Not-for-profits in Bulgaria

1st July 2020
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Bulgarian law provides for two forms of not-for-profit organisation:
● Incorporated association (sdruzhenie); and
● Foundation (fondatsiya)

The incorporated association (Association) and the Foundation – together, not-for-profits or “NPOs” – are governed by the Not-for-Profit Organisations Act (Act).

Each form of NPO can be classified as promoting the public or private interests. Which interests are promoted determines the legal rights and obligations of a not-for-profit and may affect its governance. Whether to serve the public benefit is chosen initially on registration, and can be changed only in one direction – from private to public. This status is also important for the tax position of the organisation. Not-for-profits may carry out auxiliary
economic activities only insofar as necessary for the pursuit of their primary objects.

Incorporated Association

The association is a not-for-profit with a corporate structure. It must have at least 3 members at incorporation but may have more. Other members can join at any time, subject to subscribing to the Articles of the Association. Members can also leave. Members can be legal or natural persons.

An annual membership fee may be provided for in the Articles and the receipts are used to pursue the purposes of the Аssociation, which must not be commercial. However, the Association may promote the development of a branch of industry or a specific style of investment, etc, or engage in business through a subsidiary.

The governance arrangements for an Association can be relatively freely determined by the incorporators and/or members at any time, subject to certain mandatory legal provisions.

Foundation

The Foundation is a form of not-for-profit with no corporate structure and no membership.

The Foundation requires assets (in cash or non-cash form) which are contributed by one or more settlor(s). The settlors appoint the initial executive body and may retain powers of appointment during their lifetime. The executive body subsequently manages theFoundation’s affairs in accordance with the Foundation’s constitutional documents. The membership of the executive body can be changed by the settlors (if alive) or (subject to the constitution) by the executive body.

As with the Association, a Bulgarian Foundation can incorporate a subsidiary or hold shares in domestic or foreign companies and a variety of other assets.

Both types of not-for-profit are subject to registration with the Company Registry. Both must also declare their beneficial owner(s) or controller(s). This information is publicly available online here. For more information, please contact us at [email protected]

Authors: Nevena Bekyarova & Kamen Shoylev

© New Balkans Law Office 2020

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© New Balkans Law Office 2020