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01 February 2024

The VCC: a new company form launched in Bulgaria

The eagerly awaited Variable Capital Company (VCC) was introduced on 1 August 2023 with amendments to the Bulgarian Commercial Act. It blends the limited liability company (LLC) and joint stock company (JSC), and somewhat resembles the UK's open-ended investment company (OEIC). Like the OEIC, the VCC can issue shares at any time and its capital may vary. But as it is not a regulated investment fund, the VCC is not regulated or supervised by the financial supervision authorities.


VCCs have fewer formalities for their establishment and operation (their capital is not subject to registration with the Commercial Register), simplified procedures for valuation of in-kind capital contributions and for transfer of shares, the ability to hold the general meeting by electronic means of communication (unlike LLC and non-public JSC), and no requirement to have a bank account at the time of registration. The latter will shorten establishment times by postponing the cumbersome AML/KYC procedure when opening a bank account until after the VCC is registered. Various legal instruments, already established as common market practice, have now been explicitly introduced in the law for the VCC, such as the right of first refusal, tag-along and drag-along rights, convertible loans or share options for employees.

Start-ups rejoice 

Early-stage companies have welcomed the VCC because they will now have modern legal tools to attract funding, although to what extent VCCs will be used in practice is debatable due to the legal thresholds on employees and turnover or assets value. The VCC must have less than 50 employees and a turnover or asset value of up to BGN 4m, which correspond to the accounting thresholds applicable for micro- or small enterprises. If these thresholds are exceeded, the VCC must be transformed into an LLC or a JSC by year end of the year following the general meeting that established the exceeding of the thresholds. Failure to comply may lead to the mandatory liquidation of the VCC. In recent years, we have seen rapid growth of IT and tech companies, some of which already have more than 50 employees and/or turnover or asset value above BGN 4m in their first year. Therefore, the VCC may be viewed as a short-term business solution.

Baby steps

Although the first step to bringing the VCC to Bulgaria has been taken by the statutory regulation, there is still work to be done. The Bulgarian Commercial Register will have to make registering a VCC technically possible by implementing new tools in its electronic registration system by 30 June 2024. Until then, the registration authorities will have to rely on the IT business to develop the best technical solutions and start-ups will have to rely on the old corporate vehicles.

authors: Katerina Kaloyanova-Toshkova, Silvia Ribanchova


Attorney at Law