Does a company close automatically when its owner dies?
In principle, no. An OOD share is inherited (Article 129(1) of the Commerce Act). An EOOD is wound up only if the founding act does not provide otherwise and the heirs do not ask to continue the business (Article 157(1) of the Commerce Act).
I inherit a share in an OOD with other partners — do I automatically become a partner?
Not automatically. The property right in the share is inherited, but admission as a partner as a rule requires a decision of the general meeting (Article 137(1)(2) of the Commerce Act), unless the partnership agreement provides otherwise.
What documents are needed to inherit a company share?
A certificate of heirs, a document proving the death, the declarations required by the Commerce Act and updated founding documents, filed for entry in the Commercial Register.
The death of a partner, or of the sole owner of a company’s capital, puts to the heirs a question they have rarely met — what happens to the share in the commercial company. A company share is a property right and, like real estate or a bank account, it falls into the estate and passes to the heirs by law or by will.
The company does not cease to exist
There is a common idea that a company is closed automatically together with its owner. In principle that is not so. The Commerce Act provides that a company share can be transferred and inherited (Article 129(1) of the Commerce Act), and for single-member companies it expressly allows the heirs to continue the business (Article 157(1) of the Commerce Act). In other words, the fate of the company depends first of all on the will and actions of the heirs, and does not follow automatically from the mere fact of death.
What exactly is inherited
The property right in the share of the capital is inherited. When there is only one heir, the position is relatively simple. When there is more than one heir, they acquire the share jointly until they settle their relations among themselves, and the exercise of the membership rights during that period is bound by the requirement of joint action laid down in the law.
Two different situations must be distinguished. One is inheriting a share in a company in which the deceased was one of several partners — here the consent of the remaining partners is usually also needed for the heir to enter the company, because admitting a new partner as a rule requires a decision of the general meeting (Article 137(1)(2) of the Commerce Act), unless the partnership agreement provides otherwise. The other is inheriting the capital of a single-member company in which the deceased was the sole owner — here the heirs decide alone, without anyone else’s consent, whether and how to continue the business.
An important distinction: inheriting the company share (the property right) is not the same as automatically acquiring membership rights in the company. The heir to a share in an OOD with other partners is a third party to the company until admitted as a partner — unless the partnership agreement expressly provides otherwise.
What documentation is needed
Whichever route the heirs choose, a certificate of heirs, a document proving the death of the partner or owner, the declarations under the Commerce Act connected with the transfer of the share, and an update of the company’s founding documents are usually required. Each case has its own features, however — depending on the number of heirs, the type of company and their wish to continue the business together or to have only one of them take it over.
Features when the heirs are foreign citizens
When the deceased or the heirs are foreign citizens, additional documents issued by foreign authorities are usually required — such as a certificate of heirs or a death certificate — which, depending on the country, may have to be legalised and accompanied by a certified translation into Bulgarian. When the heirs cannot appear in person in Bulgaria, a representative can be authorised, which also requires certain formal requirements to be observed.
Inherited a share in a Bulgarian company and not sure how to proceed? Every case has its own features.
+359 896 963 447A mix of inheritance and commercial law
Inheriting a company share combines the rules of inheritance law and commercial law and includes specific requirements for the form of the documents and the regularity of the entries in the Commercial Register. That combination is also why the subject raises so many questions in practice — heirs often do not suspect that, besides the inheritance case before a notary, a separate procedure before the Commercial Register awaits them.
Frequently asked questions
Nikolay Hristev, Plovdiv Bar Association