The articles of association are the principal internal document of a variable capital company (VCC). They set out not only the company’s basic data, but also the rules governing how the shareholders participate in the company, adopt decisions, transfer shares and distribute profits. Where a VCC is incorporated by a single person, a deed of incorporation is drawn up instead of articles of association. In both cases, the document must be executed in writing.
Basic company information
Pursuant to Article 260v of the Bulgarian Commercial Act, the articles of association must specify the company name; its registered office and management address; its scope of business; the term for which it is established, where such a term is provided for; the class and nominal value of the shares in each class and the rights attached to the respective classes of shares; any special conditions governing their transfer; the type and value of any non-cash contributions; the company’s management and manner of representation; any privileges reserved by certain shareholders, where agreed; and the way in which profits are distributed. The company name must include the designation “variable capital company” or the abbreviation “VCC”. In the case of a sole owner company, the designation “sole-owned variable capital company” or the abbreviation “SVCC” is used.
Company shares and shareholders’ rights
One of the most important parts of the articles of association is the regulation of the company shares. They may provide for different classes of shares, their nominal value and the rights attached to each class. The law allows different classes of shares to be linked to special rights and/or restrictions. For example, certain shares may confer the right to:
- more than one vote,
- a guaranteed or additional dividend,
- a liquidation preference,
- a right of redemption, or
- a right of veto when resolutions are adopted by the general meeting.
This flexibility is one of the main reasons why a VCC is suitable for start-ups, investors and businesses in which different shareholders have different roles.
Management and Representation
The articles of association must clearly determine how the company is managed and represented. They should specify who may manage the VCC, how the persons representing it are appointed and removed, and how decisions are adopted by the shareholders. A VCC may be managed by one or more managers or by a Board of Directors. Well-structured management rules facilitate the company’s day-to-day operations and reduce the risk of disputes between shareholders.
Transfer of shares and changes in the shareholder structure
The articles of association of a VCC regulate the manner in which shares are transferred, the conditions under which a new shareholder may be admitted, and what happens upon withdrawal or exclusion. Detailed regulation of these matters creates predictability and protection for both founders and investors. In the articles of association, the founders of the VCC may provide that a share is transferred by means of:
- a written agreement with notarised signatures, or
- a written agreement.
To simplify the transfer of shares, the DPK.bg team recommends the second option. After registering on the platform, you can transfer your shares in a VCC in just a few clicks through the automatic generation and delivery of the required written agreement.
How are the articles of association amended?
The articles of association of a VCC are amended by the general meeting following a duly held meeting. The general meeting may amend any of the main or additional provisions contained in them. When the articles of association are amended or supplemented, an updated version incorporating all adopted changes must be prepared. This updated version is filed with the Bulgarian Commercial Register, certified by the company’s management body. It is therefore important for the VCC to always retain the latest effective version of its articles of association.
Document management through DPK.bg
After registration on the DPK.bg platform, users can store their corporate documents in one place, including the current articles of association. This allows all shareholders in the VCC to access them at any time. The platform also enables users to submit a request for an amendment to the articles of association. Our team can assist with the preparation and formalisation of the documents required for the relevant amendment.
Why is this document so important?
The articles of association are not merely a formal requirement for registering a VCC. They form the basis of the relationship between the shareholders and determine the rules under which the company will develop. The more clearly the rights, management arrangements and transfer of shares are regulated, the lower the risk of future disputes and practical difficulties.
This article does not constitute legal advice or consultation, but is for informational purposes only. The publication should not be used as a basis, justification or motive for solving legal problems and taking certain legal actions. The owner of the website, as well as the author of this article, bear no responsibility to users or to third parties, for any damages arising from legal or actual actions based on the information published on this page.
