I. Legislative Framework
Both the EOOD (Sole Ltd.) (еднолично дружество с ограничена отговорност) and the OOD (Ltd.) (дружество с ограничена отговорност) are regulated primarily by Part Three, Chapter Thirteen of the Commercial Act (Търговски закон, ТЗ), supplemented by the Accountancy Act, the Corporate Income Tax Act, and, where the company has foreign participation, the Foreign Investment Act. The two forms share a common statutory foundation and differ principally in the number of their participants: the EOOD (Sole Ltd.) has a single owner, while the OOD (Ltd.) requires at least two and permits any number of members.
Despite their structural similarity, the choice between an EOOD (Sole Ltd.) and an OOD (Ltd.) carries meaningful legal and practical consequences in the areas of decision-making, corporate governance, management accountability, and the scope of fiduciary obligations owed by the manager to the company and its members. These consequences are examined in turn below.
II. Capital Requirements and Formation
Both forms require a minimum registered capital of €1. This nominal threshold, introduced by legislative amendment in 2009, effectively removed capital adequacy as a practical barrier to incorporation and reflects the legislature's policy of encouraging entrepreneurial activity through accessible corporate forms. In practice, the vast majority of Bulgarian limited liability companies are incorporated with capital of €1, with operating capital provided through shareholder loans or retained earnings.
Formation of both the EOOD (Sole Ltd.) and OOD (Ltd.) requires the preparation and notarial certification of the founding document — a memorandum of association in the case of the EOOD (Sole Ltd.), and articles of association in the case of the OOD (Ltd.) — followed by registration in the Commercial Register maintained by the Registry Agency. Registration is currently effected electronically in the majority of cases and typically takes between one and five business days from the date of submission of a complete application.
III. Governance and Decision-Making
The EOOD (Sole Ltd.)
In an EOOD (Sole Ltd.), the sole owner concentrates all decision-making authority in a single person. The owner exercises the functions of the General Meeting and may also act as manager, creating an entirely unified governance structure. All decisions that would ordinarily require a resolution of the General Meeting in an OOD (Ltd.) — including amendments to the memorandum, approval of annual accounts, and decisions on profit distribution — are taken unilaterally by the owner and recorded in writing.
This concentration of authority is both the principal advantage and the principal risk of the EOOD (Sole Ltd.) form. Transactions between the sole owner and the company require particular care: Article 147a of the Commercial Act imposes specific disclosure and documentation requirements on transactions concluded between the company and its sole owner in circumstances other than the company's ordinary course of business, and the courts have applied these provisions strictly.
The OOD (Ltd.)
In an OOD (Ltd.), governance is distributed between the General Meeting of members and the manager or managers. The General Meeting is the supreme governing body and has exclusive competence over a range of fundamental matters, including amendment of the articles of association, appointment and dismissal of managers, approval of annual financial statements, decisions on profit distribution, and resolutions on restructuring or dissolution. Ordinary resolutions require a simple majority of the represented capital, while resolutions on certain fundamental matters require a qualified majority of three-quarters.
The multi-member structure introduces the possibility — and risk — of deadlock, particularly in a two-member company with equal shareholdings. Unlike some jurisdictions, Bulgarian law does not provide a comprehensive statutory deadlock-breaking mechanism, and the articles of association should therefore include appropriate provisions addressing decision-making in the event of a tie, including, if appropriate, casting vote arrangements or mandatory arbitration provisions.
IV. Manager's Liability
The manager (управител) of both an EOOD (Sole Ltd.) and an OOD (Ltd.) is subject to fiduciary duties of loyalty and care. Article 145 of the Commercial Act provides that a manager who causes damage to the company through culpable actions in breach of the law or the company's articles is personally liable for that damage. This liability is direct and unlimited — it is not capped by the company's share capital — and may be enforced either by the company itself or, in certain circumstances, by individual members acting derivatively.
In an EOOD (Sole Ltd.) where the sole owner is also the manager, this liability framework has limited practical effect inter partes, since the owner cannot in substance bring a claim against himself. However, it remains relevant to third-party creditors of the company and to regulatory authorities, who may pursue the manager personally in cases of culpable mismanagement or insolvency-related misconduct under the Insolvency provisions of the Commercial Act.
V. Liability of Members
The defining characteristic of both forms is the limitation of member liability to the amount of the member's contribution to the registered capital. This principle — analogous to the limited liability of shareholders in a company limited by shares — means that a member's personal assets are, in general, not available to satisfy the company's creditors. The practical value of this protection is, however, qualified by two considerations.
First, banks and other institutional lenders routinely require personal guarantees from the members or managers of Bulgarian limited liability companies as a condition of extending credit facilities to the company, effectively piercing the corporate veil by contract. Second, the courts have in a number of decisions applied the equitable doctrine of piercing the corporate veil where the company form has been used as an instrument of fraud or deliberate asset-stripping to the detriment of creditors, although the formal legal basis for such decisions remains contested in academic commentary.
VI. Comparative Overview
| Feature | EOOD (Sole Ltd.) | OOD (Ltd.) |
|---|---|---|
| Number of members | One (sole owner) | Two or more |
| Minimum capital | €1 | €1 |
| Founding document | Memorandum of association | Articles of association |
| Decision-making | Sole owner (written resolution) | General Meeting (majority vote) |
| Deadlock risk | None | Present; requires contractual mitigation |
| Transfer of interest | Transfer of entire company or ownership change | Transfer of shares subject to members' pre-emption rights |
| Member liability | Limited to capital contribution | Limited to capital contribution |
| Corporate income tax | 10% flat rate | 10% flat rate |
| Dividend tax | 5% withholding tax | 5% withholding tax |
VII. Tax Considerations
From a tax perspective, the EOOD (Sole Ltd.) and OOD (Ltd.) are treated identically. Both are subject to corporate income tax at the flat rate of ten percent under the Corporate Income Tax Act. Dividends distributed to individual members are subject to a withholding tax of five percent; dividends distributed to corporate members that are Bulgarian tax residents are generally exempt. Bulgaria's extensive network of double taxation treaties — currently encompassing approximately seventy bilateral instruments — may reduce or eliminate Bulgarian withholding tax on dividends distributed to non-resident members, subject to the conditions of the applicable treaty.
The choice between the two forms therefore has no direct tax consequences, and the decision should be made primarily on the basis of governance preferences, the nature of the investor relationship, and the anticipated operational profile of the company.
VIII. Practical Recommendations
For a sole foreign investor establishing a company in Bulgaria — whether for trading, property-holding, or service provision purposes — the EOOD (Sole Ltd.) is typically the more appropriate choice. Its governance simplicity, absence of deadlock risk, and unitary decision-making structure make it well-suited to the needs of a single principal. The standard memorandum of association can be tailored to the investor's specific requirements with relatively modest legal input.
The OOD (Ltd.) becomes the appropriate vehicle where there are multiple investors or partners, or where it is anticipated that equity participation will be extended to additional persons in the future. In such cases, careful drafting of the articles of association is essential: the allocation of voting rights, the scope of management authority, the pre-emption regime on transfer of shares, the quorum and majority requirements for different categories of resolution, and the provisions for deadlock and exit all require detailed attention and should be negotiated and agreed between the members before registration.