Closing a Company Through Liquidation in Bulgaria
Closing a company is a significant legal procedure that requires compliance with specific regulations and steps. Whether due to business restructuring, financial difficulties, or other reasons, understanding the process of liquidation is crucial to ensure proper closure. This article outlines the key aspects of company liquidation in Bulgaria.
What is Liquidation?
Liquidation is the legal process of dissolving a company. It involves:
- Settling the company’s debts and obligations.
- Distributing the remaining assets to the shareholders or owners.
- Deregistering the company from the Bulgarian Trade Register.
Liquidation can be voluntary, initiated by the company’s owners, or mandatory, enforced by a court or regulatory authority.
Steps to Liquidate a Company in Bulgaria
- Decision for Liquidation
The first step is making an official decision to liquidate the company:
- Limited Liability Companies (LLC or OOD): Requires a decision by the General Assembly of shareholders.
- Joint Stock Companies (JSC or AD): Needs a resolution by the Board of Directors or shareholders.
- A liquidator is appointed to oversee the process. This can be one of the owners or an external expert.
- Notification to the Trade Register
The decision for liquidation must be registered in the Trade Register. The following documents are required:
- Minutes of the General Assembly or shareholders’ decision.
- Appointment of the liquidator.
- Updated Articles of Association or company statute reflecting the decision.
- Announcement of Liquidation
The Trade Register publicly announces the liquidation process, setting a period (minimum six months) for creditors to submit claims against the company.
- Settling Obligations
The liquidator is responsible for:
- Settling all outstanding debts.
- Terminating contracts and resolving legal disputes.
- Paying employee salaries and severance packages.
- Preparing financial statements and tax declarations.
- Distribution of Remaining Assets
Once obligations are settled, the remaining assets are distributed among the shareholders or owners, based on their equity in the company.
- Deregistration from the Trade Register
The final step involves submitting a request for the company’s deletion from the Trade Register. This includes:
- Financial statements confirming no remaining liabilities.
- Proof of creditor satisfaction or settlements.
- Confirmation of asset distribution.
What Are the Legal Requirements for Liquidation?
- Tax Obligations
Before liquidation, the company must settle all tax obligations with the National Revenue Agency (NRA). This includes:
- Corporate income tax.
- VAT declarations (if applicable).
- Employee-related taxes and contributions.
- Creditor Rights
Creditors have the right to file claims during the liquidation period. Failing to notify creditors can result in legal disputes and delays in the liquidation process.
- Liquidation Reports
The liquidator must prepare and file detailed reports, including:
- An opening liquidation balance sheet.
- Interim financial reports.
- A final liquidation report.
When Is Mandatory Liquidation Required?
Mandatory liquidation may be initiated by a court in cases of:
- Insolvency or bankruptcy.
- Violation of regulatory requirements.
- Lack of business activity for a prolonged period.
In such cases, the court appoints a liquidator, and the process is closely monitored by legal authorities.
How Long Does Liquidation Take?
The duration of the liquidation process depends on:
- The complexity of the company’s financial and legal affairs.
- The time required to settle creditor claims.
- Compliance with regulatory requirements.
On average, liquidation in Bulgaria takes 6–12 months.
Why Consult a Legal Expert for Liquidation?
The liquidation process is legally intricate and involves multiple steps. Errors in documentation, failure to notify creditors, or unresolved tax obligations can result in penalties or delays.
Legal Frame Can Assist You With:
- Preparing and submitting the necessary documents to the Trade Register.
- Managing creditor claims and settlements.
- Ensuring compliance with tax obligations.
- Advising on asset distribution and final deregistration.
Contact Us
If you’re considering closing your company through liquidation, contact Legal Frame. Our team of experienced corporate lawyers will guide you through every step, ensuring a smooth and compliant process.
