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Choosing between a branch and a subsidiary requires distinguishing legal autonomy, liability, representation, accounting and taxation. The statutory references and formalities in the text must be checked against the current legislation. Closure cannot be reduced to deletion from a register without considering debts, employees, contracts and tax obligations.
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A foreign entity wishing to conduct business in Bulgaria may register a branch in Bulgarian with the Registry Agency’s Commercial Register (Article 17a(1) of the Commerce Act and Article 25 of the Investment Promotion Act). A branch in Bulgaria is not a separate legal entity, but it may enter into transactions whose rights and obligations arise for the foreign company rather than for the branch itself. Its lack of separate legal personality is also confirmed by the possibility of bringing proceedings against the foreign trader at the branch’s registered office (Article 20 of the Commerce Act). A Bulgarian branch has its own registered office and address, manager and business activity, which may differ from that of the foreign trader. These particulars are entered in the Commercial Register. A branch is a form of permanent establishment for tax purposes (§ 1, item 5(a) of the Tax and Social Security Procedure Code). Furthermore, a foreign trader’s branch must keep commercial accounts as an independent trader and prepare financial statements. The Bulgarian Commercial Register must contain details of the foreign entity (legal form and company or trading name, as well as the branch’s trading name if different, the register and registration number under which the foreign entity is registered, where the applicable law so provides, if different from the law of a… Under the Commerce Act, the following particulars must also be entered in the Commercial Register: closure of the branch; termination of the foreign entity; commencement of liquidation; continuation of business; termination and completion of the foreign company’s liquidation; and all insolvency court decisions entered in the register where the foreign entity is registered. A copy of the foreign company’s incorporation document or articles must be filed with the register, together with amendments, including after registration of the foreign entity in the local business register, and each annual financial report of the foreign entity after its filing or as required by the national law of its registration. Closing the branch. A branch’s advantage is that its termination does not require liquidation proceedings, but only an application to the Commercial Register after closure. In this respect, a branch is a good alternative to a subsidiary.