What happens when Bulgarian Companies fail to submit their Annual Accounts?

These questions are most commonly asked around February and March each year when owners of Bulgarian companies have the legal responsibility to submit annual accounts. This applies even when there have been no transaction and no activity in the past year or when the sole asset (a property) has been sold, unfortunately as long as the company is still registered it is considered active and its directors have the legal responsibility to submit an official statement of its accounts.

When accounts are not filed by the 31^st March each year (even nil returns), the state automatically fines the company approximately 1,000 Euros. These fines stay in the system and continue to clock up each year until paid.

Can I sell my property if I have fines outstanding?

When selling a property asset from a company it is most often the case that a ‘certificate of good standing’ must be provided to the buyer (or the bank who is lending the money to the buyer). This document proves that nothing is owed by the company to the state and thus company is up to date, in order to achieve this all fines and taxes must be paid. In some cases a private buyer or their solicitor will turn a blind eye to this or simply not request it, however they are taking a substantial risk as when taxes are owed to the state and assets are sold subsequent to the creation of that debt then the state can legally reverse the sale to recoup its loses from the value of the asset that existed at the time of the debt’s creation. Technically this is possibly, but practically this is only conducted against commercial premises, trading businesses, property developers etc who owed VAT or similar at the time of selling, but the same laws apply to all companies regardless of size and thus it is possible to happen to foreign owners who own single property assets via a limited company.

How much are the fines?

When you fail to submit accounts on time there are fines applied from three different departments (500 Euros from the National Income Agency, 500 Euros National Statistics Institute, Registry Agency has the right to fine 250-1000 Euros, but rarely does implement this). These are annual and will continue to clock up in the system against your name / record in Bulgaria.

What if my company has sold its property assets and then I decide not to submit any further accounts, what happens?

If you have assets in your company then these can be seized by the state and liquidated to cover the outstanding amounts owed. However, without assets there is not much the state can do at the current time to force these funds from you; as a foreign owner there is no practical or affordable legal route to recover these costs from you abroad, but legally they have every right to pursue you in your home country if they choose to. The reality is that the risk is minimal, but it exists and every director of Bulgarian companies must consider this fully before actively deciding not to submit their annual accounts, especially as the laws are likely to change and the fines will can only grow. Technically, as a limited company you are only personally liable for the capital of the company, which will vary in amount according to its structure when it was setup, please check with your accountants. Should you fail to pay your fines you will be blacklisted as a director and banned from owning or operating a Bulgarian company in the future.

Will I  be effected in my home country?

We heed extreme caution if considering to abandon your company to avoid its annual running costs or payment of its fines. European Union company directives are all geared towards collective accountability for all EU citizens operating commercially within the EU borders. Whilst no one can say for sure what the future holds for European commercial law the general consensus is that if a person has been blacklisted in one country then this will be shared with and applied in other countries too, thus reducing fraud and risk whilst increasing accountability. We are a long way from that being reality, but should you have interests in commercial ventures within Europe or plan to in the coming 10-20 years or so, then we would strongly recommend properly terminating your responsibilities as a director or shareholder of your Bulgarian company instead of letting it run up fines endlessly to avoid this future potential.

What can I do if I have sold my property and no longer want my Bulgarian company?

Sadly there is no free way to dispose of your Bulgarian company, but you do have options. As every situation is unique, please contact us to discuss your options and see which route is most efficient for you.