Shares and Transfers of Shares

Before buying shares, check their type, the seller’s title and the company’s articles. A transfer involves more than signing an ordinary contract or handing over a receipt.

What does a share certify?

A joint-stock company has capital divided into shares. Under Article 175 of the Commerce Act, a share certifies participation at its stated nominal value. Membership rights depend on the law, share class and articles; preference shares are possible. Article 183 sets the required particulars of certificated shares.

Registered shares, not newly issued bearer shares

Current Article 178(1) provides for registered shares. The amendment took effect on 23 October 2018. The old description of bearer shares transferred solely by delivery should not be used as the current general procedure for shares in a Bulgarian joint-stock company. An old bearer document requires investigation of compliance with transitional requirements and the company’s status.

Endorsement and the shareholders’ register

Under Article 185(2), certificated registered shares are transferred by endorsement. The transfer must be entered in the shareholders’ register to be effective against the company. The original certificate, chain of endorsements, transferor’s rights and requirements of the articles must be checked. A sale agreement and payment do not replace the necessary transfer steps.

The articles may impose additional transfer conditions, commonly associated with restricted-transfer shares. There is no general rule requiring every registered share to be offered to the other shareholders first: the actual articles and applicable law must be examined.

Provisional certificates and dematerialised shares

Provisional certificates under Article 167 are issued against contributions for subscribed shares. Their transfer is governed by Article 187 and the rules for registered shares. Merely calling a document a “certificate” is insufficient: its issue, signatures and the rights it certifies must be checked.

Dematerialised shares are issued and transferred under special statutory and depository procedures pursuant to Article 178(2). A certificate or statement does not replace the required entries. The procedure should not universally be described as an ordinary assignment or physical delivery of a paper share. Additional capital-market rules must be checked for public companies.

Value and documents

Nominal value reflects participation in capital; issue value is the price on issue; market value is the possible transaction price; book value is derived from accounting data. They need not be equal, and none alone establishes a fair purchase price.

Prepare the current articles, shareholders’ register, original shares or provisional certificates, contribution details and documents for earlier transfers. Encumbrances, special rights and necessary corporate resolutions must also be checked. Tomovi Law Firm can conduct a legal review and prepare the transaction documents.

Source: Commerce Act, Articles 167, 175, 178–185 and 187.