Liquidation of bulgarian company

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Liquidation of bulgarian company

Postby Admin » Mon Jun 17, 2013 11:23 am

LIQUIDATION OF BULGARIAN COMPANY

In 2005 up to 2011 Bulgaria became a major investment destination for many overseas property investors. Some of them have decided to invest in off-plan properties in different parts of the country, but others decided to invest in houses and land. Back then, in relation to the purchase of land plots in Bulgaria by foreigners, the local legislation has provided some temporary restrictions applicable only when foreign citizens purchase land. One of these restrictions has been connected with the ban land plots (usually situated under a house or villa) to be purchased by foreign individuals in their names. Such purchases were possible only if the land (or the whole property) is purchased on the name of registered local Bulgarian company, where the foreign individual is shareholder or sole owner of the capital of this company and this company could be non-working. If you are one of these owners of land in Bulgaria, then you probably although have been informed that before completing the purchase, you were asked to set up a local company here in Bulgaria, which is registered under the local Company Law at the Bulgarian Company House.
The registration of the company was connected with expenses for all these investors and such expenses are annual, because according to the law these companies are obliged to submit every year full financial reports (known as “zero tax returns”), connected with the payment of various annual fees and State taxes. Fortunately the investors who have bought regulated land (usually together with a house), are able now to cut these annual expenses, due to some changes in the local law. More information about these changes you can find in the following topic on our forum: viewtopic.php?f=41&t=562.
The fact that the legal restriction, forbidding foreign investors to purchase regulated land on their own names is no longer in force doesn’t mean that automatically the land plots owned by such Bulgarian companies are being transferred to the shareholder’s own names. These regulated land plots are still in the name of the companies and managers are still obliged to follow the provisions of the local law and perform all needed actions to keep these companies properly run. BUT this situation could be changed and the Bulgarian company to be terminated because not needed any longer. By doing this the investors can save the annual expenses for keeping the company working. Normally these expenses are in the amount of several hundred leva /100-200 Euro usually/ and there is really no need to continue paying them instead of liquidating the company. Please also note that if you fail to follow the provisions of the local law about keeping a company working and forget to submit any declarations and financial reports before the local authorities within the determined periods of time, you are also facing the danger of paying penalties as per the local law. Additionally the local taxes /property and garbage tax/ are higher if the property is owned on the name of a company than on the name of physical person. All this points that it is better to have the properties transferred to your own names now as this is the cheaper variant and allowed now by the law.
The liquidation of a company is a procedure, which ends with its actual termination/closing. It is very close to the insolvency procedure, because both procedures end with termination of the company, but there are very important differences between them:
1/ The liquidation is an out-of-court procedure, where the court has absolutely no or restricted influence. On the other hand, the insolvency is court procedure which starts with court decision.
2/ The liquidation is a process, performed in the best interest of the shareholders of the company. The main goal of the process is to share all assets of the company between the shareholders before the company is terminated. While the insolvency is performed to protect the interests of the creditors of the company.
During the liquidation process the company is managed by a person called “liquidator”. He/She is representing the company before all third parties and companies and performing/signing the company bulk (documentation). The main part of the liquidation process is the evaluation of all assets owned by the company and sharing of these assets among the shareholders, usually transfer of the assets. Creditors of the company can register his claim before the liquidators of the company and once get their money from the company, the remainder is divided between the shareholders. But of course, If your company has no debts and assets, the liquidation procedure could be easily completed and the property- transferred into your name as physical individual.
Please note that if you start a liquidation process, but after that you suddenly change your mind and decide to keep the company, then you can do this, but only if the liquidation process is not in its final stage.
The above article represents only a brief explanation of the liquidation process, which has the goal to inform you about the main steps of this process. In all cases, if you decide to terminate your Bulgarian company, because you want to cut your expenses, we advise you to contact local Bulgarian attorney-at-law, who will be able to advise you in details about the process and its main stages. If you need help on the above matters, of course do not hesitate to contact us.


Bulgariandeals Team

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