You only have a minute? Check out these 3 points to remember:
- Bulgaria has introduced the Variable Capital Company (VCC), which is expected to reduce the need for startups to register abroad, allowing them to retain more control and contribute positively to the local economy.
- The VCC is expected to facilitate fundraising and facilitate the implementation of incentive plans such as convertible debt or stock options in a safer and more structured way, thus strengthening the credibility of Bulgarian startups.
- The VCC is a key legislative element needed to unlock resources for Bulgaria’s National Recovery and Resilience Plan.
In a revolutionary move aimed at boosting the entrepreneurial landscape, the Bulgarian Parliament has approved amendments to the Commercial Law, introducing the Variable Capital Company (VCC), aimed at propelling the growth of innovative startups in the country. The initiative was defended by the Bulgarian Entrepreneurs Association (BESCO), which hailed it as the most radical change to commercial law in the last three decades and as an alternative option to existing limited liability companies (SARLs) and joint stock companies (JSCs). With an overwhelming majority of 178 votes in favor, the VCC is poised to provide new opportunities for startups, as it eliminates the requirement to specify the size of capital at creation.
Unlike traditional businesses, a VCC does not have fixed capital which must be registered in the commercial register. On the contrary, its capital, made up of contributions from partners, can change constantly without the need for registration. Additionally, the partners themselves can change without the need for registration. This new legal form is designed to meet the unique needs of startups, making it easier for them to operate and thrive in the Bulgarian business landscape. The flexibility of VCC is its main selling point, blending the best elements of limited liability companies (SARL) and joint stock companies (JSC).
The VCC is not just a stand-alone initiative. This is a key piece of legislation needed to unlock resources for Bulgaria’s National Recovery and Resilience Plan.
The impact of the Variable Capital Company (VCC) on Bulgarian startups
The approval of the variable capital company (VCC) in Bulgaria has generated widespread support and enthusiasm, including from key figures in the startup community.
Dobromir IvanovCEO of BESCO, welcomed the legislation, highlighting its potential to significantly benefit local startups and technology companies. He highlighted that the VCC addresses a crucial problem facing many Bulgarian startups: the need to register their companies abroad, often in the UK, Estonia or other countries, in order to offer employee incentives, implement acquisition contracts or seek investments via convertibles. debt.
“This new legislation aims to address this issue by providing a legal framework to offer and implement these options in Bulgaria, thereby keeping businesses in the country. This is crucial because registering a company overseas from the start can result in losing leverage in negotiations with investors. By having the option to register the company in Bulgaria from the start, they can retain more control and potentially keep their research and development as well as their head office in the country, thus contributing positively to the local economy and society “, says Ivanov for The Recursive.
Furthermore, Ivanov considers the VCC to be the most important reform of Bulgarian trade law, enjoying crucial political support from all parties that voted in favor of it. He recognizes that even if initial application of the legislation is limited to companies with up to 50 employees, it presents an attractive option for smaller, younger startups. However, Ivanov also emphasizes the importance of resolving certain issues in the form of a joint stock company.
“Currently, creating joint stock companies from the first day is impractical due to excessive bureaucracy and high costs,” explains Ivanov. He highlights that this new legislation will make the process much more attractive for startups and young businesses, thus potentially creating a more favorable environment for entrepreneurial businesses in Bulgaria.
Momchil Vassilevgeneral director of Endeavor Bulgariaechoes the optimism surrounding VCC’s impact on the local startup ecosystem.
“Until now, achieving similar results required various legal complexities, leading to unstable corporate structures. However, with this new legislation, fundraising and the implementation of incentive plans such as convertible debt or stock option plans will be much safer and structured, making these companies more reliable and credible to potential investors,” Vassilev explains for The Recursive.
While not expecting an immediate and widespread conversion of existing legal forms, Vassilev believes that over time more companies will opt for VCC, stating: “Due to this new legal form, some existing companies might choose to adopt it, especially those seeking to adopt it. new financing or wishing to set up stock option plans. He emphasizes the importance of track the percentage of newly created companies adopting this legal form as a relevant key performance indicator (KPI) to accurately assess its impact.
According to Vassilev, the transition to the new legal form may involve certain administrative and internal factors, as well as legal costs, which constitute potential obstacles. However, from a practical point of view, existing companies should not encounter major obstacles in changing their legal form.
Furthermore, Vassilev emphasizes that the creation of the VCC marks a significant step forward for the startup ecosystem and its relations with the state. As he points out, “The state is working to create a more modern and favorable environment for this type of entrepreneurship, and the interests and voices of these businesses are beginning to be heard. »
The genesis of the Variable Capital Company (VCC) in Bulgaria
With a unicorn in his repertoire, supplemented by several successful outings and supported by a burgeoning pool of seasoned professionals venture capital fund, The entrepreneurial community of Bulgaria has seen significant growth over the past decade, positioning the country as a regional hub for startups and innovation. However, a worrying trend has emerged where successful companies have chosen to register abroad, thereby depriving Bulgaria of tax revenue, intellectual property and reputation.
One way to address these challenges and retain local talent is to embrace the variable capital company (VCC). The VCC is inspired by successful models like the French company SAS (Simplified Joint Stock Company, a type of VCC), which has dominated the French corporate landscape since the mid-1990s, with over 70% of all French companies being SAS companies. Similar legal forms exist in Germany, Poland, Greece, Spain, Slovakia and other European countries.
Future plans to improve the Bulgarian startup environment
Looking ahead, BESCO’s Dobromir Ivanov highlighted the importance of establishing a stronger foothold in the global technology investment landscape, as it holds the potential to boost GDP growth and improve the average lifestyle of Bulgarian citizens over the next 15 years. The following initiatives are on the horizon as part of the strategic roadmap to strengthen the Bulgarian startup ecosystem:
- Presentation an invoice in September encourage foreign investors to invest more in Bulgaria and stimulate a more drastic increase foreign direct investment (FDI). A key aspect of this effort is attracting high-tech investors to improve Bulgaria’s competitiveness compared to other countries in the region, including Serbia, Romania, Greece, Poland, the Czech Republic and the Hungary.
- Work on education reform and plans to present the first invoices in October or November improve the skills and knowledge of the Bulgarian workforce.
- Anticipate improvements the startup visa processamong other topics, in December.
Ivanov believes that these initiatives are fundamental for Bulgaria’s development and will be BESCO’s priority over the next 6-12 months.