Registration of a Joint-Stock company
Introduction
A Joint-Stock Company (JSC) provides businesses with the opportunity to raise capital through the issuance of shares. This structure is ideal for large enterprises seeking flexibility and access to external funding. In Bulgaria, the registration of a JSC is strictly regulated by the Commercial Act (CA) and requires adherence to specific requirements and steps.
Legal Framework
Key Legal Acts
- Commercial Act (CA): Governs the incorporation, management, and operation of joint-stock companies.
- Law on Public Offering of Securities (LPOS): Regulates public offerings of shares and obligations for public companies.
Characteristics of a Joint-Stock Company
- Minimum Capital: JSCs require a minimum registered capital of BGN 50,000, with at least 25% paid up at the time of incorporation, and a timeline set for the remainder.
- Shares: The capital is divided into shares, which may have voting rights, no voting rights, or preferential terms.
- Liability: Shareholders are only liable up to the amount of their subscribed shares.
Registration Procedure
Step 1: Prepare Incorporation Documents
- Articles of Association:
- Define the management structure, rights, and obligations of shareholders.
- Specify the company’s objectives, types of shares, and capital allocation.
- Minutes from the Constituent Meeting:
- Record decisions regarding the incorporation of the company and the appointment of management bodies.
Step 2: Capital Contribution
- Bank Account for Capital:
- Open a dedicated bank account for depositing the initial capital (minimum 25% of the capital value).
- Capital Documentation:
- Obtain a certificate from the bank confirming the deposited funds.
Step 3: Register with the Commercial Register
- Application Form (Form A5):
- Must be signed by all founders or an authorized representative.
- Required Attachments:
- Articles of Association;
- Minutes from the Constituent Meeting;
- Proof of deposited capital;
- Declarations in a prescribed format;
- Operational rules for management bodies;
- Notarized signatures of the individuals representing the company.
- Registration Approval:
- Once approved by the Registry Agency, the company is assigned a unique company identification code (UIC).
Management Bodies
- General Meeting of Shareholders:
- The supreme body that decides on changes to the articles of association, profit distribution, and election of management bodies.
- Board of Directors and/or Supervisory Board:
- Depending on the governance system—either one-tier or two-tier.
- Auditor:
- Ensures compliance with internal controls and regulatory requirements.
Tax and Legal Considerations
Tax Obligations
- Corporate Tax: 10% tax on the company’s profit.
- Dividend Tax: 5% tax on distributed dividends to individual shareholders.
- VAT: Revenue from sales may be subject to VAT if the company is VAT-registered.
Legal Risks
- Non-Compliance Penalties: Incorrect registration data may result in fines or rejection of the registration.
- Shareholder Disputes: Poorly defined shareholder rights can lead to conflicts.
- Abuse of Shares: Lack of clear regulations on share rights may cause legal disputes.
Practical Tips
- Seek Professional Assistance: Engage legal and accounting consultants to facilitate the process and ensure compliance with regulations.
- Regularly Update Documents: Periodically review and update the articles of association and internal documents to reflect changes in legislation or company structure.
- Maintain Transparency: Ensure clear reporting and communication with shareholders.
Conclusion
Registering a joint-stock company is a complex yet critical process for businesses seeking access to larger markets and funding opportunities. Properly prepared documentation and strict adherence to procedures ensure a successful start and stable operation. Investing in quality legal services is vital for the long-term success of any joint-stock company.
For assistance with JSC registration tailored to your company’s specifics, Legal Frame Law Firm is here to help with the process and documentation preparation.
