What is a VCC and why was it created?
The Variable Capital Company (VCC) is a new form of commercial entity introduced in Bulgarian legislation to provide startups with a modern, flexible legal framework comparable to the best global jurisdictions.
Before the introduction of the VCC, Bulgarian startups frequently incorporated in:
- Delaware, USA — for the flexible corporate structure and SAFE notes.
- Estonia — for e-residency and easy remote registration.
- United Kingdom — for investor recognition and the Ltd. structure.
The VCC is designed to offer all these advantages within the Bulgarian jurisdiction — with a 10 % corporate tax, 5 % dividend tax, and access to the EU market.
When did the VCC come into effect?
The legislative process for introducing the VCC went through several stages:
- August 2023 — adoption of amendments to the Commerce Act introducing the VCC as a new legal form.
- February 2024 — adoption of the secondary legislation — regulations for the electronic shareholder register and other technical requirements.
- 15 December 2024 — practical start of VCC registration in the Commercial Register. From this date, the Registry Agency accepts registration applications.
As of March 2026, there are already hundreds of registered VCCs, with the form gaining popularity among technology companies and startups attracting venture financing.
Key features of the VCC
- No minimum capital — unlike an LLC (EUR 1) and a JSC (EUR 25,000), the VCC does not require any minimum capital at incorporation.
- Minimum share value — EUR 0.01 — allows issuance of a large number of shares at a low nominal value, similar to stock.
- Capital is NOT registered in the Commercial Register — changes in capital are not subject to registration, radically simplifying fundraising and issuance of new shares.
- No escrow account required — no need to open an escrow account at incorporation, saving time and costs.
- Share transfers without a notary — shares are transferred in simple written form, without notarization and without registration in the Commercial Register.
- Different classes of shares — shares with different rights (voting, dividend, liquidation preference) can be issued, similar to preferred/common shares.
- Electronic shareholder register — a mandatory electronic register maintained by the company, reflecting the current ownership structure.
- Shareholder confidentiality — shareholders are not registered in the Commercial Register (unlike an LLC), providing greater confidentiality.
Comparison: VCC vs LLC
| Criterion | LLC / single-member LLC | VCC / single-member VCC |
|---|---|---|
| Minimum capital | EUR 1 | No minimum |
| Min. share value | EUR 1 | EUR 0,01 |
| Capital registration in CR | Yes — every change | No — capital is not registered |
| Escrow account | Mandatory | Not required |
| Notary for share transfer | Yes — notarization | No — simple written form |
| Share classes | No — all shares equal | Yes — different classes with different rights |
| ESOP (опции за служители) | Complex and expensive | Built-in support — up to 15 % of shares |
| Convertible loans | No explicit regulation | Explicitly regulated by law |
| Shareholder confidentiality | Public — registered in CR | Non-public — electronic register |
| Administrative costs for changes | High (fees, notary, CR) | Low (no CR, no notary) |
Vesting, ESOP, and convertible loans
ESOP (Employee Stock Option Plan)
The VCC provides an explicit legal framework for employee share options:
- ESOP may cover up to 15 % of the total number of company shares.
- The acquisition right is non-transferable — the employee cannot transfer it to third parties.
- Vesting conditions are defined in the articles of association or in a separate agreement.
- Upon departure before the vesting period expires, unexercised options lapse.
Convertible loans
The law provides explicit regulation for convertible loans (convertible notes), but with an important feature:
- Conversion is not automatic — the conversion conditions must be explicitly provided for in the company's articles of association.
- Upon conversion, the lender receives shares of the relevant class defined in the articles of association.
- This regulation is significantly simpler than the mechanism under an LLC, where convertible loans required complex legal constructions.
Vesting
The vesting mechanism allows for gradual acquisition of full rights over shares, tied to continued participation in the company. Typical vesting schemes include a 4-year period with a 1-year cliff.
Mandatory conversion thresholds
The VCC is designed for early-stage companies. Upon exceeding certain thresholds, the company is required to convert to another legal form (LLC, JSC):
| Criterion | Threshold |
|---|---|
| Average number of employees | Under 50 |
| Annual net turnover | До EUR 2 045 168 |
| Balance sheet total | До EUR 2 045 168 |
If the company exceeds two of the three thresholds for two consecutive reporting periods, it is required to convert by the end of the following financial year.
The conversion is carried out under the Commerce Act and does not terminate operations — the company continues to exist in a new legal form.
Management of the VCC
The VCC offers two management models:
- Manager — one or more individuals, similar to an LLC. The simplest option for small companies.
- Board of directors — a collective management body, suitable for companies with more complex structures and multiple investors.
Business Judgment Rule
The law introduces the business judgment rule — managers are not liable for business decisions made in good faith and on an informed basis, even if the outcome is unfavorable. This is a standard known from American corporate law.
Piercing the Corporate Veil
The law provides for piercing the corporate veil for controlling shareholders who abuse limited liability. A controlling shareholder who uses the company to the detriment of creditors may be personally liable for the VCC's obligations.
VCC registration
The VCC registration procedure is simplified compared to an LLC:
- Drafting the articles of association — the articles (not a partnership agreement!) define share classes, rights, ESOP conditions, and convertible loans.
- Signing the founding minutes — the founders' decision to establish the VCC.
- Filing an application in the Commercial Register — electronically.
- Registration — the Registry Agency processes the application within 5 business days.
Fee: BGN 55 (euro equivalent) for electronic filing — the same as for an LLC.
Remote: The entire procedure can be completed remotely through an authorized attorney, without physical presence in Bulgaria.
VCC naming
The name of a variable capital company must include the designation:
- "VCC" (DPK) — for a company with two or more shareholders.
- "single-member VCC" (EDPK) — for a single-member variable capital company.
The designation is added after the company name, similar to "OOD" or "EOOD."
Frequently asked questions
Need assistance?
The Innovires team can assist you with establishing a VCC, drafting articles of association with an appropriate share structure, an ESOP plan, and attracting investment.