Setting up a holding company in Bulgaria often begins with a simple question: “How can we structure our companies more efficiently?” The answer, however, is rarely limited to registering a new company. A holding structure affects ownership, taxation, control, financing, succession and the future sale of the business.

In brief: why this matters

A holding company can be a very useful structure when a business has outgrown the model of “one company – one activity – one owner”. It can help manage several companies more effectively, separate assets from operational risk, prepare for an investor or sale, and regulate relations between shareholders more clearly.

But a holding company is not a universal solution. If it is created too quickly or without proper planning, it may create tax issues, shareholder disputes, complications in transferring shares, unclear control over subsidiaries and difficulties in a future transaction. That is why the right approach does not start with the word “holding”, but with the specific business objective.

What is a holding company under Bulgarian law?

In everyday business language, the term “holding” is often used broadly. Many entrepreneurs associate it with a group of companies, a parent company or a structure that holds participations in other businesses. In the legal sense, however, a holding company has a specific regulation under the Bulgarian Commercial Act.

A holding company may be a joint-stock company, a partnership limited by shares or a limited liability company whose purpose is to participate in other companies or in their management. The law also requires that at least 25% of the capital of the holding company be directly invested in subsidiaries.

This is an important distinction. Not every parent company is necessarily a holding company within the meaning of the Commercial Act. Conversely, it is not always necessary for a business to create a formal holding company in order to achieve its objectives.

In practice, we often see a different situation. The owner says they want a holding company, but after a proper discussion it turns out that the real goal is asset protection, preparation for an investor, succession planning, separation of risky activity or facilitation of a future sale. In such cases, the legal form must follow the business logic, not the other way around.

When does it make sense to set up a holding company?

A holding structure makes sense when the business can no longer be managed conveniently through a single company. This usually happens where there are several different activities, several shareholders, high-value assets or plans for expansion.

For example, one company may conduct trading activities, own real estate and also have a separate company for software, manufacturing or distribution. If all of this remains within one company, the operational risk from one activity may affect assets that should reasonably be separated.

Another typical case is the family business. A holding company can help concentrate ownership in one company, while the rights of heirs, restrictions on sale, governance and mechanisms for resolving disputes are regulated in advance.

A holding company may also be useful when an investor is expected. It is easier for an investor to understand an organised group where it is clear which company owns the assets, which company carries out the operating activity, where the employees are, where the contracts are and how cash flows move.

Адвокатско дружество „Василев и партньори“ can assist at this first stage — not with a ready-made template, but with an analysis of whether the business needs a formal holding company, an ordinary parent company, a shareholders’ agreement, an investment agreement or a combination of several instruments.

Choice of legal form: OOD, EOOD, AD or EAD

The choice of legal form is one of the first practical mistakes when building a holding structure. Sometimes owners choose an AD because it sounds more serious. In other cases, they choose an EOOD because it is faster and cheaper. In both cases, the approach may be wrong if it is not linked to the real objective.

OOD or EOOD

An OOD or EOOD is usually the more flexible option for more closed structures. It is suitable where ownership is concentrated in one person, a family or a small group of shareholders and there is no expectation of quickly bringing in multiple investors.

This form works well for small and medium-sized groups, real estate holding companies, family companies or entrepreneurs who want to place several operating companies under one parent company.

However, particular attention must be paid to the articles of association. If they are drafted formally, without real rules on voting, transfer, exit, succession and deadlock between shareholders, the problem usually appears later — in a dispute, divorce, succession, investor entry or sale.

Following the introduction of the euro in Bulgaria from 1 January 2026, the registered capital of capital companies is converted ex officio by the Registry Agency. This does not mean that the companies’ documents should remain unchecked. In a holding structure, it is reasonable to review the incorporation deeds, articles of association and statutes in light of the new capital values and the internal rules of the group.

AD or EAD

An AD or EAD is more suitable for more complex structures. This is particularly true where investors are expected, different classes of shares are planned, a future sale is contemplated, easier transfer of participations is required or higher standards of corporate governance are needed.

A joint-stock company is usually more administratively demanding. It requires more documents, stricter organisation and more careful management of corporate bodies. In larger groups, however, this complexity is often justified.

For example, if an investment entry, bank financing or future exit is planned, an AD may provide a more convenient framework. It allows clearer structuring of shareholder rights, transfer restrictions, options, exit rights and control mechanisms.

Related questions on the choice of legal form

1. Does a holding company always have to be an AD?
   No. Bulgarian law also allows a holding company to be an OOD. The more important question is the objective — asset protection, investor entry, sale, succession or management of a group of companies.
2. Is an EOOD suitable for a holding company?
   Yes, where there is one owner and the structure is relatively simple. If, however, an investor, family succession or sale of part of the business is expected, it is more prudent to discuss other options as well.
3. Can the holding company carry out its own activity?
   Yes. A holding company may participate in other companies or manage them with or without its own commercial activity. The practical question is whether such own activity introduces unnecessary risk into the parent company.

How a holding structure is built in practice

At first glance, building a holding company seems easy: a new company is incorporated and starts holding participations in the other companies. In reality, there are several different approaches, and each has different legal, tax and accounting consequences.

The first option is for a new parent company to acquire shares or quotas in existing companies. This may be done through a sale and purchase of shares or quotas. This approach is relatively understandable, but the price, payment method, source of funds, tax effect and restrictions in the corporate documents must be assessed.

The second option is an in-kind contribution. An in-kind contribution means that instead of cash, an asset is contributed to the capital of the company. This may be a company quota, shares, real estate, a receivable or another asset that can be valued. Here, the valuation, title documents, registrations and possible tax consequences are important.

The third option is transformation. This may include merger, consolidation, division or spin-off. In larger groups, transformation is sometimes the cleaner approach, but it requires more serious preparation, plans, resolutions, deadlines, creditor protection and registration actions.

Адвокатско дружество „Василев и партньори“ can prepare a legal map of the structure before documents are drafted. This includes a review of articles of association, transfer restrictions, status of assets, potential tax effects and risks of future shareholder disputes.

Tax and accounting issues in a holding structure

Bulgaria has a 10% corporate income tax, which often makes the country attractive for business structures. The low rate, however, does not mean that every transfer, loan or dividend within the group is safe.

In a holding structure, particular attention should be paid to dividends, loans between related parties, management fees, licence fees, hidden profit distributions and transfer pricing.

The term hidden profit distribution is particularly important. This is a situation where a company formally pays an expense, bonus, loan, fee or other amount, but economically that amount represents a distribution of profit to an owner or related party. The consequences may include additional tax assessments, interest and penalties.

Another important term is transfer pricing. It concerns transactions between related parties. If one company in the group provides a loan, service, licence or management to another company within the same group, the terms must be market-based and documentarily defensible.

Dividends also cannot be assessed in general terms. It matters whether the recipient is an individual, a Bulgarian company, a company from the European Union or a person from a third country. In international structures, the applicable tax treaties must also be reviewed.

Frequently asked questions on holding company taxation

1. Can a holding company receive dividends from subsidiaries?
   Yes, but it must be assessed who pays the dividend, who receives it and whether there is a cross-border element. The tax result is not the same in all scenarios.
2. Are loans between group companies a problem?
   Not in themselves, but they may become a problem if they are not on market terms. During an audit, the revenue authorities may challenge the interest, term, security or economic rationale of the loan.
3. Is a preliminary tax analysis necessary?
   For larger structures — yes. Адвокатско дружество „Василев и партньори“ can assist with legal and tax structuring together with accounting and tax experts.

Risks when setting up a holding company

Possible problems	How we can assist you
Wrong choice between OOD, EOOD, AD or EAD: the structure may prove unsuitable for investors, succession, sale or control.	Legal structuring: Адвокатско дружество „Василев и партньори“ analyses the owners’ objectives and proposes a structure according to control, tax effects, future investors and a possible sale.
Shareholder dispute: lack of clear rules may lead to deadlock, litigation, delayed transaction or loss of negotiating position.	Shareholders’ and partners’ agreements: we prepare articles of association, shareholders’ agreements, exit rights, non-compete restrictions and deadlock resolution mechanisms.
Tax risk regarding dividends, loans and management fees: payments between related parties may be challenged during an audit.	Legal and tax review: we review the group’s cash flows and prepare a contractual framework that reduces the risk of a dispute with the revenue authorities.
Problems with in-kind contribution or asset valuation:errors in valuation or documents may delay registration or create future claims.	Assistance with in-kind contributions and registrations:we assist with the legal analysis of assets, document preparation and actions before the Commercial Register.
Omissions regarding beneficial owner, AML and reporting: a complex structure may lead to incomplete declarations, sanctions or difficulties with banks, investors or regulators.	Ownership review and registration actions: we review the ownership chain and prepare the necessary declarations, resolutions and applications.

Registration, AML and reporting obligations

A holding company does not end with registration. After it is created, ongoing obligations begin — corporate resolutions, accounting, reports, registry filings, declarations and control over the ownership structure.

The Bulgarian Measures Against Money Laundering Act requires information on beneficial owners to be entered in the relevant registers. This is particularly important in more complex ownership chains, foreign companies, trusts or similar arrangements.

From an accounting perspective, a holding company may also trigger obligations for consolidated financial statements. The Bulgarian Accounting Act provides for the publication of annual financial statements and, where applicable, consolidated financial statements in the Commercial Register by 30 September of the following year.

This is particularly important for CFOs, owners and investors. A holding company is not just a “legal box”. It creates reporting duties, internal documents, resolutions, audit issues and a need for control over information.

Competition law risks in acquisitions

If the holding company acquires an independent business, an obligation to notify the Bulgarian Commission on Protection of Competition may arise. This depends on turnover, control and the economic logic of the transaction.

A mistake here can be costly. If the transaction is implemented without the required clearance, the consequences may include delay, sanctions, inability to complete the transaction and loss of negotiating position.

In larger acquisitions, Адвокатско дружество „Василев и партньори“ can carry out a preliminary analysis of whether notification is required, prepare the documents and assist in communication with the regulatory authorities.

Frequently asked questions on control and governance

1. Does the holding company need a separate management team?
   Not always, but it is advisable for the management of the parent company to be clearly distinguished from the operating companies. Otherwise, roles and responsibilities may become blurred.
2. How is the owner protected from actions of managers in subsidiaries?
   Through well-drafted articles of association and statutes, transaction limits, prior approvals, reporting duties, internal rules and control rights.
3. Can a holding company facilitate the sale of the business?
   Yes. If the structure is organised in advance, the sale of shares or quotas may be faster, more transparent and easier for investors to understand.

What is the correct order of work?

A good holding structure is built in the right order. If the order is reversed, the documents may look formally correct, but the structure may fail to solve the real problem.

First, the objective must be clarified. Is the aim asset protection, group management, succession, investment, sale, international expansion or separation of risky activity?

Then the legal form is chosen. This is where the number of owners, future financing, transfer restrictions, tax consequences, possible sale and need for corporate control must be assessed.

Next comes the analysis of existing companies, real estate, receivables, contracts, employees and licences. Sometimes an important contract contains a change-of-control restriction. Sometimes a creditor must give consent. Sometimes the asset should not be moved; instead, the operational risk should be separated.

Only then are the documents prepared: incorporation deed, articles of association, statute, transfer agreements, shareholders’ agreements, corporate resolutions, declarations and registry applications.

Finally, internal governance is set up. This includes reporting, control rights, approvals for significant transactions, dividend policy, financing rules and dispute resolution mechanisms.

This is not a matter that should reasonably be left “for later”. In holding structures, later corrections are usually more expensive, slower and riskier than proper planning at the beginning.

Conclusion

Setting up a holding company in Bulgaria can be a strong instrument for growth, asset protection, management of a group of companies and preparation for investment or sale. But this is true only when the structure is built with legal, tax and business logic.

The most important point is not to start with the name “holding”, but with the owners’ objective. Sometimes the correct answer is a formal holding company. Sometimes it is better to use an ordinary parent company, a shareholders’ agreement and clear governance of the subsidiaries.

For entrepreneurs, investors and managers, an error in the initial structure may lead to a tax dispute, blocked transaction, shareholder conflict or difficulty in selling the business.

If you do not want to risk errors in the structure, taxation, registrations, shares or future sale, you may entrust the matter to Адвокатско дружество „Василев и партньори“.

Frequently asked questions about setting up a holding company

1. How long does it take to set up a holding company?
   It depends on whether a new company is being created or an existing group is being restructured. Simple registration is faster, but transfers of shares, in-kind contributions or transformations require more preparation. For a concrete plan, you can contact us.
2. Is it better for the holding company to be an OOD or an AD?
   An OOD is more suitable for closed structures, while an AD is more appropriate where there are investors, more complex rights and a future sale. The choice should be made after analysing the objectives. If you are uncertain which form is suitable, contact us.
3. Can I transfer existing companies under a new holding company?
   Yes, but the correct mechanism must be chosen — sale of shares, in-kind contribution, transformation or another structure. Each option has different tax and legal consequences. You can contact us for a preliminary review.
4. Are there tax advantages to a holding company?
   There may be, but not automatically. Dividends, loans, interest, related parties and international payments must be analysed. An incorrect structure may create more problems than benefits. If you need a tax and legal assessment, contact us.
5. Is a shareholders’ agreement necessary in the holding company?
   In most cases — yes. Especially if there are several owners, an investor, family heirs or a future exit. The agreement may regulate voting, sale, deadlocks, competition and protection of minority participants. For preparation of such a framework, you can contact us.
6. Can a holding company be useful for international business?
   Yes. A holding company can facilitate the management of companies in different countries, cross-border transactions and centralised ownership. But then tax treaties, registration obligations and beneficial ownership control become even more important. In an international structure, it is prudent to consult us in advance.

Warning
The information contained in this article is for general informational purposes only and serves as a basic orientation on the subject according to the legal position as of the date of publication of the article. Although we strive for maximum accuracy of the content, legal rules and their interpretation develop over time. To verify the current text of the provisions and their application to your specific situation, you should contact us directly. We are not liable for any damages arising from independent use of the information in this article without prior individual legal consultation. This article does not constitute a legal opinion.