The so-called transfer of a company essentially involves the transfer (sale) of company shares or the transfer (sale) of a commercial enterprise.

Transfer of Shares in a Limited Liability Company

The transfer of shares can be done through inheritance, donation, settlement, or sale. Most often, shares are transferred via sale, both between partners and to third parties. According to the Commercial Law, the transfer of shares between partners is free, executed through a written contract with notarized signatures and content. The subject of the transfer transaction can only be company shares. Each partner or sole owner of the capital can decide to sell all or only part of their company shares. The partner selling their shares is referred to as the transferor, and the person buying them is referred to as the acquirer. In cases where the company shares are purchased by a third party (the acquirer) or inherited, it is necessary for the acquirer or heir to submit a request to be accepted as a partner in the company and to declare acceptance of the terms of the partnership agreement. If the heir is not accepted as a partner, they only acquire a claim against the company for the value of the share of their deceased relative. The general meeting of partners in a limited liability company (when its legal form is LLC) is the body that decides on the acceptance of a new partner. The company’s refusal to accept the third party as a candidate partner cannot be contested. In cases where the sole owner of the capital sells all or part of their shares, the decision is made solely by them.

Legal Form Required

According to legal requirements, the contract must be executed with notarized signatures and content, done simultaneously, meaning it must be signed by the parties in front of a notary. At the end of 2016, amendments to the Commercial Law were adopted (published in the State Gazette, No. 105 of December 30, 2016), which introduced the requirement that the Minutes of the General Meeting, which gives consent for the transfer of a company share to a new partner, must also be signed before a notary, who will verify the signatures in the document as well as its content. This new requirement can be circumvented by amending the Partnership Agreement. The partners can decide that in cases of sale of company shares, the Minutes of the General Meeting accepting the new partner will be in written form without requiring notarization. If the newly accepted partner is also elected as the manager of the company, it is necessary to have a notarized specimen of their signature. The complete set of required documents for the transfer of company shares is submitted to the Commercial Register at the Registration Agency, where the change is recorded in the company’s file, namely the change of owners of the company shares. The registration has a declarative effect.

Fees for the Commercial Register

According to the Tariff for state fees collected by the Registration Agency, the fee for recording a change of circumstance related to the transfer of company shares is 30 leva (Article 16a, Paragraph 3, Item 2 of the Tariff). When documents are submitted electronically, the fee is halved, namely 15 leva (Article 16a, Paragraph 4, Item 2 of the Tariff).

Transfer of a Commercial Enterprise

The definition of a commercial enterprise and the manner in which it is transferred from the transferor (seller) to the acquirer (buyer) is regulated by Article 15, Paragraph 1 of the Commercial Law. Essentially, a commercial enterprise represents a collection of elements, namely rights, obligations, and factual relationships. By transferring the commercial enterprise, you may transfer the property rights held by the selling commercial company. Property rights are those rights that have a monetary value. Such rights can include ownership of movable or immovable property, limited real rights such as the right to build, right of use, right to expand and modify, etc., intellectual property rights (rights to patents, registered trademarks, inventions and utility models, copyrights, rights to industrial design, know-how), claims against third parties (suppliers, clients) arising from contracts, promissory notes, court cases, etc., security rights (mortgages and pledges, rights from guarantees and warranties, etc.), rights from employment contracts, and more. In addition to rights, by transferring the enterprise, the acquiring company also assumes all liabilities, meaning it enters into the debts of the selling company. Most often, these are contractual obligations arising from the commercial activities of the company. The obligations can be both private and public in nature. The third group of elements includes the factual relationships resulting from the commercial activities of the transferor company. Factual relationships include the established clientele, relationships with suppliers, skills of hired workers and management staff, established distribution networks, built reputation, etc.

Form of the Contract

The transfer of the enterprise can be executed through a compensated or uncompensated transaction. The most common case is for the transfer transaction to be executed in the form of a Sale Agreement, but there is no obstacle for the commercial enterprise to be transferred through donation, exchange, as a contribution in kind, etc. The law does not impose an explicit prohibition on transferring part of the enterprise of a commercial company. For a sale of an enterprise or part of it to occur, an individual asset cannot be transferred; instead, the subject of the transfer must be a collection that contains the characteristics of an enterprise.

The law requires the transaction to be executed in writing with notarization of signatures and content, done simultaneously (the notarization cannot be performed by a mayor or other local administrative body). The transfer of an enterprise is publicized by recording the transaction in the Commercial Register, simultaneously for both the transferor and the acquirer. The registration has only a declarative effect. In capital companies, such as a limited liability company, it is necessary for the General Meeting of partners, with a majority of ¾ of the entire capital, to adopt a decision for the transfer of the enterprise of the company. When the limited liability company is sole-owned, the decision is made by the sole owner. There is no need for an explicit decision when the sole owner of the capital and the manager are the same individual. The law does not require an explicit listing of the elements of the enterprise, but in cases where movable or immovable property is transferred, it is advisable for it to be individualized in the contract.

Notification of the Tax Administration

According to the provisions of Article 77, Paragraphs 1 and 2 of the Tax and Social Security Procedure Code (TSSPC), the transferor must notify the Tax Directorate of the National Revenue Agency (NRA) at the location of the company that they intend to transfer the enterprise of the company. The Tax Directorate issues a certificate of notification within 60 days from the date of filing the notification. The practice of the tax authorities is such that in cases where the transferor has outstanding public obligations, the certificate is issued only after all obligations have been settled. The certificate must be submitted to the Commercial Register along with all documents proving the sale of the enterprise. The absence of a certificate from the NRA would lead to a refusal to register the transaction in the files of both companies.

In cases where an enterprise is transferred to a Sole Trader, the sole trader must decide whether they wish to be deregistered after the transfer of the enterprise or if they will continue to exist. When a decision is made for the sole trader to be deregistered, this fact must also be indicated in the notification under Article 77, Paragraphs 1 and 2 of the TSSPC. The NRA issues a separate certificate for the notification. In this case, the deregistration in the Commercial Register occurs simultaneously with the submission of the documents for the sale of the enterprise of the sole trader.

Registration in Other Registers

In addition to the Commercial Register at the Registration Agency, the contract for the transfer of a commercial enterprise is subject to registration in other registers, depending on what rights are included in the enterprise.

• When the transaction involves the transfer of real estate, property rights over such real estate, or a mortgage, the contract is also registered in the Property Register at the Registration Agency.
• When the transaction involves the transfer of a special pledge, the contract is registered in the Central Register of Special Pledges.
• When the transaction involves the transfer of a vehicle, the change of ownership is registered with the Road Traffic Administration (more specifically in the Ministry of Interior, Traffic Police Sector).

Liability to Creditors

Articles 15 and 16a of the Commercial Law regulate the issue of liability of the transferor and acquirer to creditors and their special protection. According to the law, the transferor, unless otherwise agreed with the creditors, is jointly liable for the obligations of the company together with the acquirer up to the amount of the rights received. The solidarity serves as security for the creditors. Creditors of the claims must first turn to the transferor of the enterprise. For example, the liability of the transferor of a commercial enterprise for a debt obligation whose early maturity occurred after the transfer of the commercial enterprise due to the fault of the acquirer may be engaged. Each creditor has the right to demand performance of the entire claim from either of the co-debtors, but the acquirer will be liable only up to the extent of what they have received, meaning their liability is limited in scope. It does not matter whether the acquirer was aware of the claim or not. The transferor is liable without limitation. Solidarity covers obligations arising up to the moment of the transfer of the enterprise. Only in cases where creditors give their explicit consent can the acquirer replace the transferor in the debt.

The law requires the successor to manage the transferred commercial enterprise separately for a period of 6 months from the registration of the transfer, which serves as one of the most important means of protecting creditors. The period begins from the date of registration of the transfer of the enterprise in the Commercial Register and cannot be shortened or extended. However, the law does not specify exactly what this „management“ entails. It may include, for example, separate accounting for the enterprise from the rest of the acquirer’s assets.

To explore the legal options available to you, you can contact a lawyer from the law firm „Birou avocat Denislav Marinov.“