Key Issues with Mergers & Acquisitions in Bulgaria

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Key Issues with Mergers & Acquisitions in Bulgaria

This publication was provided to Merar by our friends from DLA Paper back in 2010 and is intended to provide a brief overview of certain key issues likely to affect the structure and timing of mergers and acquisitions in Bulgaria.

It does not cover tax, EU or national competition issues (a wall-chart setting out merger filing thresholds is available) or any other matters specific to regulated industries.

Deal Structure

Public company – formal offer required?

A formal offer procedure must be followed on the acquisition of shares in a publicly listed company if the shares represent more than 50 percent of the voting rights.

Can a foreign company acquire by merger?

Mergers between limited liability companies established in different EEA member states are possible pursuant to the national legislation implementing the Cross-Border Mergers Directive, and certain other cross-border mergers are possible pursuant to the Regulation on the Statute for a European Company.

Other cross-border mergers are not permitted under Bulgarian law.

Restrictions on share or business transfers?


The transfer of shares in a limited liability company ("OOD") from one shareholder to another shareholder is unrestricted; the transfer to a third party is subject to shareholder approval. Other restrictions (eg pre-emption rights) may be contained in the articles of association or in a privately negotiated shareholders' agreement.

Transfers of registered shares in a joint stock company ("AD") may be subject to the approval of the company (by virtue of the articles).


Restrictions (eg pre-emption rights, approval requirements) may be contained in the articles of association or in a privately negotiated shareholders' agreement. The transfer of the entire business of a company is subject to approval by qualified majority vote in general meeting.

Preliminary Agreements

Legally binding?

Letters of intent are not usually intended to be legally binding, unless the parties have clearly expressed that certain provisions are to be legally binding (eg those relating to confidentiality, lockout/exclusivity, exclusion of damages for terminating negotiations without cause).

If the parties intend a letter of intent to be binding, it should be executed as a contract.

Duty to negotiate in good faith?

The conduct of a party (eg in continuing with negotiations) may create a justified expectation of another party that the acquisition will take place. If such expectation is not met without good cause, damages may be payable.


Consultation requirements


Both the seller and the buyer must inform the relevant trade union about the date of the transfer, the reasons for and consequences of the transfer and the measures proposed which may affect employees. The information should be provided at least two months before the actual transfer or merger is executed.


If a change of employer occurs because of the transfer of assets or business, the same consultation requirements as are relevant to share acquisitions apply.

Business transfers

Do employees automatically transfer? If so, what liabilities pass?

Yes. The buyer and the seller will be jointly and severally liable for all accrued pre-transfer liabilities under the employment contracts of transferred employees.

Restrictions on post-transfer reorganisations?

In general, the buyer may not change employment contracts unilaterally. It is not possible to make any contractual change which would contradict any applicable collective bargaining agreements.

Acquisition Documents

Any provisions incorporated by statute/law?

Certain mandatory provisions (eg date of acquisition for accounting purposes, statute of limitations) will apply by statute/law. Certain statutory warranties (eg regarding title to the subject of the acquisition) and remedies (eg right to rescind the contract if breached) are deemed incorporated within the agreement, unless otherwise agreed.

Is foreign governing law permissible? Any overriding national law?

Foreign governing law is permissible, subject to certain mandatory statutory rules. The actual transfer of shares must be governed by Bulgarian law.

Financial Assistance (Share Acquisitions)

Can a company give financial assistance to a buyer of its shares?

Generally, financial assistance (eg loans, security or any advance payment) granted by a target joint stock company for the purpose of purchasing shares in the target company or its parent is prohibited. An exception applies to loans granted by credit institutions within their usual scope of business.

Assets, Liabilities and Creditors (Business Acquisitions)

Do any assets/liabilities automatically transfer to the buyer?

The assets, liabilities and contractual relationships are automatically transferred from the seller to the buyer. Employment liabilities (see above).

The buyer of a business is jointly liable with the seller for any business-related debts (including arrears of taxes and social security contributions) unless otherwise agreed with the creditors. The amount of such liability is limited to the assets acquired.

In an asset acquisition (ie the purchase of individual assets), lease rights, easements and pledges are transferred together with the purchased asset (this is particularly relevant in the case of real property).

Assignment of burden of contract?

On the transfer of a business, all contractual relationships associated with the business pass from the seller to the buyer by operation of law.

Completion Formalities



An agreement for the transfer of shares in an OOD must be in writing and filed with the companies registry. The signatures of the parties involved must be officially certified. Where the transfer agreement is to be executed by a person acting under power of attorney, the signature of the person who has executed the power of attorney must be officially certified.

There are no notarisation requirements in relation to an AD.


Merger agreements and transfer of business agreements need to be notarised.

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Image courtesy of Jared Tarbell, 2007, Flickr CC.


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