Resignation of a CEO in a LLC and LTD in Bulgaria

In the management of limited liability companies, such as EOOD and Ltd, situations often arise in which partners or managers wish to retire from their positions. Such decisions can be due to various reasons - from personal changes in the life of the partner to changes in the strategic goals of the company. It is important to know that the process of leaving is regulated by Bulgarian legislation and requires compliance with certain procedures and steps in order to be carried out correctly and lawfully.

The role of the partner in an EOOD or Ltd is key, since he is part of the structure that determines the direction of development of the company. The departure of a partner can have a significant impact on the functioning and management of the company. Therefore, it is important to regulate this process through clearly defined and transparent mechanisms that guarantee the protection of the interests of both the partner himself and the company.

The departure of a partner in an EOOD or LTD requires the submission of an official notification and compliance with a certain notice period. This process is also bound by financial and legal consequences, which must be carefully considered and settled.

Let us now consider in more detail what are the requirements for leaving a partner or manager in limited liability companies (EOOD or LTD) in Bulgaria.

Leaving a partner/manager in a Ltd. /Ltd. - what are the requirements?

The departure of a partner or manager from a limited liability company (EOOD or LTD) is a complex process that requires compliance with a specific procedure according to the Commercial Law of the Republic of Bulgaria, depending on whether the person who wishes to leave the company has the status of a manager only, only a partner, or is both a manager and a partner at the same time.

Departure of the EOOD/Ltd by a manager. Change of company manager.

The manager of the Ltd plays a key role in the management and representation of the company. It is a mandatory sole body of the company and can only be a natural person who must be able to act. The selection and dismissal of the manager shall be carried out by the General Meeting of Shareholders or by the Sole Proprietor of the capital at EOOD. The decision on the exemption shall normally be taken by a simple majority of the capital, unless otherwise provided in the Company Agreement.

The manager has the right to be dismissed from office on his own initiative. In the event that the partners or part of them do not agree with the manager's wish to be released, or if no decision can be taken on his release, the manager has the opportunity to request his deletion from the Commercial Register. He must notify the company by written notification, which is best sent by a notary invitation to the address of the company entered in the Commercial Register.

After receiving the notification, the company has a period of 1 month to decide on the dismissal of the manager and apply for entry of this circumstance in the Commercial Register. If the company does not take these actions, the manager can apply for registration of the circumstance himself, providing proof of sending and receiving the notification, as well as that the one-month period has expired.

It is important to note that according to Art. 155, para. 1, item 3 of the Commercial Law, the public prosecutor has the right to demand the dissolution of the company if for 3 months it does not have a registered manager. This underlines the importance of timely recording changes in the management of the company.

The deletion of the manager has effect in relation to third parties in good faith from the moment of its entry in the Commercial Register. In cases where the manager is also a partner in the company, his dismissal as a manager usually does not affect his position as a partner.

Important! If the manager is also a partner in an LLC, then both the procedure for leaving a manager and leaving a partner should be carried out!

Departure of the EOD/Ltd by a partner

The termination of a partner's participation in an LLC is often a process that occurs when the partner fails to sell his share to the other partners or to third parties. This process is regulated by giving written notice of departure on the part of the partner.

In order to terminate his participation in the company, the partner must give written notice to the company, observing a minimum period of 3 months before the date of departure. It is possible that the company contract also regulates another, different term. It is important that the notice clearly and unambiguously expresses the will of the partner to leave the company and terminate his participation in it.

The notice can be filed at the office of the company or sent in various ways, including by mail, by courier, by e-mail, etc. In order to avoid legal disputes about proving the date of its receipt and content, it is often resorted to serving it through a notary. The notice period begins to run from the moment of its receipt by the company.

Upon expiry of the notice period, the partner's participation in the Ltd is automatically terminated. It is not necessary for the general meeting to decide on the dismissal of the partner, nor to settle the property relations or the fate of the company shares that he held.

The partner has the right to withdraw his notice of departure before the expiration of its term, which allows changing the decision if the circumstances so require.

Upon leaving, the partner has the right to receive the monetary equivalent of his share in the company. The valuation of this share shall be carried out on the basis of an interim balance sheet drawn up at the end of the month in which the notice expired. The law provides that the valuation of assets is carried out at their historical price or another, in accordance with the applicable accounting standards.

Judicial practice assumes that to determine the value of shares, the assets and liabilities of the company must be taken into account, forming a net asset. This value is divided by the number of shares forming the capital of the company in order to determine the equivalence of the shares of the leaving partner.

Thus, the process of leaving a partner in an LLC is strictly regulated and provides for clear steps for written notice, automatic termination of participation and calculation of the value of the company share.

Repayment of the company's share to a departing partner

After a partner leaves the LLC, the process of paying off his share takes place. The commercial law does not specify a specific deadline for making this payment, but the details can be regulated in the company contract. If the company contract does not provide for a specific period, the claim of the departing partner becomes due immediately after the expiry of the notice period. This means that the departing partner has the right to expect the payment of his share after that moment.

If the company does not pay the company share within the established period or if the partner does not agree with the method of valuation of his share, he has the right to file a claim against the company. The limitation period for such claims is 5 years, which gives enough time for the departing partner to take the necessary legal action.

Important! The limitation period for filing a claim against the Ltd for the payment of a company share to a departing partner is 5 years.

The balance sheet prepared by the company is not binding on the court and cannot be used as the sole evidence in challenging the valuation of the share. If there are disputes about the accounting entries, their regularity is established through a forensic economic examination. This is especially important if the company does not present an interim balance sheet.

It is possible that the departing partner and the company will reach an agreement on the amount, terms and method of payment of the share. Such agreements can provide flexibility and allow the issue to be resolved without the need for judicial intervention.

Thus, the process of paying the company share of a departing partner in an LLC includes various stages and possibilities, and the legal frameworks provide both protection of the rights of the leaving partner and dispute resolution mechanisms.

Registration of the departure of a partner in the Commercial Register

The process of registering the departure of a partner in an LLC in the Commercial Register is an important step that has a disclosing effect and is associated with a number of legal and administrative nuances.

It is important to emphasize that the member's membership in the LLC is terminated automatically from the date of expiry of the notice period, and not from the moment of entry in the Commercial Register. This entry is intended to inform the public about changes in the composition of the company.

After the departure of a partner, the other partners have the obligation to take one of the following actions:

1. Reduction of the capital of the company with the shares of the departing partner.
2. Taking over the exempted shares and contributing their value to the company.

Depending on the option chosen by the partners, the types of documents to be prepared for the entry of the departure in the Commercial Register are also determined. It is not mandatory to provide evidence of the disbursed share of the departing partner, although such is sometimes required.

Often, officials refuse to register if the application is not accompanied by a minutes of the general meeting or a decision of the other partners, from which it is clear what is happening with the shares of the departing partner, as well as an amended company agreement. The case law on this issue is mixed, with some courts overturning such refusals, while others affirming them.

There is also the problem of the possibility for the departing partner to declare his departure on his own, especially when the other partners and the manager are inactive. Although the law does not provide for the right of the departing partner to independently request its deletion, the case law is again mixed.

The process of registering the departure of a partner in an LLC is complex and includes various aspects that depend on the specific circumstances and case law. It is important to correctly and timely document all changes, as well as knowledge of the legal frameworks, to ensure the correct and lawful execution of these processes.

Necessary documents for the departure of a partner and manager from the LTD/EOOD

The necessary documents for the departure of a manager or partner from the LLC or EOOD requires careful compliance with the rules and the preparation of the correct documents. This procedure is critical for the proper registration and functioning of the company. Preparing the necessary documents is key to ensuring a smooth transition and avoiding legal disputes.

For a manager or partner who is a manager:

When only a manager leaves the Ltd or EOOD, the process involves filing a certain set of documents in the Commercial Register. These are:

1. Application form A4: Standard form for entries in the Commercial Register.
2. Written Notice of Leaving: A document formally notifying the company of the manager's intention to leave.
3. Evidence of receipt of the notification by the company: This may include a signed confirmation from the company.
4. Declaration under Art. 13, para. 4 and para. 5 of the Commercial Register Act: These declarations are necessary to certify the authenticity of the submitted documents.
5. Payment order for a paid state fee: Confirmation of payment of the relevant fees.
6. Power of Attorney: In the event that the documents are submitted by proxy.

For a partner who is not a manager:

When leaving a partner from an LLC who is not a manager, the situation is more complicated, since the entry of this circumstance in the Commercial Register does not depend on him, but on the manager of the company. Necessary documents include:

1. Written notice of departure: This notice must be in writing and it is advisable that it be in the form of a notarial invitation.
2. Evidence of service of the notice to the company: Such evidence is important in possible disputes.
3. Application for registration of the change in the Commercial Register: It is submitted by the manager or authorized person, since the partner who is not the manager does not have a direct right to file the application.

In situations where the company or the manager is inactive, the departing partner may have to take legal action for the official registration of his departure in the Commercial Register. This often leads to lawsuits and can be complex and time-consuming, so we advise you to contact us to refer you to a suitable corporate and commercial lawyer!

What are the consequences of leaving the EOOD/Ltd by a partner/manager?

The departure of a partner or manager from a limited liability company carries with it a number of consequences, both for the leaver himself and for the company. These consequences affect the legal and property relations between the two parties.

1. Annulment of resolutions of the general meeting: The former partner is not entitled to bring an action for annulment of decisions of the general meeting taken after his departure, except in cases where these decisions affect the settlement of property relations with him.
2. Claim for dissolution of the company: The departing partner may not file a claim for the dissolution of the company under Art. 155, para. 1, item 1 of the Commercial Law, since he is already an ordinary creditor of the company. Unsettled property relations between the departing partner and the company do not lead to the conclusion that the partner's participation in the company has not been terminated.
3. Share size: When a partner leaves on notice, the law does not allow the size of the leaving partner's share to be calculated on the basis of the market price of the company's assets. This happens only in the liquidation procedure of the company.
4. Company share vs. liquidation share: There is a difference between a company share and a liquidation share. When leaving a partner with notice, the value of the share is determined on the basis of the company's accounting statements, and not on the market price of the assets. A reduction in the property coverage of the company's capital may occur, but this must be done in the manner provided for in Art. 149 of the Commercial Law.

The departure of a partner or manager from the EOOD leads to important legal and property changes in the structure of the company. These changes require careful consideration and compliance with the relevant legal provisions in order to ensure legality and legal certainty for both the company and the departing partner or manager.