Why do people register a DPK in Bulgaria?

An investment vehicle that has become a lifeline for buying a car

A new and highly progressive business form has appeared in Bulgarian corporate law — the Дружество с променлив капитал (DPK), a variable capital company. The legislator originally created it for entirely specific purposes: serving large investment projects, IT start-ups and technology companies raising venture capital.

In practice, however, this specific legal form has unexpectedly found another, very practical use among foreigners staying in Bulgaria under temporary protection status.

Let us look at what the DPK was originally created for and in which situations it can genuinely help.

The true purpose of the DPK: investment and flexibility

The main economic essence of the DPK is contained in its very name — it is a company with variable capital. Unlike the classic LLC (OOD (LLC) / EOOD (single-member LLC)), here the amount of capital and the composition of the participants are not rigidly fixed in the Commercial Register. All movement of shares is reflected only in an internal document — the Register of shareholders.

This is an ideal solution for large-scale projects and start-ups, because:

• It allows investors to be brought in easily over several rounds without bureaucracy and without constantly re-registering documents with government bodies.
• It makes it possible to issue different classes of shares flexibly (for example, preferred shares with a veto right or multiple votes).
• It allows option programmes (ESOP) to be implemented easily in order to motivate key employees.
• All settlements and the share capital are tied exclusively to the euro.

At the same time, clear restrictions apply to the DPK, confirming its focus on small and medium-sized innovative business: the company must employ fewer than 50 people, and its annual turnover or the value of its assets must not exceed 4 million euros. If a project outgrows these limits, it is obliged to transform into a classic LLC or a joint-stock company.

The DPK as a lifeline for buying a budget car

In addition to its main investment function, the DPK is today actively used by Ukrainians with temporary protection status as a temporary technical solution for buying personal transport.

Registering a car directly to an individual with temporary protection at KAT (the Bulgarian traffic police) is impossible — the vehicle must be registered to a legal entity. When setting up a standard LLC (EOOD/OOD), founders often face strict compliance requirements at Bulgarian banks: far from all financial institutions agree to open capital deposit accounts for foreigners, and those that do charge very high tariffs and fees for checking documents.

This is where the DPK acts as a “lifeline”, since it has an important legal advantage: by law, its registration does not require opening a capital deposit account at a bank at all. The company is created without paying in minimum capital in advance, which makes it possible to obtain a legal entity quickly and register the car to the firm.

An important restriction: the limit on cash payments

When using a DPK to buy a car, you need to be clearly aware of the financial framework of this instrument. This arrangement works effectively only when it comes to buying a budget car costing up to 5,113 euros.

The point is that Bulgaria has a strict statutory restriction on cash turnover. If the price of the car exceeds this threshold, settlement between buyer and seller must be made exclusively by bank transfer. And for that the company will in any case need a full current account at a bank, and when opening it you will once again face bank checks and tariffs.

What to choose for a real business: an LLC or a DPK?

If your goal is not simply to buy an inexpensive car but to run a fully-fledged commercial activity in Bulgaria, then the LLC (EOOD / OOD) remains the indisputable priority.

Despite the stricter requirements for opening a capital deposit account and the accompanying bank fees, the classic LLC has a key advantage — absolute trust. This business form is clear and familiar to everyone:

• Banks open current accounts and issue loans to classic OOD (LLC) companies far more willingly and quickly.
• Business counterparties and suppliers perceive an OOD as a stable, transparent and predictable partner whose structure and capital are clearly visible in the official Commercial Register.

The DPK, in turn, remains a specialised instrument: either for complex venture structuring involving investors, or as a temporary legal solution for a narrow task such as purchasing an inexpensive car.

If you need to register a business in Bulgaria, choose the optimal legal form for your objectives or resolve the question of registering assets, our specialists will take on full support of the process and subsequent accounting services.