If you are wondering why you should set up a VCC (variable capital company) rather than the standard limited liability company (LLC), this article is for you.

 

Similarities between LLC and VCC

Let's start with the similarities between the two companies.

  • Both LLC and VCC can be created by one or several Bulgarian or foreign citizens or companies. In other words, anyone can create a VCC or an LLC.
  • Both LLC and VCC must have an address in Bulgaria: either a physical office or a virtual address.
  • The business activity and the duration for which LLC and VCC are established are freely determined by the founders.

 

Differences between LLC and VCC

However, the differences between the two types of companies are much more numerous.

  • An LLC can be incorporated with a minimum capital of BGN 2.00, while the VCC can be incorporated with a minimum capital of BGN 0.02. The more important point here is that, in order to register an LLC, you must open a deposit account at a Bulgarian bank. This legal condition makes it very difficult for foreign investors from all over the world, as the travel costs to Bulgaria very often exceeds many times the cost of opening a bank account.
  • Another obstacle for those wishing to have a Bulgarian LLC is the fact that many Bulgarian banks refuse to open bank accounts for foreign citizens, or they impose additional burdensome conditions, such as high fees and long processing times for the documents.
  • On the other hand, a VCC can be registered without a bank account. This resolves a huge problem for foreign investors wishing to establish a Bulgarian company.
  • Another major and significant difference is that information about the owner or partners in an LLC is entirely public and easily accessible. Unlike an LLC, in a VCC, this information is not visible to outsiders. The names of the partners are not published. All the information about them is only available in the Book of shareholders, which is an internal document in the VCC. It can be in either paper or electronic form.

However, for both types of companies, the names of the managing bodies are published in Bulgarian Commercial Register. As we all know, in an LLC, this can be one or several managers. A VCC can be managed by one or several managers, or by a board of directors, which selects one or more chief executive officers (CEO).

The most important practical and economic difference between an LLC and a VCC is the way shares are transferred. A partner in an LLC can sell his/her shares only after the sales contract is notarized. However, a partner in a VCC can transfer his/her share with only a written contract. In a VCC, there are no unnecessary steps, such as notarization or official registration of the new partner, to complicate the sales process. After selling their share, the partner in a VCC notifies the manager, who then registers the new partner only in the Book of shareholders. This significantly simplifies turnover, as notarization fees, travel expenses to the notary, and state fees for registering the change are eliminated.

If you're still wondering which option to choose, this article can help you assess the advantages and disadvantages of LLCs and VCCs.

Limitation of liability

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 site, as well as the author of this article, are not liable to users or third parties for any damages arising from legal or factual actions based on the information published on this page.