BULGARIA Law and Practice Contributed by: Nikolay Zisov, Svetlina Kortenska, Deyan Terziev and Teodora Peycheva, BOYANOV & Co.
investment process is typically initiated by presenta- tion of a pitch deck and business plan covering the start-up’s plans and strategy, market opportunity and financial projections. Start-ups are also typically required to provide financial statements to the poten- tial investors (if available). The process then contin- ues with a due diligence procedure of the start-up (usually legal, financial and operational due diligence review) and completes with the signing of investment documentation, which typically comprises an Invest- ment Loan Agreement and/or Shareholders’ Agree- ment together with Articles of Association reflecting the relevant arrangements between the parties. 2.6 Change of Corporate Form or Migration As a start-up grows and expands its operations, it may need to adopt a corporate form that better suits its needs. For example, a limited liability company (OOD) might be appropriate in the early stages, but the shareholders may need to transform the start-up to a joint stock company (AD), which is often more suitable for larger companies with more shareholders, especially professional investors. If a start-up plans to expand into other countries, it may need to establish subsidiaries or branches in those jurisdictions, which often requires adopting the appropriate local corpo- rate form. Investors may have specific preferences or requirements regarding the corporate form or jurisdic- tion. As a rule, in Bulgaria the joint stock company is the preferred company form for a large number of the bigger investors. The authors have seen no cases where investors have required the start-ups to change their jurisdiction, except in cases of listings (IPO) on foreign stock exchanges. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale In the past decade, more investors have opted for going public and listing on a securities exchange rather than seeking a sale, even though selling tends to remain the most common choice. In 2018, the Bul- garian Stock Exchange, with the approval of the regu- lators, established the SME Growth Market (BEAM) as a specialised market within the Bulgarian Stock Exchange designed to facilitate fundraising for small
and medium-sized enterprises in Bulgaria. BEAM is primarily aimed at small and medium-sized compa- nies registered as joint stock companies in the country or abroad. The EuroBridge market segment on the Bulgarian Stock Exchange allows for joint listing of securities in Bulgaria and Germany, with all trades conducted in Euros via the Xetra T7 platform. Securities are reg- istered in the TARGET2-Securities system, enabling easy settlement of transactions across the EU. Issuers are required to disclose regulatory information simul- taneously in Bulgarian and English, making it easier for foreign investors to access the market. 3.2 Choice of Listing Bulgarian start-ups’ choice of exchange for listing depends on their target market and investor base. Domestic exchanges like BSE or BEAM offer easier access to local investors and simpler regulatory com- pliance. Foreign exchanges like London, Frankfurt or Warsaw provide greater visibility and access to inter- national investors but require more complex compli- ance and foreign consultant support. Domestic list- ings may offer limited liquidity, especially for smaller start-ups, while foreign exchanges typically provide better liquidity due to larger trading volumes. The decision impacts fundraising success, investor reach and overall valuation. 3.3 Impact of the Choice of Listing on Future M&A Transactions Listing on a foreign exchange can impact future sale feasibility, especially regarding minority shareholder squeeze-out rules. Different jurisdictions have vary- ing regulations on squeeze-outs, potentially com- plicating the process of acquiring 100% control. Companies must comply with both home and foreign regulatory requirements, increasing complexity and costs. Foreign listings may attract a different investor base with unique expectations, potentially influenc- ing sale terms. Additional approvals and filings for cross-border transactions can extend timelines and increase expenses. These factors collectively affect the dynamics of future sales for companies listed on foreign exchanges.
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