Variable Capital Company (VCC): a new perspective for startups and innovation

Variable Capital Company

Bulgaria is turning a new page in its economic and legal history with the introduction of the Variable Capital Company (VCC).

This innovative legal form promises to improve the business climate, facilitate start-ups and boost investment in innovation.

The creation of the VCC responds to the needs of innovative and growth-oriented start-ups that contribute to the development of the economy but need a more flexible and simpler legal framework.

Main features of the VCC:

VCC offers flexibility and ease in the structure and management of the company. With low initial capital and freedom in the choice of governing bodies, this new legal entity can be described as a “simplified public limited company”.

By comparison, traditional corporate structures require significantly more initial capital and are bound by complex governance rules.

A variable capital company (VCC) is an alternative to existing capital companies such as limited liability partnerships, limited liability companies and joint-stock or public limited companies.

It combines the advantages of these forms while removing unnecessary requirements and restrictions.

One of the most significant features of a Variable Capital Company, evident from its name, is the possibility for its capital to be variable. As such, it is not subject to registration with the Companies` Registry.

A resolution of the ordinary annual general meeting convened to consider the annual accounts establishes the amount of the capital at the closure of the financial year and its variation in relation to the previous financial year.

In addition, there is an extremely low initial capital requirement, which may be as low as the symbolic amount of 1 penny.

Furthermore, it allows the creation of different classes of shares – with different rights, restrictions and privileges, which can be useful for retaining key employees and incentivize investors.

In addition, the company can acquire its own company shares. All this allows good flexibility in raising finance.

Until recently, these options were reserved exclusively for public limited companies, which have much higher requirements for initial capital, as well as on their governance and accountability.

All this opens the door to easier creation of new companies and attracting start-up funding and stimulating innovation.

A company with variable capital has flexibility in the choice of management and great opportunities to attract investors.

This can be critical for innovative technology start-ups, which often need quick and easy access to venture capital and seed capital.

One of the most important features of a VCC is also its ability to convert to another legal form if the company grows and reaches a certain size.

This enables companies to start with a VCC and gradually adapt as their needs and development evolve.

Ease of raising capital:

An essential aspect of the VCC is ease of access to finance and raising capital. This new type of company allows for easy and quick transfer of shares, which is key for start-ups that need funding for growth.

This capital raising process creates an opportunity for companies to attract investors and offer shares to employees as an incentive to engage and participate in the success of the company.

Variety of shares:

DPC provides flexibility in the allocation of shares in the company. This is achieved through different classes of shares with different rights and privileges.

This model allows for innovation in company structure and the creation of more diverse financial instruments.

Opportunities and prospects:

VCC is focused on supporting start-ups and innovative companies. This model provides framework for the rapid development and growth of young enterprises, which can be later transformed into public companies or sold to investors after successful Go-to-Market.

Also, the VCC can contribute to improving the entrepreneurial culture and increasing investment in innovation.

VCC is a promising new opportunity for business entrepreneurs in Bulgaria. This innovative approach to the legal form of companies can contribute to the dynamic development of the entrepreneurial sector and investment in innovative projects.

Although some challenges are expected in the implementation of the VCC, as well as overcoming possible barriers related to the modernization of the Commercial Register, there is no doubt that the new legal form will have a positive and long-lasting effect on start-ups and innovation in the country.

What is interesting about the implementation of the VCC is that it not only opens up new opportunities for businesses, but also has the potential to change the culture of entrepreneurship and investment in innovation.

In a similar way to the case of the simplified public limited company in France, the VCC can become a major form of association and create a solid foundation for innovative enterprises in Bulgaria.

Notwithstanding the potential challenges that may arise, the VCC represents an important step towards creating a more friendly and flexible legal environment for start-ups.

With this new type of company, Bulgaria is moving towards improving the business climate and fostering innovation, which could have long-term positive consequences for the country’s economy.

The introduction of the VCC will require cooperation between business and government, as well as continuous monitoring and evaluation of its impact.

It will certainly be interesting to see how this new model develops and how it will support innovation and the start-up ecosystem in Bulgaria.

If you are a start-up company looking to grow or a scale-up firm looking to stabilize and expand and would like to venture all the possibilities which this innovative form of business vehicle has to offer, do not hesitate to contact us!

Our business lawyers will guide you and assist you with every question and concern, so that you can explore to the fullest extent possible all the business opportunities which the market has to offer.