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[null,"Prepared By:","Contributors:"]
[null,"Penkov, Markov & Partners"]
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["Social Enterprise Law Surveys"]
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["Report Generated: 5/2/2025"]
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["View your report results on next tab"]

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["Question","Bulgaria"]
["I. Enterprise Form"]
["What jurisdiction(s) do you practice in?","Republic of Bulgaria\n"]
["What are the most commonly used types of for-profit corporate organizational forms in your jurisdiction (e.g., corporation, limited liability company, benefit corporation, social purpose corporation, etc.) used by Enterprises operating a trade or business (rather than for investment or holding company purposes)? Please briefly describe these forms. a. Of these, which are the most common for-profit organizational forms used by Enterprises seeking financing from investors and that will have multiple owners? b. Other than organizational forms specifically designed for Social Enterprises (and discussed below under Question 4), which, if any, are the most common for-profit organizational forms used by Social Enterprises?","The most commonly used corporate legal form for operating a trade or business is the limited liability company (LLC).\nLLC: \nLLC could be established by one or more shareholders (partners), who form the General Meeting. The LLC is managed by Managing Director(s), who is/are bound by the decisions of the General Meeting / Sole owner.\nThe LLC is subject to registration with the Bulgarian Commercial Register and has registered capital, guaranteeing it creditors, which minimum, in fact, is 1 euro.\nJSC:\nAnother popular form for trade and business is the joint-stock company (JSC), established by one or more shareholders, who form the General Meeting. The JSC could be managed by a Board of Directors (one-tier system) or by a Managing Board and Supervisory Board (two-tier system). In order to guarantee its creditors, the JSC has a significant amount of minimum registered capital, in contrast with the LLC, amounting to approx. 25,000 euro.\nThe JSC could be private or public (listed).\nIn addition, Bulgaria is also familiar with cooperatives regulated under the special Cooperatives Act, which, however, are not very common. The cooperative is established only by natural persons with variable equity and a variable number of members who through mutual assistance and cooperation carry out commercial activity to satisfy their economic, social and cultural interests. Furthermore, the cooperative itself, could establish a cooperative enterprise or form cooperative joint ventures with other cooperatives.\nOther types of corporate organizational forms include General Partnership, Limited Partnership, Partnership limited by shares, Housing Associations, all not very popular due to their organizational form and/or liability of shareholders.\n \na. The most suitable form used when seeking financing from investors which tends to have multiple owners is the JSC. Moreover, as mentioned, only this type of company could be public (listed). It is also possible for LLCs to seek financing from investors though not commonly met in practice.\nb. Since LLC and JSC are the most commonly used for-profit organizational forms, they are also the most common for enterprises that pursue social objectives. Corporate social responsibility objectives are usually incorporated in the respective company’s by-laws. Additionally, Code of Conduct, Ethical Code or something similar may apply, but these are not mandatory, and thus are left to the respective company’s management.\n"]
["Do any of your jurisdiction’s traditional organizational forms require or permit the board or managers to consider, balance or prioritize interests other than shareholder value in decision making? What other interests, if any, are they required to or allowed to consider (e.g., interests of employees, customers, the environment, etc.)?","In general, the management should be guided by the decisions of the shareholders, the principles and aims in the articles of association, as well as all applicable laws and practices. Each legal entity is required to be compliant with all regulatory requirements, governing environmental protection, protection of competition, etc.\nIn addition, when an LLC or a JSC has more than 50 employees, they shall be represented in the General Meeting by one person in an advisory capacity and are thus more or less required to consider the interests of employees.\n"]
["Does your jurisdiction have organizational forms specifically designed for Social Enterprises? If so: a. What type(s) of organizational forms are they? b. How do they materially differ from the most closely analogous traditional organizational form? c. What are the main benefits for founders and funders of such organizational forms? d. Are there any restrictions on the use of these organizational forms (such as profit-caps, stakeholder involvement and impact reporting)? If there are, what are they? e. Are there any material differences in timing or costs for forming a Social Enterprise versus a traditional Enterprise? f. How prevalent and well known are Social Enterprise forms?","No. Usually, Nonprofit organizations are used for this purpose.\nIn Bulgaria, the Nonprofits are divided into Foundations and Associations, whereas both types are additionally subdivided into ones pursuing activity in public benefit and ones pursuing private objectives.\nIn general, the differences between both types of Nonprofits are with respect to their internal structure and organization. In particular, the Associations are established by three or more individuals/entities (members) united for pursuing non-profit activity, while the Foundations are not established by “members” but during the lifetime or in the event of death of an individual by unilateral act by virtue of which certain property is provided Ðµx gratia for the attainment of a non-profit objective. That said, generally, the governing bodies of the Associations are the General Meeting of the Members and the Managing Board, while those of the Foundations consist of Manager or collective Managing Body.\nWe may note thus that Associations are used in events when the activity of the entity benefits both the public and its members.\nSince Foundations have no members, their property is used in the benefit of third parties, in line with the aims of the Foundation, specified in their statutes.\nGenerally, Foundations enjoy more tax privileges (exemptions).\nBoth forms – Associations and Foundations – pursue non-profit aims. Still, usually, the Foundations are used for charity, while the Associations often aim at promoting and/or protecting the interest of their members of a certain branch; for promoting/popularising knowledge, science, education, initiatives and others in respective fields.\n"]
["Are Social Enterprises permitted to be formed and operated as Nonprofits? If so: a. Are Nonprofits that are Social Enterprises treated differently under the law as compared to Nonprofits that are not Social Enterprises, whether from a corporate, tax or other perspective? b. Are there any material benefits of, and/or restrictions on, using a Nonprofit form for Social Enterprises that does not apply to Nonprofits that are not Social Enterprises? c. Is there any type of “hybrid” Nonprofit form that requires less reporting and/or allows for faster formation? If so, please describe the drawbacks of utilizing this form (i.e. fewer tax benefits). d. How prevalent is the use of Nonprofits for Social Enterprises?","As pointed above, usually Nonprofit organizations are used for pursuing objectives/considering the interests of other stakeholders for purposes similar to ones of Social Enterprises within the meaning of this Questionnaire.\nIn view of this:\na. There is no difference in the way of treating Nonprofits in general compared to the ones performing social activities; still, to the Nonprofit may established for pursing activity for private benefit or for public benefit, the latter are treater differently from corporate (stronger reporting obligations, additional registration with the Ministry of Justice) and tax (relief in some events) perspective;\nb. N/A\nc. N/A\nd. As noted, usually Nonprofit organizations are used for these purposes\n"]
["Does your jurisdiction allow for worker-owned Enterprises, such as cooperatives? If so, please describe any material benefits of, and/or restrictions on, using such forms.","The Bulgarian law allows the incorporation of worker-owned Enterprises.\nCooperatives may be established by workers - the so called Labor-production cooperatives.\nAs noted, Bulgarian law regulates also the Cooperatives, as a typical worker-owned enterprise. A Cooperative may be established only by natural persons with variable equity and a variable number of members who through mutual assistance and cooperation carry out commercial activity for satisfying their economic, social and cultural interests. The cooperative itself, could establish cooperative enterprise or form cooperative joint ventures with other cooperatives.\nThe Labor-production cooperatives have commissions for social activities which perform the functions of a committee on the labor conditions.\nAs a social benefit, even in cases when the members of the cooperative are not employed (they do not have employment contract with the cooperative), they are insured persons under the Social Security legislation (with the exception that they shall not be insured against unemployment). Moreover, every legal entity under the Commercial Act could be incorporated by workers for pursuing commercial purposes and simultaneously employing its shareholders (e.g. LLC, JSC, General Partnership, Limited Partnership (\nKommanditgesellschaft).\nIn addition, workers and employees are usually united in syndicates, regulated by the Labor Code, upon their profession (e.g. school teachers). However, workers could also establish a non-profit legal entity – association.\nThe benefits of joining a syndicate are related to assistance when exercising labor rights, protection in event of dismissal, whereas some syndicates offer bonuses and discounts in certain stores, restaurants, etc.\n"]
["Are there unique reporting requirements for Social Enterprises? If there are, please describe them. Please also discuss what government bodies Social Enterprises are required to report to.","N/A (please see response to question 6)\n"]
["In your jurisdiction, has case law and jurisprudence evolved to address Social Enterprises? If there is meaningful jurisprudence around Social Enterprises, please provide some brief examples.","The Ministry of Labor and Social Policy has adopted a Corporate social responsibility national strategy for the period 2018-2023, encouraging socially responsible business practices, in line with the strategy of the European Commission. Moreover, the government has established a Council on corporate social responsibility, providing counsel on developing and applying the state policy in this area. \n"]
["Does your jurisdiction have any ESG requirements for Enterprises generally? If it does, please describe.","No.\n"]
["Does your jurisdiction have any ESG requirements specifically for Social Enterprises? If it does, please describe.","No.\n"]
["Does your jurisdiction have any ESG requirements for investors? If it does, please describe.","No.\n"]
["II. Funding"]
["Are any major investor classes (e.g., pension funds, mutual funds, etc.) required to look at ESG issues when making investment decisions in your jurisdiction? a. If they are, please describe the requirements. b. If they are not, are they permitted to consider such factors? c. What other relevant factors do investors tend to consider (aside from profit motive).","The Bulgarian legal framework does not stipulate such requirement for the major investor classes to consider ESG issues in the process of structuring an investment.\nBulgarian law does not provide requirements for major investor classes to look at ESG issues when making investment decisions, whereby investors are still permitted to consider such factors.\nUsually, the main factor that is taken into account while making an investment is ROI and profitability in general. Still, ESG issues are often considered, as they may have significant impact on activity of the target.\nFor instance, we note that all investments by the European Bank for Reconstruction and Development, including in Bulgaria, have to be in accordance with the criteria adopted by the Bank Ecological and Social Policy aimed at promoting the environment and sustainable development across the full range of its investment and technical cooperation activities under the EBRD Treaty.\n"]
["What kinds of philanthropic funding do Social Enterprises in your jurisdiction commonly receive (e.g., grants, charitable investment, traditional investment)?","As noted, usually Nonprofit entities are used in Bulgaria for pursuing the aims of Social Enterprises in the meaning hereof. The funding they receive is mainly from donations, grants, and on some occasions from funding by the State. Some Nonprofits also collect annual fees from their members. In addition, the Nonprofits may pursue some commercial activities, but only if they are related to the subject of the main scope of activities and provided that the profits therefrom are used for the purpose of attaining the non-profit objectives set forth in the statute. In this context, the Nonprofits may not distribute dividends to their members.\nGenerally, upon establishment of Nonprofit as Foundation, its founder provides property ex gratia for the attainment of the specific objective.\n"]
["How prevalent, if at all, are new for-profit impact investments in your jurisdiction (e.g. traditional instruments with impact terms, new investment instruments, aggregation with philanthropic capital, community based funding, etc.)?","Impact investments are generally not prevailing in the country. Still, the Bulgarian State through the EU operational programs provides structural funds aimed at improving the governance of enterprises, developing innovations, ameliorating the competitiveness of the small and medium-sized enterprises, growth in the science and education sectors, etc.\nIn addition, when making an investment in general the investors focus on funding oriented to reducing the ecological footprint, improving the social environment in the respective enterprise (for instance encouraging gender diversity) and optimizing the expenses in general.\nThus, for-profit impact investments are increasing in the country.\n"]
["What are the types of government funding and support available to Social Enterprises, if any, available in your jurisdiction (e.g., grants, investments, bonds, and guarantees)? a. How difficult is it for Social Enterprises to obtain government funding? b. Is any government funding limited to Enterprises incorporated using Social Enterprise forms?","There is no special government funding specifically available to Social Enterprises as such. Depending on the Enterprise form and industry, government grants, loans, bonds, and guarantees may be available. For instance, the Bulgarian State through the State Fund Agriculture provides financial aid for agricultural producers under state aid schemes with resources from the national budget by short-term and long-term instruments.\n"]
["Are there any companies that are formed as a Social Enterprise listed on your jurisdiction’s leading securities exchange(s)?","No.\n"]
["To what extent are publicly traded Enterprises required to disclose ESG related factors in annual reports/public filings in your jurisdiction."," The publicly traded (listed) enterprises are required to include in their consolidated annual financial reports inter alia a declaration of corporate management which shall contain: \n\n \n\t information as to whether the respective publicly traded enterprise complies with the corporate management code;  \n\t explanation as to which parts of the corporate management code the enterprise does not comply with and  what the grounds for this non-compliance are; \n\t description of the main characteristics of the internal control system and of the risk management system of the issuer in connection with the financial reporting process; \n\t the composition and functioning of the administrative, managerial and supervisory bodies and their committees; and \n\t description of the diversity policy applied as regards the administrative, managerial and supervisory bodies of the enterprise. \n \n\n Thus, ESG related factors are disclosed by the publicly traded (listed) enterprises to the regulator (Financial Supervision Commission) and to the general public. \n"]
["How prevalent, if at all, are impact bonds in your jurisdiction?","N/A\n"]
["In your jurisdiction, are there any restrictions on foreign investments or donations that are unique to Social Enterprises (whether incorporated as for profit entities or as Nonprofits)?","No.\n"]
["Is “crowdfunding” legal in your jurisdiction? Are there rules under applicable securities laws that make it easier for smaller businesses or Social Enterprises to take money from investors that are not sophisticated/accredited/qualified under applicable statutes?","Currently, there is no explicit legal framework regulating the operation of crowdfunding platforms in Bulgaria, since this manner of investment is still quite unpopular in the country. To the best of our knowledge, crowdfunding platforms have been discussed to launch in the near future. However, in practice, this has not yet occurred and at this stage, there are only smaller-scale active crowdfunding initiatives, which are yet to be subject of legislative regulation.\n"]
["III. Tax"]
["Are there any tax exemptions that are uniquely available for Social Enterprises? a. Please describe any tax exemptions that are available and whether they are partial or full. b. Are they dependent on the Social Enterprise utilized using a specific organizational form (e.g., for profit vs. Nonprofit form)? c. Please describe any other key requirements of the available tax exemptions (e.g., restrictions on sources or uses of funds, restrictions on commercial activities, etc.).","There are no tax exemptions uniquely available for Social Enterprises.\nStill, tax exemptions are provided for the Nonprofits – their income from the non-profit activity is not subject to taxation (ex. donations). Additionally, the law also envisages tax deductions for individuals for the donations made throughout the year in favor of certain strictly indicated institutions/facilities. The deduction is a certain percentage (5%, 10% or 15%) from the tax base of the income taxable through the total annual tax base.\nNonprofits conducting activity for public benefit are exempt from real estate transfer tax, as well as from vehicles transfer tax and inheritance tax.\n"]
["Are individuals or other organizations able to provide tax deductible donations to for-profit Social Enterprises? If they are, please describe any restrictions applicable to tax deductible donations?","No, except for Nonprofits as detailed in question 1. \n"]
["Are there any other tax benefits uniquely available for Social Enterprises? (e.g. deferrals, favorable tax rates, business deductions, etc.)","No.\n"]
["Does your jurisdiction provide for reciprocal recognition of tax-exempt status that has been granted under the law of any other jurisdictions?","In general, the tax regulations between the Bulgarian State and other countries are subject to treaties for the avoidance of double taxation. In case such treaty is in force between Bulgaria and another state, a foreign Nonprofit shall be subject to the Bulgarian tax requirements and thus exempt from the respective tax.\nIn addition, for EU/EEA Non-profits, the tax exemption pointed above in item 1 shall apply subject to the provision of official documents from the other country certifying the entity’s status.\n"]
["IV. Governmental Infrastructure"]
["Does your jurisdiction have Regulatory Sandboxes or similar policy frameworks for Social Enterprises? If it does, please describe.","No.\n"]
["What government operational support, resources, training or services, are available for small businesses or Social Enterprises?","Recently, the Bulgarian government has implemented numerous programs for financing and compensating small and medium enterprises for losses incurred due to the COVID-19 economic crisis with the aim to support their business and avail them to keep their employees.\n"]
["Are there different compliance requirements for different types of Social Enterprises than for traditional Enterprises? Please provide examples if there are.","No, given that the Bulgarian legal framework does not regulate the Social Enterprise as such.\nHowever, the Nonprofits conducting activity for public benefit are required to prepare an additional report enclosed to their Annual Financial Report (AFR), containing information for substantial activities, funds spent for such purposes, their relevance to the objectives and the programs of the organization and the results attained; the amount of properties received in grant and revenues from other activities conducted for the purpose of raising funds; the type, the size, the value and the purposes of any donations received or given, as well as data about the donors; etc.\n"]
["Is there a dedicated government agency or department that oversees Social Enterprises? If there is, please describe its mandate and effectiveness.","No.\n"]
["Is there a different bankruptcy system available for Social Enterprises?","No.\n"]
["VI. Miscellaneous"]
["What are the average time and filing fees to form an Enterprise in your jurisdiction?","In Bulgaria, the registration process of an enterprise, both for-profit and non-profit, is quite swift and usually takes up to 7 business days. However, since the opening of a bank account in a local bank is a precondition for registering an Enterprise (specifically LLC, JSC, etc), it is noteworthy that given the severe AML checks, a general setback for the timely registration of an enterprise in Bulgaria (being EU member state) could be the opening of a bank account in Bulgarian Bank by a foreign individual (citizen of non-EU member state), as well as the transformation of already opened deposit bank account into a regular one.\n"]
["What government or third-party certifications or accreditations, if any, are available for Social Enterprises that allow for access to benefits e.g. funding, beneficial tax status, etc.? Please provide examples and briefly describe them as well as the standards there are to maintain them.","No certifications allow beneficial tax status or another beneficial legal status (again, relating to Nonprofits).\n"]
["Please describe whether, in your opinion, startups and other entrepreneurial Enterprises generally can easily form and flourish in your jurisdiction.","In our experience and opinion, along with the quite simple and time-efficient establishment and registration procedure for an Enterprise, any start-up could easily grow and develop in Bulgaria. That said, the Fund Manager of Financial Instruments in Bulgaria through its Operational Programme “Innovation & Competitiveness” is rapidly and broadly investing in any start-ups established and operating in the country aiming to aid the start-ups' further development. In general, the requirements for the start-ups to receive such financial help are rather basic and easily complied with.\n"]
["Please describe whether, in your opinion, Social Enterprises, in particular, can easily form and flourish in your jurisdiction.","As noted, Bulgarian legislation does not regulate such a form of Enterprise. Still, Nonprofits pursuing a social aim are relatively easily formed and develop their activity.\n"]
["Please describe whether in your opinion there are any laws that are obstructive to the formation of Social Enterprises (i.e. that actively disfavor or penalize, or otherwise discourage their formation) in your jurisdiction (for example, are Social Enterprises subject to legislation prohibiting inclusion of Social Enterprises in government contract procurement)?","N/A\n"]
["In your jurisdiction, are there any major fraud concerns or defects due to corruption or fraud that should be addressed? If there are, please briefly discuss the concerns or defects.","No.\n"]
["What changes to the law do you think would be most beneficial to enabling Social Enterprises to flourish in your jurisdiction?","As a general remark, any legislative initiatives aimed at simplifying and limiting the administrative burden in the daily interactions with the public authorities would lead to compound benefits.\nExpanding the scope of the donations leading to tax exemptions/discounts would also benefit these enterprises.\n"]
["What changes to the law do you think would be most beneficial to enhancing the social and environmental responsibility of Enterprises generally (whether or not Social Enterprises)?","The Enterprises that are improving the social environment and are reducing the ecological footprint should be subject to further tax concessions and/or exemptions, should enjoy less administrative burdens, i.e. they should receive comprehensive administrative assistance in their interactions with the public authorities (more swift and easy-going resolutions of occurred issues).\nIn addition, it would be appropriate to impose an obligation to the large-scale enterprises that generate significant annual profits to allocate part of their earnings for overcoming ESG issues, which indeed shall lead to the above-mentioned facilitations, as well.\nImplementing a uniform set of standards for ESG policies and reporting of public companies and/or Nonprofits (or even for for-profit enterprises, at least the ones operating in certain spheres) would facilitate the investors and consumers to compare and evaluate which enterprises are in fact pursuing socially important aims.\n"]
["Is there anything else you would like to add or guidance you would like to provide? Are there any questions we should have asked but did not?","We consider that, as a first step, the Bulgarian legal framework should explicitly regulate the Social Enterprises (within the meaning of this Questionnaire), their specifics and obligations, which will certainly contribute to overcoming a number of the existing social and environmental issues, such as unemployment, lack of diversity, reducing the ecological footprint, etc. \n"]