Company with variable capital – Part II: Rights and obligations of the partners. General Assembly.

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The rights and obligations of partners do not differ significantly from those provided for partners in LLCs – the right to participate in the management, the right to vote, to dividend, to information and to liquidation share. The articles of association may provide for additional rights or restrictions. The same applies to the obligations of the partners – in addition to the obligation to contribute with the above-mentioned features, the partner is obliged to implement the decisions of the General Assembly and to provide assistance for the implementation of the company’s activities, unless otherwise agreed in the articles of association.

The termination of the membership shall be on the general grounds and the unilateral withdrawal shall be regulated by the articles of association, which may provide for other cases in addition to those listed in the law.

The organs of the company are a general assembly of members and a board of directors/manager. The competence of the general assembly does not reveal any specifics, it is regulated in Article 260п of the Commercial Act, where it is stated in point 8 that the general assembly decides on other matters assigned to it by the law and the articles of association. A quorum of at least half of the votes is required for its regular holding. Similarly to the JSC, an alternate date may be specified in the invitation for the first meeting, and the meeting held on that date is lawful regardless of the shares represented. A qualified majority of two-thirds shall be required for resolutions to amend the articles of association, to issue or cancel shares, to expel members, to reconstitute or dissolve the company, to elect or dismiss a liquidator, manager or members of the board of directors, to fix their remuneration and to discharge them.

Pursuant to Article 260p(4) of the Commercial Act, where the law or the articles of association provide for voting by classes, and where the proposed resolution affects the rights of members of a class, the quorum and majority requirements shall apply to each class separately.

Notice of the meeting shall be published in the Commercial register at least 15 days before the date of the meeting or shall be in writing or sent by electronic means with express acknowledgement of receipt received at least 7 days before the date of the meeting. This matter should be regulated in the articles of association. The invitation must contain the agenda, the place, date and time of the meeting as well as the company’s name and registered office.

It is also possible to adopt the resolutions of the general meeting by default if all the shareholders have expressed their consent to the resolution in writing or by electronic means (Article 260ф (4) of the CА) and to hold the general meeting by electronic means by one or more of the following means (Article 260ф (5) of the CA):

  1. real-time transmission of the general assembly;
  2. real-time two-way communications allowing the shareholders to participate in the discussion and adoption of resolutions at the general assembly meeting remotely;
  3. a voting mechanism before or during the general assembly without the need for a proxy to attend the assembly in person.

The company is entrusted with the obligation to ensure the necessary measures for the identification of the members – Article 260ф (5) of the Commercial Act.

In the case of a general assembly held in a virtual environment, the minutes and the list of persons exercising voting rights in the general assembly shall be certified by the chairman and the secretary of the general assembly.


According to Art. 260н, par. 1(2) of the Commercial Act, the bodies of the company shall be a board of directors or a manager. Art. 260ц speaks of a board of directors, and does not require a minimum number of members, as Art. 241(4) of the CА and Art. 244(1) of the CА do, but leaves this matter to be settled in the articles of association. The term of office of the members of the Management Board should also be determined there. They should submit a notarised consent and a declaration that there are no obstacles to them holding office. From among its members, the Management Board shall elect a chairman – Article 260ц (5) of the CА.

A company with variable capital must elect one or more managers (Art. 260ь of the CA), or a board of directors. Pursuant to Art. 260ц, par. 1, p. 1 of the Commercial Act, the company is managed and represented by the board of directors, which elects a chairman. However, Article 260щ states that the board of directors shall entrust the management and representation of the company to one or more executive members elected from among its members and shall determine their remuneration. It is not clear whether the chairman of the board is considered an executive member and, if so, whether several co-chairmen may be elected, since the second sentence of the first paragraph of Article 260щ states that the executive members should be fewer than the other members of the board. The executive members shall submit a notarized consent and a specimen signature. Joint liability for the damage caused to the company is provided for the members of the Executive Board – Article 260ъ, paragraph 4 of the Commercial Act, and a member of the Executive Board may also be a legal entity – Article 260ц, paragraph 2 of the Commercial Act, which appoints a representative to perform its duties in the Executive Board. The legal entity shall be jointly and unlimitedly liable with the other members of the Management Board for the obligations arising from the actions of its representative.

Conversion and termination.

Pursuant to Art. 260ю of the CА, a CVC should be “converted into a capital company” (it follows from the language of the provision that the legislator does not consider a CVC to be a capital company) if it is established at the regular annual general meeting that, as of the end of the previous financial year, the company no longer meets the requirements of Art. 260a, para. 3 of the Commercial Act, i.e. the number of employees exceeds 50 and the annual turnover does not exceed BGN 4 000 000 and/or the value of assets does not exceed BGN 4 000 000. This conversion shall take place by the end of the financial year following the general meeting, otherwise the CVC shall be dissolved by the district court of the company’s registered office on the action of the public prosecutor. The conversion shall take place in accordance with the procedure laid down in Section III of Chapter Sixteen of the Commercial Act – conversion by change of legal form.

An interesting issue is the conversion of other types of companies into a CVC or their merger with it, as well as its division or separation from it. Insofar as there is no express prohibition in this direction, these possibilities should be available, since Article 261(2) of the CA states that in all forms of conversion, the converting, the receiving and the newly established companies (the companies involved in the conversion) may be of different types, insofar as the law does not provide otherwise.

The type of the companies involved in the conversion is also relevant in the conversion. Pursuant to Article 263т CA, where all the companies involved in the conversion are personal companies, Articles 262и – 262н shall not apply. Hence, the determination of the type of the CVC is essential and a definitive answer is difficult at this stage.

With regard to the termination of the company, the grounds for termination are provided for in Article 260я of the Commercial Act, and the legislator has allowed additional grounds for termination to be provided for in the articles of association. It may also be terminated by the district court of its registered office on the action of some of the partners or the public prosecutor. An solely-owned CVC shall be dissolved on the death of the sole member unless otherwise provided or the heirs request that the business be continued.


The company with variable capital will pose a number of challenges to practice, and it remains to be hoped that its emergence will lead to a positive outcome in the economy and offer a viable alternative for investors. However, its current set-up, and the lack of it in places, is more worrying than encouraging. The limitation imposed by the Bulgarian alphabet will have to be overcome by interpretation, as the wide discretion granted to the partners places on them (or rather on their lawyers) the obligation to regulate their relations in as much detail as possible.

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