Investing in the interests of a limited liability company (LLC/OOD) or in the shares of a joint-stock company (JSC/AD) carries different rights and risks. The legal framework determines how the participation is transferred and protected — and choosing the wrong structure can prove costly.
Interests in an LLC
The limited liability company is the most common form for small and medium-sized businesses in Bulgaria. LLC interests are not transferable without the consent of the other members, unless the memorandum of association provides otherwise. Transfer is effected by a notarised agreement and registration in the Commercial Register.
A member of an LLC has the right to:
- participate in management (voting at the General Meeting of Members);
- a share of the profits (dividend);
- a share of the liquidation surplus on dissolution.
Shares in a JSC
The joint-stock company is suitable for larger-scale investments and raising capital from a wider circle of investors. Shares are freely transferable — by endorsement (registered shares) or delivery (bearer shares, where permitted). Shareholders bear no personal liability for the company's debts.
A shareholder has the right to dividends, voting rights at the General Meeting, and the right to information. Above certain thresholds (5% or 10%) the law also grants additional rights — to convene a General Meeting or to challenge resolutions.
Minority investor protection
The law provides minimum protection for minority members and shareholders — against dilution of interests, management abuse or exclusion without cause. In practice this protection is more effective when agreed in advance in the memorandum of association, statutes or a separate shareholders' agreement.
Shareholders' agreement
A shareholders' agreement between the members governs rights beyond the statutes: right of first refusal, tag-along rights, drag-along obligations, management rights above certain ownership thresholds and deadlock resolution mechanisms. These clauses are particularly important for foreign investors.
Due diligence before investment
Before acquiring interests or shares it is advisable to carry out legal and financial due diligence on the company — to identify hidden liabilities, litigation or violations that would reduce the value of the investment or create personal liability.
How we can help
We advise on the appropriate corporate structure, draft the shareholders' agreement or articles of association, carry out due diligence and represent the client at the Commercial Register filing. Contact us for a specific consultation.
Disclaimer
This article is for informational purposes only and does not constitute legal advice. The law changes — for a current and binding assessment of your situation, please contact us.
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