Closing down a Bulgarian company – dissolving and liquidation
I. Standard liqiodation rpocedure:
The process of closing down a Bulgarian company is not an easy process but a rather complicated procedure involving numerous actions before different authorities (public bodies).
The first stage of this process is the dissolution of the company which could be initiated by passing a resolution by the shareholders for closing the company down. Such decision must be voted by a majority of 3/4 of the capital shareholders in the company and the resolution should be registered in the Trade Register. For the purpose of dissolving the company, it is also necessary for the manager of the company to notify the Tax Office of the dissolution process. The Tax office then issues a certificate under art.77 of the Tax Code certifying that the company does not have tax obligations towards the State. The above Certificate should be sent directly by the Tax Office to the Trade Register.
It is also necessary for the General Assembly of the shareholders to appoint a liquidator and to determine the deadline for liquidation which could not be less then 6 months. All documents related to the above actions should be presented before the Trade Register. If they are correctly prepared, the Trade Register should change the status of the company from “active company” to a ‘company in process of liquidation”. In the case where there are missing documents or incorrectly prepared documents there is a possibility that the Trade Register will refuse publishing the above circumstance. To avoid such complications we strongly recommend that the documents for liquidation are prepared by a lawyer.
As at the time of starting the dissolution process, the company would still be in business relations with third parties and such relations could not be terminated immediately, for the duration of this process the company would still exists as a legal entity. However, its commercial activity could be stopped. Whether the company will be active during the process of its liquidation depends on the decision made by the shareholders (The General Assembly) on the General Meeting. If the shareholders decide so, during the process of its liquidation, the company would not be allowed to participate in any commercial transactions or to sign any commercial contracts. However, they could decide instead that the company shall participate in the commercial transactions. In any event this decision of the General Assembly should be published in the Trade Register.
The dissolution process should be finished within a specified deadline –a minimum of 6 months. In every individual case this deadline is specified by the shareholders in the General Assembly but it is always at least 6 months. The main goal of this time period is for the existing business relations between the company and third parties to be concluded and for the assets and shares to be divided between the shareholders.
After this deadline expires, the second stage of the liquidation process commences. The General Assembly is summoned again and the relevant legal documents for the final liquidation and deleting the company from the Trade Register are prepared. Along with the respective Minutes from the General Assembly’s meeting, the company should present before the Trade register a Certificate from the National Insurance Institute, notifying that the company has no obligations towards the National Insurance Institute ( it actually means that the national insurance of the employees has been paid by the company). The company is also obliged to present before the Trade Registry the specified in the Commercial Code accountancy documents.
Upon receipt of all documents and a satisfactory check, the Trade register would erase the company’s entry from its records.
II. Qucik liquidation
According to the Commercial Act traders, who meet the following 6 conditions, could apply for quick liquidation and satisfying the creditors in shorter terms:
- the company did not carry out any activity or stopped the activity carried out more than 12 months ago;
- the company has not hired workers or has terminated the employment contracts more than 12 months ago;
- the company was not registered under the Value Added Tax Act or has terminted its registration more than 12 months ago;
- there are no outstanding debts to the state and municipalities;
- there are no pending proceedings to establish tax obligations and obligations for mandatory insurance contributions, to which the National Revenue Agency is a party;
- the company is not a defendant in court proceedings, a debtor in execution or injunctive proceedings, or has not been subject to enforcement under the Special Pledges Act or the Financial Security Contracts Act.
All the above circumstances is certified by a declaration which the liquidators present when submitting an application for termination of activity and liquidation of the company.
In this case the duration of the liquidation procedure shall be 3 months instead of 6 months.
This article was created by Valova&Angelova law firm.