The Variable Capital Company (VCC) is a new type of corporate form introduced into Bulgarian commercial law, designed to provide a more flexible structure for small enterprises and investment participation. It may be incorporated by one or more individuals or legal entities, and the company is liable to its creditors only with its own assets.
1. Why the VCC Is Attractive for Investors
The main advantage of the VCC for investors is the combination of limited liability, variable capital, and equity participation, which allows for more flexible structuring of the relationship between founders and investors.
The company is liable to creditors with its own assets, meaning that the legal framework is based on the principle of the company’s separate assets from those of its shareholders or members. This is particularly important for investors seeking participation in a business while limiting their risk to the scope and terms of their investment.
2. Variable Capital: A Key Feature
The most significant legal characteristic of the VCC is that its capital is variable and is not subject to registration in the Commercial Register.
This distinguishes the VCC from traditional capital companies, where capital is subject to stricter registration requirements. In the case of a VCC, the amount of capital is determined by a resolution of the annual general meeting convened to review the annual financial statements. The calculation takes into account the capital at the end of the financial year and the change compared to the previous financial year.
From an investment perspective, this creates an opportunity for a more adaptive development of the company’s capital structure, particularly in cases involving staged financing, the admission of new investors, or changes in the economic value of ownership interests.
3. Shares and Classes of Shares
The capital of a VCC is divided into shares. Shares belonging to the same class must have the same nominal value, which may not be lower than 1 (one) eurocent.
The law allows shares belonging to different classes to have different nominal values. This is particularly relevant for investors, as it allows participation through different classes of shares. Such a structure may be used to organise different investment rights, economic interests, or financing stages, provided that the specific rights attached to such shares are structured within the limits permitted by law.
Against the shares they undertake, the shareholders make contributions, with the deadline for making such contributions determined by the company’s articles of association or by a resolution of the general meeting. Where a contribution is made in kind, its valuation is carried out by three experts appointed by the management board or, respectively, by the company’s manager. The nominal value of each share corresponds to the amount of the shareholder’s contribution.
4. Suitable for Small Enterprises
The VCC is designed as a legal form for small enterprises. The law expressly provides that a variable capital company may only be an enterprise with an average number of employees below 50 persons and with annual turnover not exceeding EUR 2,045,167.52 (BGN 4,000,000), and/or assets not exceeding EUR 2,045,167.52 (BGN 4,000,000).
This makes the VCC particularly suitable for investments in early-stage or developing companies that have not yet reached the scale of a larger corporate structure but require clearly regulated ownership participation and flexible financing opportunities.
5. Founders and Restrictions
A VCC may be incorporated by both individuals and legal entities, including by a single founder. This allows a project to initially be structured by one person and subsequently expanded through the admission of investors acquiring shares.
There is, however, an important restriction: a legal entity that has been declared insolvent may not act as a founder of a variable capital company. This limitation is relevant when conducting preliminary due diligence on participants in an investment structure.
6. Transformation and Further Development of the Structure
Commercial companies may be transformed through merger by acquisition, merger by formation of a new company, division, spin-off, spin-off of a sole-owner company, as well as through a change of legal form. The companies participating in a transformation may be of different types unless otherwise provided by law.
In the case of a change of legal form, a commercial company may be converted into a company of another type. The newly established company becomes the legal successor of the transforming company, which is dissolved without liquidation. However, new shareholders or members may not be admitted simultaneously with the change of legal form.
For investors, this means that the VCC may form part of a broader corporate development strategy, including future restructuring. However, the admission of new participants must comply with the statutory restrictions applicable to transformations.
7. Investment Profile of the VCC
The VCC is suitable for investors seeking:
- participation in a small enterprise with fewer than 50 employees and turnover and/or assets of up to EUR 2,045,167.52 (BGN 4,000,000);
- a corporate structure based on limited liability, where the company is liable to creditors with its own assets;
- a variable capital structure where capital is not registered in the Commercial Register and is determined annually;
- participation through shares, including shares belonging to different classes;
- flexibility in determining contribution deadlines through the articles of association or a resolution of the general meeting.
8. Practical Considerations for Investors
Before investing in a VCC, investors should verify whether the company meets the statutory thresholds relating to employees, turnover, and assets, as this type of company may exist only as an enterprise within the specified limitations.
Particular attention should be paid to the structure of shares and classes of shares, as the law allows different classes and different nominal values between classes. This is the main instrument for adapting an investor’s participation to the specific investment model.
Where contributions are made in kind, the statutory requirement for valuation by three experts appointed by the management board or the manager must be taken into account. This is particularly important for investments involving intellectual property rights, assets, technology, or other non-monetary contributions.
Conclusion
The Variable Capital Company is a legal form that combines limited liability, equity participation, and variable capital. Its focus on small enterprises makes it particularly suitable for early-stage investments, start-ups, and growing businesses where the capital structure needs to adapt to new investment rounds and changes in shareholders’ participation.
By providing greater flexibility in structuring ownership interests and financing arrangements, the VCC offers a modern corporate vehicle for entrepreneurs and investors seeking a balance between legal certainty and adaptability.
