In the life cycle of every company there come moments of restructuring – bringing in a new investor, a partner leaving the business, handing a family firm over to the next generation, or selling the company outright. In the legal world of limited liability companies (OOD and EOOD) this is done through the procedure for transfer of company shares.
Although the Commerce Act (ТЗ) provides a clear framework, this is one of the most formalistic and strictly regulated procedures. Missing a specific statutory requirement or an error in the wording of the declarations leads to a certain refusal of registration by the Registry Agency, which can block the company's operations for weeks. In this guide we look in detail at the steps, the hidden pitfalls and the documents required for a successful transaction.
The two main share transfer scenarios
The procedure differs significantly depending on who the buyer (transferee) of the shares is. The Commerce Act sets different requirements in the two cases:
| Criterion | Transfer between partners | Transfer to a third (outside) party |
|---|---|---|
| Legal basis | Art. 129(1), first alternative, of the Commerce Act | Art. 129(1), second alternative, of the Commerce Act |
| Requirement for a decision of the General Meeting (GM) | Free, unless the Articles of Association provide otherwise | A GM decision admitting the new partner is mandatory |
| Majority required at the GM | Not applicable (except for special clauses in the articles) | Qualified majority (more than 3/4 of the capital) |
| Complexity of the procedure | Simpler and faster | Slower, requiring an application for admission from the third party |
Step by step: How does the statutory procedure work?
For the transfer to be valid and effective against third parties, it must go through the following four consecutive stages:
Step 1: Holding a General Meeting of the partners
When shares are transferred to a person outside the company, the prospective partner submits a written application stating that they wish to be admitted and that they accept the terms of the Articles of Association. A General Meeting is convened, which decides on: 1. Admission of the new partner. 2. Consent to the transfer of the specific number of shares. 3. Approval of a new, updated text of the Articles of Association.
Note: All decisions are recorded in Minutes which, under the latest amendments to the law, require notarisation of the signatures and the content, unless the Articles of Association themselves allow ordinary written form.
Step 2: Drafting and notarising the Transfer Agreement
Under Art. 129(2) of the Commerce Act, a company share is transferred by written agreement. To be valid, however, the signatures of the buyer and seller and the content of the agreement must be notarised simultaneously. This means that both parties must appear together before the notary.
Step 3: The important check for liabilities to employees (Art. 129(1))
This is the most common reason for refusals by the Commercial Register. The law protects employees' rights by prohibiting the transfer of shares if the company has due and unpaid salaries, compensation or social security contributions owed to current or former employees (for a period of up to 3 years back). The company's manager must sign a special declaration in the prescribed form certifying that there are no such debts. The Commercial Register verifies these circumstances ex officio electronically through the General Labour Inspectorate.
Step 4: Registration in the Commercial Register
The transfer of shares has no effect against third parties (banks, counterparties, the state) until it is officially entered in the Commercial Register at the Registry Agency. The documents are filed with Application Form B4.
Checklist of documents required by the Commercial Register
For registration to go smoothly, the file must be assembled perfectly:
- Application Form B4 for registration of changes in circumstances.
- Notarised Agreement for the transfer of company shares.
- Minutes of the General Meeting decision (or a decision of the sole owner in the case of an EOOD).
- Written application from the new partner for admission to the company (where applicable).
- New updated Articles of Association / Memorandum of Association, reflecting the new distribution of shares and the names of the partners.
- Declaration under Art. 129(1) of the Commerce Act (from the manager, confirming there are no liabilities to employees).
- Declaration under Art. 13(4) of the Commercial Register and Register of Non-Profit Legal Entities Act (ЗТРРЮЛНЦ) (on the truthfulness of the circumstances declared).
- Proof of payment of the state fee (the fees are halved if the documents are filed online with a lawyer's electronic signature).
Frequently Asked Questions (FAQ)
How long does it take to register the change?
Once the documents have been filed with the Commercial Register, the registration officer reviews the file within 3 to 4 working days. Immediately after approval, the new distribution of shares becomes publicly visible in the company's profile.
Can shares be transferred in a company that owes money to the National Revenue Agency (НАП)?
Yes, the law does not prohibit the transfer of shares where there are commercial debts or liabilities to the National Revenue Agency (unlike debts to employees). It is important for the buyer to understand that they are acquiring the company with its assets and liabilities, including liability under all current leases of commercial premises and offices, leasing contracts and obligations to counterparties. Moreover, the law provides for joint and several liability of the transferor for unpaid capital contributions.
If the partner is also the manager, does the manager change automatically?
Absolutely not. The status of partner (shareholder) and the status of manager (managing director of the company) are two completely different legal roles. If the partner selling their shares also wishes to stop being manager, the General Meeting must vote on an express separate item on their release as manager and the election of a new one (via Application Form A4).
Why is professional help from a commercial lawyer critical?
Transferring shares is not simply a matter of filling in a form. Incorrectly stating the price of the shares in the agreement can lead to unexpected and serious tax liabilities for the seller under the Personal Income Tax Act (ЗДДФЛ) (if the shares are sold above their nominal value). In addition, carefully redrafting the Articles of Association is vital for the future functioning of the business and the balance of power between the partners. An experienced lawyer carries out preliminary checks in the registers to ensure that the transaction is fully protected and will not be halted by a refusal.
Mechkova & Dimitrova Law Firm will help you carry out a balanced, secure and legally compliant transfer, protecting your business interests with complete discretion.
Secure legal certainty for your business decisions and transactions. Contact us for an initial consultation and we will prepare the complete set of documents and carry out the transfer of your company shares quickly, easily and in full compliance with commercial law.