Management & Control Agreement (DUK) in Bulgaria — Key Features & Risks

What you will learn in this article

• What a DUK is and how it differs from an employment contract (with comparison table)
• How it is concluded and what it should contain
• Social security obligations for the manager and the company
• Tax treatment of DUK remuneration
• How and when a DUK can be terminated
• Key risks for the manager
• Answers to 8 frequently asked questions

What Is a DUK and How Does It Differ from an Employment Contract?

A Management & Control Agreement (Договор за управление и контрол, DUK) is a civil-law contract by which a commercial company (LLC or JSC) assigns the organisation, management, and representation of the company to a manager. The DUK is not an employment contract — it is governed by the Commercial Act (Art. 141(7) for LLCs and Art. 241(6) for JSCs), not the Labour Code. However, for tax and social security purposes, DUK remuneration is treated as employment income, which creates specific obligations.

The DUK is a bilateral, onerous, consensual civil-law contract. The manager undertakes to organise and manage the company’s operations at their own risk, in accordance with applicable legislation, the company’s articles of association, and the decisions of the General Assembly of shareholders/partners.

The key difference: under an employment contract, the employee provides their labour, while under a DUK, the manager commits to achieving a specific result — effective management of the company. The parties to a DUK are equal, unlike the employment relationship where the employee is subordinate to the employer.

Comparison Table: DUK vs. Employment Contract

Conclusion and Content

Form

The DUK must be in written form, which is also a validity requirement (Art. 141(7) CA). The contract is concluded on behalf of the company by a person authorised by the General Assembly of partners or by the sole owner.

Recommended Content

Since the law does not prescribe specific content, the parties are free to negotiate under Art. 9 OCA. It is advisable to address: the manager’s rights and obligations (scope of management, transaction limits, reporting duties), remuneration (amount, method, payment schedule), term (fixed or indefinite — for JSCs, board members are elected for up to 5 years under Art. 233(3) CA), liability, termination grounds, confidentiality, and non-compete clauses.

Registration in the Commercial Register

The manager is registered by name in the Commercial Register (CR) at the Registry Agency. A notarised consent with specimen signature is required. The DUK itself is not subject to publication in the CR. Empowerment and deletion of the manager take effect vis-à-vis third parties in good faith after registration in the CR.

Social Security Obligations

Legal Basis

The DUK manager is insured under Art. 4(1)(7) of the Social Insurance Code (SIC) — as a person assigned the management of a commercial company. This regime is deemed equivalent to employee insurance, but the DUK remains a civil-law contract.

Conditions

For insurance obligations to arise, both conditions must be met simultaneously: (1) the manager performs actual management activities, and (2) remuneration is determined in the relevant corporate document (DUK, GA minutes). If either is missing, no insurance obligation arises.

Insurance Risks and Rates (2026)

The DUK manager is subject to mandatory insurance for: sickness and maternity, disability due to general illness / old age / death, occupational injury and disease, and unemployment.

Insurable Income

Contributions are owed on received, including accrued but unpaid, gross monthly remuneration (Art. 6(3) SIC), but no less than the minimum insurable income. For 2026 (pending new budget), the minimum is EUR 550.71 and the maximum is EUR 2,111.64.

Pensioners as Managers

DUK managers are subject to mandatory insurance even if they are pensioners. This differs from self-insured persons (partners without DUK), who may opt out of insurance if they receive a pension.

Tax Treatment

DUK remuneration is taxed as employment income under the Personal Income Tax Act (PITA). This means: the tax rate is 10 %, the tax base is gross remuneration minus personal social security contributions, the company withholds and remits the tax, and the manager does not need to file an annual tax return solely for DUK income.

Example Calculation (2026)

For monthly DUK remuneration of EUR 2,000: personal contributions ~EUR 262, tax base EUR 1,738, tax (10 %) EUR 173.80, net pay EUR 1,564.20. Company-borne contributions: ~EUR 404.

Termination

The DUK may be terminated on the following grounds:

1. By mutual consent — no notice required
2. By General Assembly decision — the GA may dismiss the manager at any time without stating reasons. Art. 333 LC protection does not apply
3. With notice — if a notice period is agreed in the DUK
4. Expiry of term — if the DUK is fixed-term (for JSCs, mandates are up to 5 years)
5. Other grounds — liquidation, insolvency, death, or incapacitation of the manager

After termination, the manager must be deleted from the Commercial Register. If the company fails to file, the former manager may request deletion independently.

Risks for the Manager

1. No labour law protection — no paid leave (unless agreed), no LC compensation, no Art. 333 protection
2. Unlimited liability — the manager is liable for damages caused to the company during management (Art. 145 CA for LLCs, Art. 240a CA for JSCs)
3. Criminal liability — for mismanagement (Art. 219 Criminal Code), tax crimes (Art. 255–257 CC), fraud (Art. 209–211 CC)
4. Non-compete prohibition — under Art. 142 CA, the manager may not engage in competing activities without the company’s consent
5. No employment service credit — DUK time counts only as insurable service (for pension), not as employment service
6. Personal liability for company debts — in certain circumstances (e.g., piercing the corporate veil, failure to file for insolvency under Art. 627 CA)

Frequently Asked Questions

Need Assistance?

Drafting, amending, and terminating a DUK requires legal precision, as errors can lead to serious social security, tax, and corporate consequences.

If you need help with a management and control agreement, the team at Innovires Legal can assist you with preparation, review, and compliance. Contact us for a consultation.

This article is prepared for informational purposes and does not constitute legal advice. For specific legal advice tailored to your situation, please consult a lawyer.