Formerly, the only possible forms of re-organization/operations with the participation of companies from the Member States regulated in the CA were mergers – both in the form of merger by acquisition and merger by the formation of a new company.
By implementing the rules of the Directive in the CA:
- Rules on mergers as form of cross-border re-organization/operation involving companies from Member States have been standardized;
- For the first time, the possibility of spin-off by incorporation of a new company, split-off separation by incorporation of a new company and split-off of a solely owned company, as forms of re-organization/operation involving companies from Member States, has been introduced;
- An entirely new “Section VI” has been created in Chapter 16 of the CA, which for the first time introduces the possibility of “conversion into a company from another Member State” (i.e. with the participation of only one company), whereby: (a) A company with its registered office in Bulgaria (converting/transforming company) transfers its registered seat and takes the legal form of a company that has been established in accordance with the legislation of another Member State; or (b) A company established under the laws of another Member State transfers its registered seat to Bulgaria and changes its legal form to a capital company (converted/transformed company).
For clarity, the re-organizations under first two bullets are referred to as the “cross-border operations”, whereby the transformation under the third bullet – “cross-border conversion”.
The CA expressly provides that the regime of cross-border operations with the participation of companies from Member States and cross-border conversion shall be applied in an identical way to companies from a Member State of the European Union or from another State party to the Agreement on the European Economic Area (collectively defined as “Member States”).
The above rules would be applicable, provided that the participating companies/transforming and transformed companies, registered in Bulgaria, are capital companies (e.g. limited liability company, joint-stock company, etc.) and:
- In case of cross-border operations with the participation of companies from Member States – at least one of the participating companies has been established under the legislation of another Member State, and its type is specified in Annex II of Directive (EU) 2017/1132;
- In the case of cross-border conversion – the company that has been transformed or transforming has been established in accordance with the legislation of another Member State, has its registered office in another Member State and is also of a type specified in Annex II to Directive (EU) 2017/1132.
Some restrictions have also been introduced under which the described forms of cross-border operations and conversion cannot be performed:
- One of the companies involved in the cross-border operations or in the cross-border conversion has its registered office outside a Member State;
- The law of the Member State applicable to one of the companies involved in the transformation/conversion precludes such a procedure;
- One of the companies participating in the transformation/conversion with headquarters in Bulgaria is an open-ended investment company, etc.
The rules of the CA apply to companies with registered seat in Bulgaria.
With regard to the procedure for cross-border operations, the amendments to the CA have introduced the requirements of the Directive and/or unified the rules regarding the determination of an equivalent share exchange ratio; the possibility of equalization of shares/shares through cash payments; specific rules on the overall re-organization plan are provided; the content of the report on the transformation by the management body of each of the transforming companies has been expanded; the rules for the protection of partners/shareholders/creditors have been changed, etc.
With regard to cross-border conversion it is specific that the conversion plan must include, in addition to the existing elements: the draft Articles of Association or Incorporation Deed of the converted company; time schedule for the planned conversion and detailed information on the state aid, tax relief and other forms of financial support received in Bulgaria over the past five years.
An integral part of the documents required for the respective procedure is the certificate of legality of the cross-border operation/conversion, which is issued – by the Bulgarian Commercial Register for Bulgarian companies and/or by the competent authority in the Member State of the companies originating from another Member State. It is envisaged that the pre-merger/pre-division/pre-conversion certificate will be sent through the Business Registers Interconnection System (“BRIS”).
The cross-border operations/conversion is entered in the Bulgarian Commercial Register and in the relevant competent registers in the Member States, and the exchange of documents between the registers of entries made is done ex officio through BRIS (for example, the converting company registered in Bulgaria is de-registered from the Bulgarian Commercial Register on the basis of a notification from the register of the Member State in which the converted company is registered, that the cross-border conversion has been registered).
