Following the introduction of the euro in Bulgaria, the share capital of commercial companies previously registered in Bulgarian lev has been automatically converted into euro by the Registry Agency. However, this does not mean that companies are entirely relieved of their obligations in relation to their corporate documents.
Companies must bring their articles of association, memoranda of association or statutes into compliance with the converted capital within the statutory deadline. Following the latest amendments to the Euro Adoption Act of the Republic of Bulgaria, businesses now have significantly more time to do so, while some of the administrative requirements before the Commercial Register have also been eased.
What is the new deadline?
The original rules provided for a period of 12 months from the date of introduction of the euro for companies to bring their corporate documents into compliance with the new currency.
Following the amendments, this period has been extended to 36 months, meaning that companies have until 31 December 2028 to complete the necessary adjustments.
For limited liability companies (OOD and EOOD), this concerns the articles or memorandum of association, while joint-stock companies (AD) and partnerships limited by shares (KDA) must update their statutes.
The requirement to submit the documents with the next Commercial Register filing has been removed
This is another significant change for businesses.
Under the previous rules, an updated articles of association, memorandum of association or statute had to be submitted together with the company’s first subsequent application for registration, deletion or announcement with the Commercial Register.
In practice, this meant that even where a company was making a filing unrelated to its share capital, it could also be required to update its corporate documents solely because of the conversion to euro.
This requirement has now been removed.
Under the amended rules, an updated corporate document will need to be submitted where the company makes another change that requires an amendment to the relevant constitutional document on separate grounds.
For example, filing an annual financial statement will not, in itself, require the company to simultaneously submit updated articles or a memorandum of association solely because of the conversion of its share capital into euro.
The Registry Agency has already converted registered share capital automatically
It is important to distinguish between the share capital recorded in the Commercial Register and the contents of a company’s own corporate documents.
Following the introduction of the euro, the Registry Agency automatically converted the registered share capital of limited liability companies, joint-stock companies and partnerships limited by shares.
Companies therefore do not need to submit a separate application or pay a state fee for the automatic conversion of the amounts recorded in the Commercial Register.
However, the contents of a company’s articles of association, memorandum of association or statute are not automatically amended.
If these documents continue to state the share capital, shares or nominal value of shares in Bulgarian lev, they must be brought into compliance with the new currency within the statutory deadline.
What do the changes mean in practice?
For many businesses, the amendments mean that there is no need to take immediate action solely because of the conversion of the share capital into euro.
Companies now have a considerably longer period in which to adopt the necessary corporate resolutions and update their documents.
This also makes it possible to combine the euro-related amendments with other future changes to the articles of association, memorandum of association or statute, rather than carrying out a separate corporate procedure solely for the currency conversion.
However, the extended deadline does not remove the underlying obligation. Corporate documents must still be brought into compliance with the converted share capital by the end of 2028.
Which companies are affected?
The rules apply to capital companies whose share capital was registered in Bulgarian lev before the introduction of the euro, including:
- EOOD – single-member limited liability companies;
- OOD – limited liability companies;
- AD – joint-stock companies;
- EAD – single-member joint-stock companies;
- KDA – partnerships limited by shares.
Companies incorporated after the introduction of the euro register their share capital directly in euro and therefore do not have previously registered lev-denominated capital that needs to be converted.
Conversion is not always as simple as dividing by 1.95583
The extended deadline does not change the rules governing the conversion itself.
The Euro Adoption Act requires the process to be carried out in a way that does not affect the rights or percentage interests of shareholders or members in the company’s capital.
This is particularly important for companies with several shareholders or a more complex capital structure.
Because of rounding rules, simply dividing each amount by the official conversion rate of BGN 1.95583 per EUR may not always produce a result where the sum of the individual shares corresponds exactly to the converted share capital.
In certain cases, it may therefore be necessary to restructure the number or value of shares and adopt the relevant corporate resolutions.
In all cases, the economic proportion of the interests held by the company’s shareholders or members should be preserved.
Are there penalties for non-compliance?
The extension of the deadline gives businesses considerably more time to comply, but it does not abolish the statutory obligation.
The Euro Adoption Act contains a general administrative penalty provision for violations for which no specific sanction has been prescribed.
A responsible individual may be subject to a fine of BGN 100 to BGN 1,000, and in the event of a repeated violation – BGN 200 to BGN 2,000.
A legal entity may be subject to a financial penalty of BGN 150 to BGN 1,500, increasing to BGN 300 to BGN 3,000 in the event of a repeated violation.
Importantly, the imposition of a penalty does not eliminate the underlying obligation to bring the company’s corporate documents into compliance with the law.
Do companies need to take action now?
The extension of the deadline until the end of 2028 provides considerably more flexibility and removes the need for an urgent update solely because another application is being filed with the Commercial Register.
However, for some companies it may still be practical to carry out the conversion earlier, particularly where an amendment to the articles of association, memorandum of association or statute is already planned.
This may allow the necessary changes to be completed within a single corporate procedure.
For companies with multiple shareholders, specific shareholding arrangements or more complex capital structures, an advance legal review may also help prevent inconsistencies between the Commercial Register, corporate documents and accounting records.
Key points for businesses
The amendments provide businesses with more time and a less burdensome procedure:
- the deadline for bringing corporate documents into compliance with the converted share capital has been extended from 12 to 36 months – until 31 December 2028;
- companies are no longer required to submit updated articles of association, memoranda of association or statutes solely because of the conversion when making their first subsequent Commercial Register filing;
- the Registry Agency has already automatically converted the registered share capital;
- corporate documents are not updated automatically and must still be brought into compliance within the statutory deadline;
- the conversion must preserve the rights and percentage interests of shareholders and members.
The changes give businesses greater flexibility to plan the update of their corporate documents and, where appropriate, combine it with other future corporate changes.
How can G&P Law assist?
The Corporate team at G&P Law provides comprehensive legal assistance to companies in bringing their share capital and corporate documents into compliance with the requirements arising from Bulgaria’s adoption of the euro. Our assistance may include reviewing the registered share capital and ownership structure, calculating the corresponding amounts in euro, determining an appropriate capital structure, preparing resolutions of the sole shareholder or general meeting, updating articles of association, memoranda of association or statutes, and representing companies before the Commercial Register. For companies with multiple shareholders or more complex capital structures, it is particularly important that the conversion is carried out in a manner that preserves the proportion between individual interests and avoids subsequent corporate or accounting inconsistencies.
Contact the G&P Law team for assistance with the conversion of your company’s share capital into euro and the necessary updates to its corporate documents.
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