Variable Capital Company in Bulgaria — DPK Registration, Shares & Investor Rights

The variable capital company — дружество с променлив капитал, commonly abbreviated as DPK — is Bulgaria's newest commercial company form. It was introduced into the Commerce Act in 2023, and electronic registration became available through the Commercial Register in December 2024.

The DPK was designed primarily for startups, technology businesses and companies seeking flexible investment and employee-equity arrangements. It combines limited liability with variable capital, different classes of shares and contractual mechanisms resembling those commonly found in shareholders' agreements.

It is not, however, available to every business. A company must remain within specific statutory size limits to operate as a DPK.

What is a variable capital company?

A DPK may be incorporated by one or more natural or legal persons. Where it has a single founder, it is registered as an EDPK — an individual variable capital company.

The company is a separate legal entity and is liable to creditors with its own assets. Its members generally do not become personally liable for company obligations merely because they hold shares. Personal liability may nevertheless arise under special rules, including through personal guarantees, unlawful conduct, management liability or specific creditor-protection provisions.

A legal person declared insolvent cannot act as a founder of a DPK.

The company name must include:

• "дружество с променлив капитал" or "ДПК"; or
• "еднолично дружество с променлив капитал" or "ЕДПК" where there is only one member.

Who may use the DPK form?

A DPK must satisfy the following size conditions:

• its average number of personnel must be below 50; and
• its annual turnover must not exceed approximately EUR 2.045 million and/or the value of its assets must not exceed approximately EUR 2.045 million.

The employee condition is mandatory. Regarding the financial test, the statutory wording permits the form to be retained where at least one of the turnover or asset indicators remains within the limit.

These are specific conditions under the Commerce Act. They should not be replaced with a general statement that every micro or small enterprise automatically qualifies.

A DPK may also be unavailable where legislation governing a particular regulated activity requires a different company form, prescribed governance structure or minimum capital.

Capital and company shares

The DPK has variable capital that is not registered in the Commercial Register. Its aggregate amount may change as shares are issued, acquired, transferred, redeemed or cancelled without requiring every capital movement to be registered publicly.

The law does not prescribe a minimum aggregate capital. Nevertheless, the capital is divided into shares, and each share must have a nominal value of at least EUR 0.01. The DPK should therefore not be described literally as a "zero-capital company."

Members make contributions against the shares they subscribe for. The deadline for making a contribution is determined in the articles of association or by the general meeting. Payment of the capital is not a condition for the company's initial registration, and no capital-raising bank account or bank certificate is required for that registration.

The annual general meeting establishes the amount of the capital at the end of the financial year and records the change compared with the preceding year.

Classes of shares and investor rights

A major advantage of the DPK is the ability to create different classes of shares with different rights.

The articles may provide for:

• ordinary and preferred shares;
• different voting rights;
• multiple votes;
• additional or guaranteed dividends;
• preferential liquidation rights;
• shares without voting rights;
• veto rights for specified classes or members;
• redemption rights;
• pre-emption rights;
• tag-along mechanisms;
• compulsory-transfer or drag-along-style arrangements;
• restrictions on transfer for a specified period;
• consequences following a change of control in a corporate member.

The company may also issue rights to acquire shares and may enter into loans convertible into company shares, provided that the conditions are properly regulated in the articles.

These mechanisms make the articles of association substantially more important than a standard template used for an ordinary limited liability company.

Employee equity and vesting arrangements

The general meeting may grant employees or other persons engaged by the company a right to acquire shares.

The terms may include performance or time-based conditions resembling a vesting arrangement. The company may prohibit the transfer of acquired shares for up to five years.

The aggregate number of shares acquired through this statutory employee mechanism cannot exceed 15% of all company shares.

The award and exercise terms should be documented carefully, including:

• the vesting conditions;
• good-leaver and bad-leaver treatment;
• expiry of unexercised rights;
• tax and social-security treatment;
• treatment upon termination, death or incapacity;
• the source of the shares to be transferred.

Transfer of DPK shares

Shares are freely transferable unless the articles provide otherwise.

The default statutory form of a share-transfer agreement is written form with notarised signatures.

The articles may expressly permit transfer in ordinary written form without notarisation. Therefore, a simplified transfer procedure is available, but it does not apply automatically.

A transfer, inheritance or pledge of shares must be entered in the members' register to have effect against the company. It is not registered as a change in membership in the Commercial Register.

The articles may require consent, pre-emption procedures or other conditions before a transfer can take effect.

Members' register and ownership visibility

The DPK maintains an internal members' register containing information including:

• the identity and address of each member;
• personal or company identification details;
• the acquisition date;
• the number and class of shares;
• the nominal value and form of the corresponding contributions.

The management body must enter relevant changes within seven days after receiving compliant supporting documents.

Members are not registered publicly as company circumstances in the Commercial Register. This provides greater ownership privacy than an OOD, but it does not create complete anonymity.

Each member has a right of access to the members' register. An interested third party may request an extract concerning the shares held by a specified member. In addition, the company must generally register information concerning its ultimate beneficial owners under Bulgarian anti-money-laundering legislation.

Management structure

The mandatory company organs are:

• the general meeting of members; and
• either one or more managers or a board of directors.

A natural or legal person may act as manager or as a board member, subject to the applicable eligibility and representation requirements.

Where a board is used, the articles determine the number of members. The board must appoint one or more executive members from among its members, and the number of executive members must be lower than the number of remaining board members. A three-member board is therefore normally the smallest workable board structure.

The persons authorised to represent the company are entered in the Commercial Register.

The annual general meeting must be held at least once each year by 30 June. The articles may permit remote participation, electronic voting and written resolutions under the statutory conditions.

Registration procedure

A DPK is registered through application form A19 in the Bulgarian Commercial Register.

The precise document package depends on the chosen governance structure, founders and applicant, but it ordinarily includes:

• articles of association, or a founding act for an EDPK;
• a redacted copy suitable for publication;
• the incorporation resolutions;
• resolutions appointing the manager or board;
• the declarations required under the Commerce Act, the Commercial Register Act and Ordinance No. 1;
• notarised consents and statutory declarations from board members, where applicable;
• notarised consent and specimen signature from the persons authorised to represent the company;
• a power of attorney where the application is filed through an authorised representative;
• evidence of payment of the state fee.

No capital-raising bank account or bank certificate is required for initial registration.

Electronic filing requires a qualified electronic signature and may be completed through the Registry Agency portal.

Registration time and state fee

An application for initial registration is ordinarily examined by the end of the next working day.

This is a statutory processing period, not a guarantee that every company will be registered within one day. Missing documents, inconsistent articles, unpaid fees or instructions issued by the registration officer may extend the process or lead to refusal.

Based on the currently applicable tariff amounts after euro conversion, the initial-registration fee is approximately:

• EUR 28.12 for electronic filing; and
• EUR 56.24 for paper filing.

The current fee should be confirmed immediately before filing.

What happens when the company exceeds the limits?

At the annual general meeting, the company must assess whether it satisfied the DPK eligibility conditions at the end of the preceding financial year.

Where the conditions are no longer met, the DPK must undergo a formal transformation into a qualifying capital company under Chapter XVI of the Commerce Act.

The transformation must be completed by the end of the financial year following the annual meeting at which the loss of eligibility was established.

If the company fails to transform within that period, the competent district court may terminate it upon a claim brought by the public prosecutor.

The transformation is not automatic and is not completed merely by changing the company name or adopting a general-meeting resolution.

Can an existing OOD or AD become a DPK?

The Commerce Act contemplates the participation of a DPK in company transformations. An existing company may therefore consider transformation into a DPK where the resulting company will satisfy the statutory eligibility criteria.

This is not a simple amendment of the articles. The company must follow the applicable formal transformation procedure under the Commerce Act, including the required resolutions, documentation, creditor-protection rules and Commercial Register filings.

Main advantages

The DPK may be attractive because it offers:

• no statutory minimum aggregate capital;
• no capital-raising bank account for registration;
• variable capital that is not registered publicly;
• different classes of shares;
• flexible voting, dividend and liquidation rights;
• convertible loans and rights to acquire shares;
• employee-equity arrangements;
• tag-along and compulsory-transfer mechanisms;
• simplified share transfers where ordinary written form is expressly permitted;
• greater privacy regarding the ordinary membership structure;
• flexible management through managers or a board.

Principal limitations and risks

The principal limitations include:

• statutory size limits;
• mandatory transformation when the eligibility criteria are no longer met;
• limited court practice due to the form's recent introduction;
• greater dependence on carefully drafted articles;
• possible incompatibility with sector-specific regulatory requirements;
• reduced public visibility of ownership, which may complicate due diligence;
• continuing beneficial-ownership disclosure obligations;
• internal responsibility for maintaining an accurate members' register;
• valuation of non-cash contributions by three experts appointed by the company's management body.

Is a DPK suitable for every startup?

No.

A DPK may be particularly useful where a business expects multiple investment rounds, different investor rights, convertible financing or employee-equity participation.

A conventional OOD may remain preferable where:

• ownership will remain simple and stable;
• investors do not require different share classes;
• the company is likely to exceed the DPK thresholds soon;
• banks, counterparties or regulators prefer a traditional company form;
• the founders do not wish to maintain a sophisticated internal members' register and investment-rights framework.

The appropriate structure should be selected after reviewing the ownership model, expected financing, employee incentives, regulatory requirements, tax position and intended exit strategy.