Competition Protection Act (ZZK)
Model notification of a concentration and instructions for completion [160 KB]

Measures to assess the concentration are put in place within three days of receipt of the notification by the CPC, or when all the necessary information has been submitted.

A notification is announced through the Commission's electronic register, allowing any interested parties to submit information or their opinions on the effect the concentration will have on the market in question.

Public e-register of the CPC

Types of acquisition

There are different ways of acquiring an existing company in Bulgaria. One way is the privatisation of a state or municipal enterprise. Another is by buying shares in a company under certain conditions.

The rules on share trading regulate the ownership of shares in companies which are traded publicly on the stock market. This type of trade is organised by the stock market itself.

Rules of the Bulgarian Stock Exchange [931 KB]

Shares in a public company can be acquired by:

initial public offering and trading on the secondary shares market (the BFB-Sofia AD regulated market);
Shares can be can be traded by accepting or making an offer if over 50 percent or over 2/3 of the votes at the general meeting have been acquired.
Public Offer of Securities Act (ZPPTsK)

Stages of the acquisition process

Lease agreement

Lease agreements allow an object or building to be used in return for payment. The lessee may acquire the object or the building upon expiry of the agreement. However, the acquisition does not automatically take place when the agreement is made.

The lessee will have obligations under the Obligations and Contracts Act (ZZD).

Obligations and Contracts Act (ZZD)

Franchise agreements

The Commercial Code (TZ) has no special requirements for franchises. 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 transfer on payment. Franchises are subject to VAT.

Corporate Income Tax Act (ZKPO)

Divestment

A company may acquire part of another through divestment. The procedure for transferring ownership depends on the type of company in question - sole trader, public company or holding.

Because divestments involves a company re-forming, various conditions need to be met before some or all of the shareholders can take such a decision. An agreement to re-form a company becomes effective when signed by the parties to the agreement.

Retiring business owners need to plan the transfer of their business in advance.

Selling on — Bulgaria

Some standard requirements to be completed when taking over a business are the same as when setting up a new business.

Start-ups — Bulgaria

Administrative procedures

Registration

The FSC approves registered bids to acquire shares in public companies in accordance with Article 148g-157e of the Public Offering of Securities Act (ZPPTsK) and Regulation No 13 on the Auctioning of Shares for Sale and Exchange. The FSC decides within 14 days and the offer can be published. When the documents have been submitted and the FSC allows the offer to be published, the bidder must publish it in two national daily newspapers.

The person 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 under the Value Added Tax Act (ZDDS).

National Revenue Agency

Check also the legislation on this topic in:

Takeovers - Bulgaria