Registration of a Joint Stock Company (JSC) is most often required when the company’s business activity requires significant financial resources and when more investors will participate. Of course, a JSC can also be established for other reasons.
The procedure for establishing a JSC is regulated in the Commercial Act (CA), the Commercial Register and Non-Profit Legal Entities Act (CRENA), and Ordinance No. 1 of 14.02.2007 on keeping, storing and accessing the Commercial Register and the Register of Non-Profit Legal Entities (Ordinance No. 1).
What is a joint-stock company?
A joint stock company (JSC) is a capital company whose capital is divided into shares. It can be established by one or more natural and/or legal persons. The company is managed based on a constitutional act called the statute and the shareholders are not required to participate in the activities carried out by the JSC personally. The shareholders are entitled to a share of the profit corresponding to their share in the form of dividends and a liquidation share and are not personally liable for the obligations of the company. The sum of the shares of the JSC forms its capital.
Establishment of a joint stock company
The establishment of a JSC is a mixed factual structure, which consists of at least: making a decision to establish; adopting a charter; electing management bodies, raising capital, and registering in the TR. It is important to note that the establishment of some JSCs is subject to a special regime, such as the establishment of a bank, insurance company, etc.
JSC is established at a constituent meeting, which is attended by all the persons who subscribe for shares. A founder may be represented only if he presents an explicit written power of attorney with a notarized signature. The constituent meeting should elect its management – chairman, secretary, and enumerator(s). The following decisions should be made at the constituent meeting:
- For the establishment of a JSC.
- For the adoption of the articles of association.
- For the election of a board of directors or a supervisory board (in the case of a two-tier management system).
- For the establishment of the amount of the expenses for the establishment.
The decisions under items 1 and 2 are taken unanimously, and the others – by a simple majority of the subscribed shares. When a JSC is established by one person, a founding act is drawn up in writing, in which the articles of association are approved and the first board of directors or supervisory board is appointed.
The minimum required content of the articles of association is defined in Art. 165 of the Commercial Code and includes:
- the company name, registered office and address of management;
- the subject of activity and the term, if any;
- the amount of capital, as well as the part thereof that must be paid up upon incorporation of the company, the type and number of shares, the rights for the individual classes of shares, the special conditions for their transfer, if any, as well as the nominal value of the individual share;
- the bodies of the company, their mandate and the number of their members;
- the type and value of non-monetary contributions, if any, the persons making them, the number and nominal value the shares that will be given to them;
- the advantages that the said founders reserve for themselves by name, if such are provided for;
- the terms and procedure for issuing shares that are subject to redemption, if any;
- the method of profit distribution;
- the method of convening the general meeting;
- other conditions in connection with the establishment, existence and termination of the company.
The raising of capital consists of two elements: subscription of shares and making contributions. The subscription of shares represents the making of statements by the founders, by which they assume part of the capital (a certain number of shares), in return for which they undertake to make a property contribution. After the holding of the constituent meeting and the subscription of shares, the founders must also make the property contributions for which they have undertaken to undertake. Cash contributions are made to a special savings account in a bank, and non-cash contributions per Art. 72 et seq. of the Commercial Code. The statutory minimum capital of a public limited company is BGN 50,000, and each share cannot have a nominal value of less than BGN 1.
How to establish a joint stock company?
The establishment of a JSC requires the following legal and factual actions:
1.Protocol
According to Art. 163, para. 4, minutes shall be drawn up for the Constituent Assembly, to which Art. 232 of the Commercial Code shall apply. The minutes shall indicate: the place and time of the meeting; the names of the chairman and secretary, as well as the vote tellers during voting; the presence of the management and supervisory boards, as well as persons who are not shareholders; the proposals made on the merits; the votes held and their results; the objections made. The minutes of the Board of Directors shall be signed by the chairman, secretary and the meeting tellers. The following shall be attached: a list of those present; the documents related to the convening of the general meeting. A notary may also attend the General Meeting to draw up a report. A written report shall be drawn up for the decisions of the sole owner of the capital. If a shareholder is a legal entity, a document certifying the existence of the legal entity and a report with a decision of the competent body of the legal entity shall be submitted.
2. List of the founders present at the founding meeting of the JSC.
3. Power of attorney from founders.
According to Art. 163, para. 1 of the Commercial Act, a founder may be represented by a proxy with a notarized signature of the power of attorney. An explicit power of attorney should be understood as one that clearly expresses the will to represent a specific Board of Directors. This requirement can be considered fulfilled when the issues on the agenda, the method of voting, or the authorization to subscribe for shares and to assume an obligation for a property contribution are specified.
4. Declarations under Art. 160, para. 2 of the Commercial Act for non-bankruptcy.
The founders of a public limited company must be capable Bulgarian or foreign individuals or legal entities who have not been declared bankrupt. This circumstance is established by the above-mentioned declaration.
5. Declaration for subscription of shares by the founders and a list of founders who have subscribed shares from the capital of the JSC.
When establishing a JSC, the capital must be fully subscribed, i.e. distributed among the founders. There are different ways to subscribe shares: written unilateral statements of the founders for the subscription (declarations); preparation of the list under Art. 174, para. 2 of the Commercial Code, in which the founders document their subscription statement by affixing a handwritten signature; conclusion of subscription contracts, etc. Regardless of how the subscription of the shares will be certified, the founders’ statements should be documented indisputably, with the relevant documents containing an unambiguous declaration of intent to acquire part of the capital (shares) against the corresponding property contribution. It is important to note that the company cannot subscribe shares from its capital. When this prohibition is violated when establishing the company, the founders are jointly and severally liable for the contributions against the subscribed shares. If a person subscribes shares in his name and on behalf of the company, they shall be deemed to have been acquired solely for the account of that person.
According to Art. 234 of the Commercial Act, a member of a council may be a capable natural person, and if the statute allows, a member may also be a legal person. In this case, the legal person appoints a representative to fulfill its obligations in the council. The legal person is jointly and severally liable with the other members of the council for the obligations arising from the actions of its representative. A person cannot be a member of a council who: has been a member of a management or control body of a company terminated due to bankruptcy during the last two years preceding the date of the decision to declare bankruptcy if there are unsatisfied creditors; been a manager, member of a management or control body of a company for which a penal decree has entered into force establishing failure to fulfill obligations to create and maintain the levels of reserves assigned to it under the Law on Oil and Petroleum Products Reserves; does not meet other requirements provided for in the statute. The members of the councils are entered into the commercial register, where they submit a notarized consent and a declaration that there are no obstacles to holding the respective position.
6. Declaration under Art. 234 of the Commercial Code by the individuals elected as members of the management or supervisory board or the board of directors. The same declaration is also submitted by the individuals elected to represent the legal entity that will be a member of the board of directors, to the management or supervisory board.
7. Minutes of the meeting of the supervisory board with decisions on the distribution of functions and on the election of the management board (in the case of a two-tier management system).
8. Notarized specimen of the signature of the executive member of the management or board of directors.
9. Minutes of the meeting of the Management Board with decisions on the distribution of functions and on the manner of representing the company. It should be borne in mind that the members of the boards have equal rights and obligations, regardless of the internal distribution of functions between them and the granting of the right of management and representation to some of them. The members of the boards are obliged to fulfill their duties with the care of a good businessman in the interests of the company and all shareholders.
10. Bank certificate of paid-in capital.
For JSC to be entered in the Commercial Register, it is necessary that its entire capital be registered and that the part of the value of each share provided for in the articles of association has been paid, but not less than 25 percent of the nominal or the issue value of each share provided for in the articles of association.
Registration proceedings.
An applicant for registration of a JSC in the Commercial Register may be: the trader; a lawyer with an explicit power of attorney, a procurator, or another person in the cases provided for by law (for example). The registration of the newly established company in the Commercial Register has a constitutive effect, i.e. from this moment the legal entity of the commercial company arises.
For registration of a JSC, it is necessary to apply “Form A5”.
Fees
For registration of a JSC – 360 leva, and when the application is submitted electronically – 180 leva.
For registration of changes in the circumstances of AD/EAD – 30 leva, and when the application is submitted electronically – 15 leva.
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