Our client, “Yana Foods” LLC, has become one of the first examples in Bulgaria of an LLC transformed into a Variable Capital Company (VCC).
Since December 2024, Bulgarian companies have had the option to be incorporated or transformed into a Variable Capital Company (VCC) – a new legal form introduced to provide greater flexibility in management and easier access to financing. At that time, the G&P Law team, through an article by attorney Marin Sarafov in Capital, outlined the key advantages of VCCs and predicted that a significant share of future VCCs would result from the transformation of existing companies.
This prediction is already beginning to materialise. With the assistance of our team, “Yana Foods” LLC was successfully transformed into a VCC with the legal support of G&P Law. This is one of the first practical examples of such a transformation in the country.
What is a VCC?
The Variable Capital Company combines characteristics of both an LLC and a joint-stock company, with its main feature being flexible capital. Capital can be increased or reduced without each change needing to be registered in the Commercial Register. This makes the structure suitable for companies that are growing dynamically, attracting investors, or intending to use equity for employee incentive schemes.
Unlike a traditional LLC, a VCC allows:
– capital that is not a fixed amount registered with the Commercial Register, but one that can be adjusted through an internal procedure
– capital changes to be reflected in the annual financial statements without separate registration for each amendment
– a structure combining elements of LLCs and joint-stock companies, allowing management and shareholder relations to be tailored to the specific business
– simplified share transfers, without the involvement of a notary.
The form has proven successful in many European countries and is a key instrument for the development of technology, investment, and innovative businesses.
The transformation process – specifics and challenges
Unlike incorporating a new company, the transformation of an LLC into a VCC requires several carefully coordinated steps across corporate, accounting, and regulatory aspects.
In general, the process includes:
– notifying the tax authorities
– preparing and adopting a transformation plan
– drafting and adopting a new articles of association compliant with VCC requirements
– assessing whether the company meets the statutory criteria for transformation (average number of employees and turnover/assets thresholds)
– ensuring the protection of the interests of shareholders and creditors
– registering the transformation in the Commercial Register and aligning internal processes with the new structure.
For “Yana Foods”, the legal analysis and structuring focused on ensuring continuity of operations, preserving relationships with counterparties, and providing clarity for future development, including potential investment and team expansion.
Why is the transformation of “Yana Foods” important?
Until now, most VCC examples in Bulgaria involved newly incorporated entities, including those handled by the G&P Law team. “Yana Foods”, however, is among the first companies in Bulgaria to transition from an LLC to a VCC – a process with a different legal framework and sequence of steps, including business analysis, preparation of a transformation plan, and adoption of a new articles of association.
The transformation demonstrates that the new form is suitable not only for start-ups but also for established companies seeking:
– easier admission of new shareholders and investors
– flexible capital structuring
– lower administrative costs
– simplified share transfers.
The role of G&P Law
The G&P Law team, led by attorney Marin Sarafov, advised the client throughout the entire process – from selecting the most appropriate structure to preparing the documentation and registering the transformation with the Commercial Register. The main focus was ensuring legal certainty for the shareholders and a smooth transition to the new form without interrupting ongoing operations.
Looking ahead
G&P Law expects the number of VCCs in Bulgaria to grow, with a significant portion resulting from the transformation of existing companies. The example of “Yana Foods” confirms that the new structure is effective and a real opportunity for businesses seeking a more modern, transparent, and adaptable corporate framework.
The transformation of “Yana Foods” LLC into a Variable Capital Company is among the first practical examples of how Bulgarian businesses can use the new legal form to prepare for growth, partnerships, and investments.
G&P Law will continue to assist clients considering whether a VCC is the right structure for their activities – whether at incorporation or through the transformation of an existing company.
If your business is expanding, planning to attract investors, or seeking a more flexible corporate structure, the VCC may be the logical next step. Our team is available to discuss how this model can be applied to your specific case.