BULGARIA Law and Practice Contributed by: Nikolay Zisov, Svetlina Kortenska, Deyan Terziev and Teodora Peycheva, BOYANOV & Co
can be competitive, especially for start-ups in early stages. However, there have been notable successes, and government initiatives and for- eign investment have been contributing to the development of the VC landscape. Bulgaria has several government-sponsored venture capital funds. These funds aim to support local start-ups and provide them with the necessary capital to grow. Foreign venture capital firms are increas- ingly active in Bulgaria, particularly those with a focus on Central and Eastern Europe. They often bring international expertise and networks to the local start-up ecosystem. 2.5 Venture Capital Documentation It could be said that there are established stand- ards for venture capital documentation in Bul- garia. The investment process is typically initiat- ed by presentation 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 potential investors (if available). The process then continues with a due diligence procedure of the start-up (usu- ally legal, financial and operational due diligence review) and completes with the signing of invest- ment documentation which typically comprises an Investment Loan Agreement and/or Share- holders’ Agreement 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 bet- ter suits its needs. For example, a limited liabil- ity 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 com-
panies with more shareholders, especially pro- fessional 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 corporate form. Investors may have spe- cific preferences or requirements regarding the corporate form or jurisdiction. As a rule, in Bul- garia the joint-stock company is the preferred company form for a large number of the big- ger investors. The authors have seen no cases where investors have required the start-ups to change their jurisdiction, except in cases of list- ings (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 Bulgarian Stock Exchange, with the approval of the regulators, 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 companies registered as joint-stock companies in the coun- try or abroad. 3.2 Choice of Listing Bulgarian start-ups’ choice of exchange for list- ing depends on their target market and investor base. Domestic exchanges like BSE or BEAM offer easier access to local investors and sim- pler regulatory compliance. Foreign exchanges like London, Frankfurt or Warsaw provide greater visibility and access to international investors but
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