Variable Capital Company (VCC) – A New Business Entity in Bulgaria and Its Advantages

Rossitza Koleva
Country Manager

Introduction

 In a significant move to boost Bulgaria’s entrepreneurial ecosystem, the government introduced the Variable Capital Company (VCC) through amendments to the Bulgarian Commercial Act in August 2023. Designed to merge the flexibility of a limited liability company (LLC) with features of a joint-stock company (JSC), the VCC provides a streamlined option for startups and small businesses. With the technical infrastructure for VCC registration in place since 15 December 2024, this innovative corporate structure is now available to entrepreneurs and investors.

What is a Variable Capital Company (VCC)?

The VCC derives its name from its dynamic capital structure, which adjusts according to the company’s development. Unlike traditional entities, the VCC eliminates the need for a fixed initial capital and streamlines processes such as capital changes and shareholder updates.

Key Characteristics of a VCC

A VCC is tailored for small and medium enterprises (SMEs) that employ fewer than 50 employees and have an annual turnover or assets not exceeding BGN 4 million. If these thresholds are exceeded, the VCC must convert to another company type, such as an LLC or JSC.

This legal entity is open to any lawful business activity without restrictions, and shareholders can include both individuals and legal entities. Shareholder details are not listed in the Commercial Register, although the Ultimate Beneficial Owner must still be disclosed. The capital structure of a VCC is highly adaptable, as it does not require initial capital registration. Instead, the General Meeting of Shareholders determines the capital amount annually at the end of the financial year.

Capital and Shares

VCC shares can belong to different classes, with a minimum nominal value of €0.01 or BGN 0.02, a notable difference from LLC or JSC shares, which start at BGN 1. Contributions in-kind are subject to valuation by three independent experts appointed by the VCC’s governing body. The transfer of shares is simplified and can be completed through formal agreements without notary verification, provided the Articles of Association permit it.

Provisions for Venture Capital

The VCC is designed to accommodate venture capital needs, offering features such as the right of first refusal, drag-along and tag-along rights, employee stock ownership plans (ESOPs), and veto rights, ensuring balanced protections for founders and investors.

Management Options

Founders of a VCC can choose between two governance models: appointing a single director or forming a board of directors. These governing bodies, along with the General Meeting of Shareholders, ensure effective decision-making and streamlined operations.

Advantages of a VCC

The VCC offers unparalleled flexibility and efficiency for startups and SMEs. Its adaptable capital structure and simplified shareholder updates reduce administrative burdens. Additionally, the absence of a requirement for an initial capital deposit or the opening of a bank account accelerates the incorporation process. Founders also gain the ability to issue multiple share classes and enjoy the cost-effective benefits of establishing a company similar to a JSC without the BGN 50,000 capital requirement.

Eurofast’s Take

Eurofast is equipped to assist entrepreneurs and investors in establishing and operating a VCC, ensuring compliance with Bulgaria’s regulatory framework while helping clients leverage the advantages of this innovative corporate structure.

For more information, contact us at [email protected].

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