Company with variable capital

From 30 June 2024, variable capital companies (VCCs) will be able to be set up, so it's important to consider the pros and cons of a VCC and whether it's right for your business.

First of all, Variable capital company - what opportunities does it give us? must meet two conditions simultaneously - the annual turnover/value of assets must be below BGN 4 000 000 and the average number of employees must be below 50. If any of these conditions change, the company must convert to a PLC or an LTD.

The capital of the SIC is not subject to registration

Unlike LTDs and PLCs, there is no obligation to register the company's capital. It is variable and is established each year by a resolution of the ordinary annual general meeting after it has considered the annual accounts.

Company shares with special rights (privileges)

If stipulated in the articles of association, the SPC may issue shares with special rights (privileges). For example, it may be agreed that preference shares provide more than one vote in the general meeting or that they guarantee an additional dividend or liquidation share. In this feature, the SIC borrows from the PLC. It is important to note for this new legal form that the minimum value of a company share may be one penny and that the value of shares of different classes may be different.

Acquisition of shares by employees of the company

The general meeting of the shareholders may grant to persons employed by the company, irrespective of the type of contract or legal relationship, the right to acquire shares of the company, which shall be exercised only by transferring the company's own shares. Here, the law gives discretion as to the terms and conditions by which this relationship will be governed, it being provided that this will be done by a resolution of the general meeting or the board of directors, respectively the manager, when empowered by the general meeting.

Free transfer of shares

The transfer of company shares is free, whether it is a transfer between partners or a transfer to third parties, unlike in the case of limited liability companies. However, it is possible to provide specific rules for the transfer of shares in the articles of association. The form of the contract by which shares are transferred is in writing with notarial certification of signatures, but again the freedom to agree on a lighter form is given, offering greater flexibility to this process.

Facilitated procedure for contributions in kind to the capital

Unlike LTDs, PLCs and CDAs, the non-cash contribution in the case of a CFC is valued by three experts appointed by the board of directors/manager, whereas in the case of classic capital companies, these experts are appointed by the Registry Agency. The latter has become a significant practical problem due to the cumbersomeness and short timeframe of this procedure.

Obligation to convert

In case the company no longer meets the legal requirements for a SIC, it becomes obliged to convert into a capital company under the general procedure for change of legal form. If the company is not converted by the end of the financial year following the general meeting at which the non-compliance was established, it shall be dissolved by the district court on the action of the public prosecutor.

The KGK team has extensive experience in commercial law, drafting company documents and resolving complex cases. Should you require legal assistance in relation to a Variable Capital Company, please do not hesitate to contact us.