Holding companies in Bulgaria
Holding companies are regulated in the Articles 277 to 280 of the Commercial Code. A legal definition of the term is given by Article 277 (1) of the Commercial Code. According to this, holding companies may be joint stock companies, partnerships limited by shares or limited liability companies with the aim to participate under any form in other companies or in their management. Consequently, holding companies may only be capital companies. Holding companies are established with a peculiar aim – the administration of other companies. Participation in other companies in terms of holding companies means a participation that assures a role in the management. According to Article 277 (2) of the Commercial Code, means in the value of at least 25 % of the capital of the holding company must be paid down to the company in which the holding company owns an interest. Companies in which the holding company owns an interest are such that are under the leadership of the holding company. Article 278 of the Commercial Code describes several purposes for which holding companies may be set up:
- Investment in interest of Bulgarian or foreign companies;
- Investment in bonds with the purpose of obtaining control over another company;
- Administration of patents between companies in which the holding company owns an interest;
- Financing of companies in which the holding company owns an interest by their credit or the credit of the holding company by companies in which the holding company owns an interest.
Article 278 (2) of the Commercial Code lists the following restrictions regarding the activities of holding companies:
- Holding companies may not participate in partnerships that are no legal entities;
- Holding companies may not acquire licences that are not intended for use by companies controlled by it;
- Holding companies may not acquire real property which is not required by its needs.
Companies in which the holding company owns an interest are companies where at least 25 % of the shareholding is owned by the holding company or where the holding company may directly or indirectly appoint more than half of the members of the board.
There are two procedures to establish a holding company:
- On the basis of a capital company that either founds companies in which it owns an interest itself or acquires shares of a company that already exists.
- On the basis of a company that transfers 25 % of their shares to the holding company. The same applies if there are several companies in which the holding company owns an interest.