The management of a company is carried out through the actions of its governing bodies. The governing bodies form and express the will of the company as a legal entity and organize its implementation. The management of a company is very often focused on determining the particular person who will be in charge of the management. This matter is, in turn, related to the empowerment of particular individuals – the governing bodies. Changes in such governing bodies will be subject to this article.

General Information

The management is usually understood as an operational one – day-to-day administration and organization of the company’s business activities. The directors (of an LLC), the partners with managements rights (in the case of a General Partnership), the executive members/directors (of a JSCo.) and so on are executive bodies – their activity is executive in nature, including functions relating to organization, management and representation.

The Commerce Act does not contain any detailed regulation on the dismissal procedure with regard to governing bodies. Both the appointment and the removal of the director of an LLC (the board members of a JSCo., etc.) are generally within the competence of the General Meeting of Shareholders which is the supreme body of the company. Removal by a resolution of the General Meeting is one of the subjective termination grounds, terms and procedure thereof being largely simplified. The resolution needs to be adopted by an ordinary majority, unless otherwise provided in the company’s statutes.

The termination of the legal relation between the director (officer) and the company resulting from the dismissal needs to be entered into the Commercial Register, i.e. the entry of the name of the director needs to be deleted. Pursuant to the Commerce Act the resolutions of the General Meeting regarding the appointment or the removal of a director of an LLC (or board members of a JSCo.) must be entered into the Commercial Register in order to become effective – as of the date of such entry. Removing a person as a director or an executive officer might as well require the termination of a management contract which might have been concluded with him.

Application

A special application needs to be filed with the Commercial Register for the purposes of the director (or other similar) being deleted as such (as a result of the dismissal). There is a standard form for the application – form A2 (in the case of a General Partnership), form A4 (in the case of a Limited Liability Company), form A5 (in the case of a Joint-Stock Company), etc. The application may be filed electronically (via the Internet) as well – by being signed with an electronic signature.

The application should be submitted by the company’s representative – most often that would be the newly appointed director (executive officer, etc.) but may also be one of the other already registered directors (if, for example, an LLC has been initially registered with two or more directors). 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.

Necessary Documents

The following documents need to be enclosed to the respective application:

Minutes with resolutions of the General Meeting;

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

Document for paid state fee.

In certain cases other documents might be necessary as well, such as a certificate for a shareholder (legal entity from a foreign country), invitations and other documents evidencing the proper calling of the General Meeting, amended statutes (if, for example, the removed director of an LLC has been specified by name in the Articles of Association), etc.

Usually, the removal of a director is accompanied by the appointment of another (a new) director in his place – thus a change of directors taking place. In such situation it would be also necessary to present additional documents pertaining to the new director (or a member of the board of a Joint-Stock Company) – notarized consent and signature specimen, declarations under the Commerce Act (such as Art. 141, par. 8 or Art. 234, respectively), etc. In the case of a JSCo. it would be also necessary to present Minutes for electing a person to represent the company.

Companies very often present additional documents as well, such as a declaration under Art. 142 of the Commerce Act and a management contract – however, such documents are not mandatory for the entry to be allowed.

In certain cases various specifics should be taken into consideration – for example, it may be necessary when appointing a director of a limited liability company to have the Minutes of the General Meeting notarized (both signatures and content – pursuant to Art. 137, par. 4 of the Commerce Act)1. In the case of Sole Proprietors there are no governing bodies, hence the only option to entrust the management of the business to another person would be through the appointment and registration of a procurator2 (commercial manager).

Fees and Other Costs

Pursuant to Art. 16a, par. 3 of the Tariff on the State Fees Collected by the Registry Agency, the state fee for entering changes into the Commercial Register is 30 Levs. Pursuant to par. 4, when the application is filed electronically, including by an authorized to that end lawyer, the due fee would be in the amount of 15 Levs.

Information about the due attorney fee may be found on page Fees. Additional costs for notary fees will apply as well, depending on the particular situation (for example, when only one signature specimen is being notarized, the notary fee would be in the amount of 6 Levs).

Unilateral Withdrawal

The Commerce Act entitles the director to request his own deletion as such from the Commercial Register – on the grounds of Art. 141 par. 5 of the Commerce Act the director may request from the company through a written notice to undertake steps for his deletion from the Commercial Register. The company must undertake such steps within one month following the receipt of the notice. If the company fails to do so, the director may request his deletion which is to be allowed regardless of whether or not another person has been appointed to replace him.

An analogical option has been provided in terms of joint-stock companies – on the grounds of Art. 233, par. 5 of the Commerce Act a board member may request his deletion from the Commercial Register by means of a written notice addressed to the company. The company must undertake such steps within six months following the receipt of the notice. If the company fails to do so, the respective board member may request his deletion which is to be allowed regardless of whether or not another person has been appointed to replace him.

The right of unilateral withdrawal has been provided for to safeguard the interests of the respective individual but upon exercising such right certain requirements should be complied with in order to take into account the interests of the company as well.

Generally, the procedure is not particularly complicated from legal point of view – the following documents need to be enclosed to the application: the notice itself, a declaration under Art. 13, par. 4 of the Commercial Register Act and a document for paid state fee (in the same amount as here above indicated).

Attention needs to be paid to the notice being duly received by the company. Possible complications may arise as to that matter – in case that the company does not carry out business activity any more, does not have any office and personnel, does not have any other representatives or they are abroad and practically hard to find, etc. The law does not regulate the procedure for serving/receiving the said notice – all feasible options could be used (including by notary invitation) with the focus being on ensuring adequate evidence as to the notice having been duly served.

Footnotes:

1 The article has been updated on 23.01.2017 in connection with amendments to the Commerce Act which you may find more information about in News article Legal protection against corporate hijacking.

2 You may find additional information on the topic in Blog article Is it required to appoint a procurator when using maternity leave?