Setting Up A Company

The two most preferred forms of carrying out business in Bulgaria are with a joint-stock company (AD) or a limited-liability company (OOD). Both types of companies develop their capital by individual shareholder contributions. Unlike the OOD shares, AD shares are not attributed to individuals and owners are free to trade them without court permission. An AD is managed by a board of directors on behalf of the shareholders, but occasionally a meeting of the board of shareholders might be required for making decisions vital for the company's future. OOD is a more flexible form of ownership and is generally considered more suitable for small companies with few owners. Shares can be transferred only through a court decision and by entering the procedure in the Commercial Register. An OOD’s annual financial statements need not be audited by a CPA unless the company happens to meet certain requirements under the Bulgarian Accountancy Act, whereas all ADs have to have their annual financial statements audited by a CPA. Both companies restrict the shareholder's liability for company debt to the amount of his or her share in the company's capital. The procedure for setting up a company in Bulgaria can be divided into five distinct stages. 1. Investors wishing to create a firm should register their company name. The procedure might take some time, as it includes reserving and registering the company name with the National Statistics Institute and the tax register. 2. All investors planning to build or restructure the company site should have their construction projects approved by the municipality. 3. Obtaination of permission to use the premises. 4. Registration of any stores, restaurants, hotels, stalls or similar premises used for commercial purposes. The list of facilities subject to registration varies depending on the municipality. 5. Obtaination of additional licences, if required. Licences are obligatory for people trading in tobacco, alcohol, medicines and drugs. Entertainment spots and hotels also require trade permits. As the procedures are complicated, regardless of the type of company establishment, one should use a reputable law firm to handle the whole process, from choosing the company name to registering the company with the court and all the subsequent compulsory registrations with tax authorities, the National Insurance Institute, etc., all of which has to be done within strict deadlines, ignorance of which carries hefty fines if time limits are not heeded! There are many legal firms with excellent reputations; most now have employees who speak the major European languages, so finding a decent one should not be a problem. As previously mentioned, registering the company name is a long and complicated procedure. In short, with his or her lawyer, one should: 1. Verify that the company name is available and reserve it with the National Statistics Institute. 2. Produce Articles of Association. 3. Pay in to the bank at least 70 per cent of the obligatory company capital for an OOD (the total capital being 5000 leva); or 25 per cent for an AD (the total capital being 50 000 leva). 4. Submit the application to form the company, together with proof of payment of the capital to the district court. 5. Await, once all the necessary documents are ready, court permission for registration with the tax register. 6. Make the company's seal. The company becomes active when it is published in the State Gazette (2 or 3 weeks later). 7. Register with the National Statistical Institute to receive a BULSTAT identification, which number must be done within 14 days; 8. Register with the National Insurance Institute (NOI) within 7 days; 10. Register with the local tax authority within 14 days; 11. Assure that any bank accounts opened in the company name are also registered with the tax authority within 14 days. Remember that the steps should be done in the order specified! To obtain permission to build or re-structure the company's facilities, one must: 1. Present documents verifying ownership of the plot or building. 2. Research and plan the project – a copy of the location in the town map describing the exact position and surroundings of the plot or building is needed. 3. Submit three copies of your construction plan, designed and approved by the architects and engineers you hired and municipal authorities. 4. Obtain approval of the authorities responsible for environmental protection and sanitary control, and undergo an assessment of the fire safety of the object. 5. Obtain permission to use water and electricity for production purposes (if required). When registering your patent, make sure to use a registered patent lawyer in dealings with the Patent Office. To be on the safe side, even if the company name is the same as that of its activity, register the name under the relevant sections anyway with the Patent Office to prevent anyone from stealing the name. The Patent Office works painfully slowly (a trademark usually takes 18 months to be registered, and a design six months), as do the regional courts that would be called upon to resolve any dispute, so make sure the case is watertight. To register a patent, one should: 1. Check the patent registers to see whether the same or a similar patent has been already been acquired by another company. 2. Fill out an application form for patent registration and send it to the Patent Office together with a document verifying payment of the registration tax. It is strongly advised to use a consultant. The registration is valid for one year only and then only on Bulgarian territory. To register a patent valid in other countries, one should also apply to the National Patent Office of the country where it is wished to register the patent. The European Patent Office is where one must register for a patent valid in the entire EU, or the World Intellectual Property Organisation for a patent valid worldwide.