Acquisition of the enterprise of a Sole Proprietor by its heirs | Deyan Sotirov

This article refers to “acquisition of the enterprise of a Sole Proprietor” in situations where following the latter’s death its heirs are willing to carry on the business activity of the deceased. If there are no successors to the enterprise willing to carry on the business, then the Sole Proprietor’s business name should be deleted from the Commercial Register.

General Information

The business activity can be carried on only by the heir who has acquired the enterprise. The latter can be acquired by only one of the heirs and that raises serious issues in the event where the deceased has more than one heir. In such situation heirs would be required to reach mutual consent on how and who is to acquire the enterprise.

Practically, the best option for the timely securing of a holder entitled to organize and manage the business activity would be entering into a notarized agreement (settlement) between the heirs on which of them is to acquire the enterprise of the deceased Sole Proprietor.

Legal theory and practice are contradictive in determining the legal nature of the acquisition of a Sole Proprietor’s commercial enterprise – whether such acquisition refers only to the activity being carried on or also covers and effects the arrangement of the property relations between the coheirs with regard to the commercial enterprise as a separate part of the estate of the deceased Sole Proprietor. In my opinion, answering such question would require taking into account the specific content of the document materializing the consent in any partucular situation – if such document effects distribution of the inheritance or has other translative effect towards the inherited portions of the enterprise, then it should be recognized that the one acquiring the enterprise also becomes its owner.

The acquisition of a Sole Proprietor’s commercial enterprise by one of its successors pursuant to Art. 60, par. 2 of the Commerce Act is subject to entry into the Commercial Register.

If the acquiring successor does not already have a registration as a Sole Proprietor prior to the acquisition, he/she would need to request such registration simultaneously with the entry of the acquisition – thus being allotted a new unified identification code. The heir who is acquiring the enterprise of the Sole Proprietor may keep its business name but would need to add his/her name (i.e., the name of the new owner) as well.

Application and Necessary Documents

A special application needs to be filed with the Commercial Register for the purposes of the acquisition to be registered – a standard form application V1 (В1 in Bulgarian). The application may be filed via the Internet as well – by being signed with an electronic signature. A lawyer may be authorized for such purposes as well – the power of attorney should be explicit but does not require any notarization of the signature.

The following documents need to be enclosed to the application:

Notarized agreement on the acquisition of the enterprise;

Death certificate;

Heirs certificate;

Certificate by the NRA under Art. 77 of the TSIPC;

Declaration on the truthfulness of the stated for registration circumstances and acceptance of the submitted for announcement acts;

Document for paid state fee.

You don’t need to submit an A1 application form for the deletion of the Sole Proprietor – such deletion is to be carried out ex officio. An additional application for deletion would be needed only where the heirs are not willing to carry on the business activity. When the acquiring successor has not been registered as a Sole Proprietor himself/herself, an additional A1 application form would need to be submitted for the purposes of such registration together with the respective enclosures thereto.

Fees and Other Costs

Pursuant to the Tariff on the State Fees Collected by the Registry Agency, the state fee for entering into the Commercial Register a transfer of an enterprise of a Sole Proprietor is 30 Levs or 15 Levs when the application is filed electronically, including by an authorized lawyer.

Information about the due attorney fee may be found on page Fees. Additional costs for notarization fees will apply as well (depending on the particular situation – e.g., the number of successors, etc.).

Questions and Answers on the topic:

QuestionDimitrova02.01.2012, 22:23

How to terminate the employment contracts upon acquisition of a Sole Proprietor?

The owner of a Sole Proprietor passed away in April 2011. On 19.12.2011 his wife acquired the enterprise and, respectively, has been allotted a new UIC. Since the old enterprise had employment contracts in effect and social insurance contributions had been made, what should we undertake with regard to the new Sole Proprietor in order to dismiss the employees?

AnswerAttorney Sotirov07.01.2012, 16:30

I am not sure whether or not I understand correctly your question. Anyway, in my opinion upon acquisition of a Sole Proprietor’s enterprise by one of its successors the provision of Art. 123 of the Labour Code should apply, i.e. the employments contracts are not automatically terminated – in such situations the rights and obligations of the transferor employer arising from the employment relationships existing on the date of the change will be transferred to the new transferee employer (notification should be sent to the NRA). Outside such hypothesis, if you need to dismiss the employees, you would be required to follow and observe the general terms and prerequisites of the Labour Code to achieve that (see Art. 325 et seq. of the Labour Code).

QuestionM. M.17.07.2012, 10:33

Can a Sole Proprietor’s successor acquire only the enterprise without the business name?

Hello, when inheriting a Sole Proprietor and a single-person LLC (the latter has already been registered in the name of the new owner), is it feasible to have the Sole Proprietor’s enterprise transferred over to the single-person LLC directly, without the heir first being registered as holder of the deceased proprietor’s enterprise and business name, respectively? Are there any legal barriers for accomplishing that and if not, why are registry officials making it problematic?

AnswerAttorney Sotirov17.07.2012, 20:47

Your question does not provide any details as to the reasons of the registry officials and that’s why I am not able to comment on whether or not such reasons are well sustained. In my opinion, the problem in the particular situation is rather “technical” than legal and the solution should also be “technical”. You could go first through an enterprise acquisition procedure (with the respective entry into the Commercial Register) and then, as a second step, transfer the so acquired enterprise. That way you will not need to keep the business name after the transfer to the single-person LLC and the Sole Proprietor may be deleted from the Commercial Register (if you want so).

QuestionAlexandrova15.10.2012, 14:20

What should we undertake in order to carry on the business of a deceased Sole Proprietor?

Dear Mr. Sotirov, I have the following questions to you: my husband passed away last month; he was registered as a Sole Proprietor conducting business in the agricultural sector (apple garden on municipal land). The Sole Proprietor has assets and liabilities. My husband left two successors – me and our son. What should we undertake in order to carry on the business activity?

AnswerAttorney Sotirov15.10.2012, 20:14

In order to be able to carry on the business of the deceased Sole Proprietor you will need to acquire its commercial enterprise. For such purposes you will need to have an agreement (settlement) between the heirs signed and notarized and then submitted to the Commercial Register with the Registry Agency (by using a standard form application). The procedure is explained in detail in the article here above.

QuestionKioseva06.06.2013, 02:28

What should be marked in the notification to the NRA under Art. 77 of the TSIPC?

Hello, Mr. Sotirov. Deceased Sole Proprietor has left one successor – his daughter who is now willing to acquire the enterprise. She is supposed to file a notification with the NRA under Art. 77 of the TSIPC – my question is: what should be marked therein, because the daughter doesn’t want to delete the registration but to carry on the business activity?

AnswerAttorney Sotirov06.06.2013, 09:08

Upon acquisition of the enterprise of a deceased Sole Proprietor the respective person needs to file a notification with the NRA under Art. 77, par. 1 of the TSIPC – selecting the option named “acquisition of an enterprise pursuant to Art. 60, par. 2 of the Commerce Act”. Even if such option is unavailable for some reason, it would be still strongly recommended to have such text inserted and selected in some way – because if the certificate indicates “transfer of an enterprise pursuant to Art. 15 of the Commerce Act”, you would most probably be denied entry into the Commercial Register.

QuestionGerdzhikov24.09.2014, 22:19

Can separate assets be excluded from the enterprise of a Sole Proprietor?

Hello, Mr. Sotirov! Is it possible upon acquisition of a Sole Proprietor’s enterprise the real estate properties included therein not to be subject to transfer when subsequently selling or donating the enterprise? In other words, can we exclude such properties from the enterprise upon the transferring of the latter?

AnswerAttorney Sotirov31.10.2014, 15:03

Your question is not clear enough – as far as I understand it correctly, my opinion is that such exclusion of real estate properties upon acquisition (or subsequent transfer) of a Sole Proprietor’s commercial enterprise would not be permissible. It is possible to transfer an autonomous part of the commercial enterprise but in the particular situation that doesn’t seem to be the case. In my opinion, such exclusion should be carried into effect in advance and, respectively, duly reflected in the accounting records.

QuestionIvan26.02.2021, 12:21

Can the enterprise of a deceased Sole Proprietor be bought up?

Hello, Mr. Sotirov. My father was registered as a Sole Proprietor but he passed away and now we (me along with my sister and mother) inherit the said proprietor. My sister wants to carry on with the business of the Sole Proprietor and for that purpose she is planning to open a new company (LLC) which is then to buy up the Sole Proprietor. Please, explain whether or not this is the right way to proceed and will the buyer (the new LLC) have to pay any VAT considering that such transaction would be inheritance related? Please, let us know if you have any other suggestions. Thanks a lot.

AnswerAttorney Sotirov10.03.2021, 16:59

The business of the deceased Sole Proprietor can be carried on following the acquisition of its commercial enterprise by one of the inheritors – as covered in detail in the article above. After the enterprise has been acquired and such circumstance duly entered into the Commercial Register, the respective inheritor (in this situation – your sister) would be able to carry out the transfer of the commercial enterprise pursuant to the general procedure (Art. 15 et seq. of the Commerce Act) – in favor of the new limited liability company to be in the meantime established and registered at the Commercial Register. In my opinion it should be legally possible that the LLC buys up the enterprise of the Sole Proprietor without necessarily a separate acquisition procedure having been completed prior to that, but in practice such approach would be unusual and could lead to complications. Pursuant to Art. 10 of the VATA, no supply of goods or services has taken place where the supply to the transferee from the transferor results from a transfer of an enterprise according to the procedure established by Art. 15 or Art. 60 of the Commerce Act.