Employee share plans in Bulgaria: regulatory overview

A Q&A guide to employee share plans law in Bulgaria.

The Q&A gives a high level overview of the key practical issues including, whether share plans are common and can be offered by foreign parent companies, the structure and rules relating to the different types of share option plan, share purchase plan and phantom share plan, taxation, corporate governance guidelines, consultation duties, exchange control regulations, taxation of internationally mobile employees, prospectus requirements, and necessary regulatory consents and filings.

To compare answers across multiple jurisdictions, visit the Employee Share Plans: Country Q&A tool.

This Q&A is part of the global guide to employee share plans law. For a full list of jurisdictional Q&As visit www.practicallaw.com/employeeshareplans-guide.

Contents

Employee participation

1. Is it common for employees to be offered participation in an employee share plan?

Share plans are not commonly used by local Bulgarian employers, partly because a significant number of the largest employers are former state-owned enterprises that have been privatised without becoming listed companies. During the privatisation process, it was common for privatised companies to distribute or sell company’s shares, vouchers or coupons to their employees. However, this process came to an end, together with the privatisation of former state-owned companies, and the applicable law was revoked in 2002.

The legislator has introduced more specific provisions on employee share plans offered in Bulgaria in line with Directive 2010/73/EU amending Directives 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (Amendment Directive). However, share plans remain relatively rare among Bulgarian listed companies.

Share plans are frequently offered to directors and senior employees of Bulgarian subsidiaries, branches or other offices of multinational corporations that offer such plans to their global workforce. Therefore, references to employee share plans in this article are essentially limited to offers by multinational corporations.

 
2. Can employees be offered a share plan where the shares to be acquired are in a foreign parent company?

It is lawful to offer participation in an employee share plan where the shares to be acquired are shares in a foreign parent company.

 

Share option plans

3. What types of share option plan are operated in your jurisdiction?

Share option plan

Bulgarian law does not explicitly provide for different types of share option plans.

As discussed in Question 1, share option plans are usually offered by subsidiaries, branches or other offices of multinational corporations. For this reason, the types of share option plan depend on the jurisdiction in which the particular multinational corporation and/or company issuing the shares is located and on its preferences.

In 2013, the legislator introduced more specific regulations for share plans in Bulgaria. The scope of the new rules is mostly limited to share plans offered:

  • By Bulgarian listed companies (only) to its registered executive managers and/or executive members of the supervisory board as part of their variable remuneration.

  • To current and/or former employees of a Bulgarian listed company where the shares originate from an increase in capital.

The executives referred to above are not regarded as employees. This applies even if their employment contracts are not properly terminated and formally transformed into management agreements (the relations between registered executives and the company are ex-lege transformed to mandates as of the date of the executives' registration with the Bulgarian Commercial Register). Accordingly, all references to executives below concern only individuals managing Bulgarian listed companies but not qualified as employees.

The new regulations introduce a number of rules for the preparation, approval and exercise of executives' remuneration policy that includes share plans. However, they do not specifically provide rules for different types of share plans and do not prohibit the operation of any plan in Bulgaria (either by local or foreign public companies).

Main characteristics. Share option plans in Bulgaria are usually offered by multinational corporations to local executives or senior employees. A share option plan grants call options on the shares of a listed company within the group, during an exercise period (option term) at a price stipulated in the plan (usually with a discount to the market price as at the exercise date, or at a price amounting to the shares market price at the date of the share option grant). However, the employees must usually comply with certain requirements to obtain the right to exercise the option, typically continuation of service for a specific period of time or meeting of a performance goal. The employees can exercise the option when all vesting requirements are met, within the option term. After the shares acquisition under the share option plan, the employees can sell the shares on the market. The employee's benefit is the difference between the exercise price and the market value of the shares at the time of the sale.

If a Bulgarian listed company intends to offer share plans to its executives and/or employees (including former executives/employees), an explicit decision of the general meeting of the company's shareholders must be adopted on this issue in advance. The decision is a condition precedent to any type of share plan.

Types of company. Companies typically granting share options in Bulgaria are non-Bulgarian listed companies or other specialised entities that are part of a multinational corporate group of which the Bulgarian employer is a subsidiary.

Popularity. Bulgarian companies, even when listed, still do not commonly offer share option plans. Non-listed companies are free to offer share option plans but do not commonly do so in practice.

Different types of options under the same plan. Employers can grant options with different maturity dates under the same plan.

Alternative awards. The most common alternative awards in Bulgaria are annual incentive plans under which bonuses are paid, usually before Easter and/or Christmas. Usually, such plans provide for different awards depending on the individual contribution of the respective employee and/or achievement of pre-determined quantitative and qualitative targets.

Grant

4. What rules apply to the grant of employee share options?

Share option plan

Discretionary/all-employee. There is no restriction on the discretionary offer of share option plans to employees. The employer must explicitly stipulate the conditions for participation in the share option plan. Payments under a share option plan are usually considered as an additional employment benefit. Where a Bulgarian employer grants a share option plan, the general criteria for determination of eligible employees must be set out in the company's internal salary regulations.

The general rules on the determination of eligible employees must be based on clear and non-discriminating criteria. The Protection Against Discrimination Act allows the setting of minimum conditions of age or professional experience/seniority in service as eligibility criteria for the enjoyment of employment -related benefits. Such requirements do not constitute discrimination if the limitation is justified by a legitimate aim, including a legitimate employment policy, and if the means for achieving that aim are appropriate and necessary.

Non-employee participation. Share plans offered to executive directors and/or executive members of supervisory boards of a Bulgarian listed company (see Question 3) are regarded as variable non-employment additional remuneration. The aim of the law is to strictly regulate the grant and the exercise of rights for such variable remuneration. This is why the decision of the general meeting for granting such options to executives must include mandatory content (such as criteria for target achievements). One of the most significant restrictions is that a Bulgarian listed company is not allowed to offer share option plans to the non-executive members of its board of directors and/or supervisory board as variable supplementary remuneration.

Maximum value of shares. If a Bulgarian listed company offers share plans to its employees and/or executives by capital increase, the increase made for these purposes must not exceed 1% per year and 3% for three consecutive years. In total, a Bulgarian listed company cannot have more than 5% newly issued shares offered to its executives/employees.

Market value. If explicitly decided by the general meeting of the shareholders, a Bulgarian listed company can offer to its executives/employees an exercise price less than the par value of the shares underlying the options. On the other hand, it can also offer an average exercise price based on the price for a certain number of days preceding the date agreed for determination of the exercise price.

 
5. What are the tax and social security implications of the grant of the option?

Share option plan

Typically, no tax and social security obligations arise from the grant of the option, since there is rarely any payment to or receipt of any benefit by the employee, or such benefit does not have an identifiable value until the option exercise date (see Question 8).

Vesting conditions usually imply that a granted option (usually non-transferrable) has no value other than when it is vested and then exercised. However, it is less likely, although still possible, for the option to be taxable and subject to social security obligations in accordance with general tax and social security laws if it is either:

  • Transferrable and has a grant price.

  • Granted for consideration by the employee (such as plans where small amounts of the employee's salary are regularly allocated to the purchase of options).

If this is the case, then the taxable base will be one of the following:

  • The grant value of the options.

  • The consideration for which they are granted.

  • Their market or fair value.

If the costs related to the option are borne by the Bulgarian employer, administration of tax and possibly social security withholding obligations are also borne by the employer. If these costs are centralised at group level outside Bulgaria, the employees themselves must administer tax returns and file and pay taxes

Vesting

6. Can the company specify that the options are only exercisable if certain performance or time-based vesting conditions are met?

Share option plan

There are no legal requirements for vesting terms and conditions that apply to options offered to employees. Since payments under a share option plan may be considered as an additional employment benefit, depending on the features of the particular share option plan (such as whether it is granted by the Bulgarian employer or another non-Bulgarian group entity), the general terms and conditions for entitlement to obtain the award (including vesting terms and conditions) may need to be specified in the employer's internal salary rules.

However, the company is free to specify the applicable performance or time-based vesting conditions. Such conditions are common in share option plans offered by multinational corporate groups to the employees of their Bulgarian subsidiaries.

For share option plans offered to executives (see Question 3), it is advisable for a Bulgarian listed company to stipulate performance and time-based vesting conditions. All the applicable vesting conditions must be determined by the company in advance and communicated to the eligible executives, including the specific and measurable performance criteria that apply. The options for executives of a Bulgarian listed company are exercisable only after expiration of three-year period from the date of the decision of the general meeting of shareholders granting the options.

 
7. What are the tax and social security implications when the performance or time-based vesting conditions are met?

Share option plan

It is possible, although unlikely, that Bulgarian tax and social security obligations arise from compliance with the vesting conditions of the option, especially if the share option plan is transferrable and funded by the employer (see Question 4). After vesting, a share option may qualify as a benefit-in-kind. The tax and social security basis may be difficult to calculate, especially if the associated cost is not directly funded by the Bulgarian subsidiary employer.

Exercise

8. What are the tax and social security implications of the exercise of the option?

Share option plan

It is likely that Bulgarian tax and social security obligations arise from the exercise of the option, especially if the share option plan is funded by the employer, in which case, on exercise, the share option qualifies as a benefit-in-kind. Therefore, depending on the particular terms, conditions and features of the option, the benefit-in-kind may be subject to accounting for tax/social security in the same manner as other payments to the employee (or senior manager). The tax rate on employment compensation is a flat 10% rate, based on gross employment remuneration less social security contributions payments.

The most common aggregate social security rate for 2015 is 30.3%. The contributions are calculated on the basis of the employee's monthly remuneration along with all employment benefits received for the respective month, subject to a capped maximum social security base currently amounting to BGN2,600. The excess of the employee's monthly remuneration is not subject to social security contributions.

The tax and social security basis may be difficult to calculate, especially if the associated cost is not directly funded by a Bulgarian subsidiary employer, or the shares are not listed.

Accounting for tax/social security. The employer, if a Bulgarian taxable entity, must withhold tax/social security on all payments to employees and registered executives, including benefits-in-kind.

If costs related to the granting, vesting or exercise of options covered by share option plans are not allocated to the Bulgarian employer, reporting and withholding obligations are the employee's direct obligation. Share option plans often provide for assistance to employees in such cases.

How liability is recovered from employee. There is little established practice on the recovering of liability from employees. It is possible for share option plans to pre-fund the employer or another group company for tax costs and other levies payable, for example, on the exercise of the options (since the employees will not have realised any income to finance such costs yet). The repayment by employees of pre-funding can take various forms and the employee's liability can be recovered by deductions from future salary (based on an express agreement with the employee), or as otherwise agreed under the share option plan terms and conditions.

Sale

9. What are the tax and social security implications when shares acquired on exercise of the option are sold?

Share option plan

Beneficial tax treatment is available on exit as capital gains realised from on-exchange transactions in shares listed on a regulated market within the European Economic Area (EEA) are exempt from taxation (Personal Income Tax Act). This exemption can be enjoyed without any further conditions by the employee. If the regulated market is a major European (therefore, a non-Bulgarian) stock exchange, it may be advisable for the employer/grantor of the options to procure for the employees sufficient evidence of meeting the exemption condition.

The employee pays income tax on the capital gain realised on sale, unless the tax exemption for transactions on regulated markets applies (see Question 4). If the shares are issued by a non-Bulgarian issuer, a double tax treaty may also regulate aspects of Bulgarian taxation.

There are no social security implications on the realisation of capital gains.

 

Share acquisition or purchase plans

10. What types of share acquisition or share purchase plan are operated in your jurisdiction?

Bulgarian companies do not typically offer share acquisition or purchase plans. Therefore, there is little established practice or legal regulation.

Most share acquisition or purchase plans are used by multinational corporate groups for the employees of their Bulgarian subsidiaries.

Share acquisition or purchase plan

Main characteristics. Generally, the employer allows its employees to set aside money over a period of time (an offering period), usually out of taxable payroll deductions, to purchase shares at the end of the offering period. Generally, the share purchase price in the share acquisition or purchase plan amounts to the shares' market value at the beginning or end of the offering period with a fixed discount.

The plan generally requires the employees to comply with certain requirements to obtain the right to purchase the shares at the defined price. These may include the continuation of service for a specific period of time or the meeting of a performance goal. After vesting, and after the expiration of any applicable holding period, the shares acquired are sold to realise a gain over the acquisition price.

Types of company. Generally, only non-Bulgarian listed companies that are part of a multinational corporation or other specialised group entity, of which the Bulgarian employer is a subsidiary or related company, grant share acquisition or purchase plans in Bulgaria.

Popularity. Bulgarian companies, even if listed, do not commonly offer share acquisition or purchase plans.

Acquisition or purchase

11. What rules apply to the initial acquisition or purchase of shares?

Share acquisition or purchase plan

Discretionary/all-employee. The position is the same as for share option plans (see Question 4).

Non-employee participation. The position is the same as for share option plans (see Question 4).

Maximum value of shares. The position is the same as for share option plans (see Question 4).

Payment for shares and price. The employer (or another group company) can fully fund the shares in the share acquisition or purchase plan.

 
12. What are the tax/social security implications of the acquisition or purchase of shares?

There is a tax exemption for capital gains realised from an on-exchange transaction on an European Economic Area (EEA) regulated market (see Question 4).

If the share acquisition or purchase plan is funded by the employer, it is likely to be deemed a benefit-in-kind, which is subject to taxation and withholding of social security levies as a part of the employment remuneration. If the costs are centralised at multinational corporate group level outside Bulgaria, it is likely that the employees must file tax returns themselves and withhold tax. The share acquisition or purchase plan is likely to include assistance for employees in this respect.

Vesting

13. Can the company award the shares subject to performance or time-based vesting conditions?

Share acquisition or purchase plan

There is no express prohibition and the position is the same as for share option plans (see Question 6). The only restriction that applies to all share plans for executives of a Bulgarian listed company is the minimum required vesting period of three years.

 
14. What are the tax and social security implications when any performance or time-based vesting conditions are met?

Share acquisition or purchase plan

It is possible that tax and social security liabilities arise, but this is unlikely unless the employee actually acquires the shares that are the subject of the share acquisition or purchase plan. The position is similar to that for share option plans (see Question 6).

Sale

15. What are the tax and social security implications when the shares are sold?

Share acquisition or purchase plan

The employee must report capital gains realised on sale of the shares in his tax return. The capital gains may be tax exempt if realised on a regulated market of the European Economic Area (EEA) (see Question 4). Otherwise, the applicable Bulgarian tax rate is 10%. A double tax treaty may apply.

There are no social security implications on the realisation of capital gains.

 

Phantom or cash-settled share plans

16. What types of phantom or cash-settled share plan are operated in your jurisdiction?

Bulgarian companies do not typically offer phantom or cash-settled share plans. Therefore, there is little established practice or legal regulation.

Such plans are more commonly used by multinational corporate groups for the employees of their Bulgarian subsidiaries and can be of various types.

Phantom share plan

Main characteristics. Phantom or cash-settled plans are bonus plans that grant employees the right to receive an award based on the value of the company's shares, rather than shares themselves. Phantom or cash-settled plans typically provide the employee with a cash payment based on the increase in the value of a stated number of shares over a specific period of time, usually paid out at the end of a specified period of time. Phantom or cash-settled share plans do not require a specific settlement date and, as with options, the employees may have flexibility as to when to exercise the plan. Some phantom or cash-settled share plans make the receipt of the award conditional on certain objectives, such as sales, profits, or other targets.

Types of company. Typically, only non-Bulgarian listed companies that are part of a multinational corporation or other specialised group entity, of which the Bulgarian employer is a subsidiary or related company, grant phantom or cash-settled plans in Bulgaria. Bulgarian companies are free to offer phantom or cash-settled plans but it is not a common practice.

Popularity. See above, Types of company.

Grant

17. What rules apply to the grant of phantom or cash-settled awards?

Phantom share plan

Discretionary/all-employee. The position is the same as for share option plans (see Question 4).

Non-employee participation. The position is the same as for share option plans (see Question 4).

Maximum value of awards. The position is the same as for share option plans (see Question 4).

 
18. What are the tax and social security implications when the award is made?

Phantom share plan

Until there is effective payment of the award to the employee under the plan, no tax or social security obligations arise as Bulgarian personal income taxation is based on the cash basis principle. There is no favourable tax treatment for phantom or cash-settled plans (unlike share option and share acquisition plans where, in the final phase or exit, capital gains realised on sale of the shares on an European Economic Area (EEA) regulated market can be tax exempt). The benefits realised by the employee under a phantom or cash-settled plan are taxed at the flat 10% personal income tax rate.

Vesting

19. Can phantom or cash-settled awards be made to vest only where performance or time-based vesting conditions are met?

Phantom share plan

The receipt of the award can be conditional on performance or timed-based vesting conditions. Depending on the particular plan (in particular, whether the Bulgarian employer or another non-Bulgarian group entity grants it), the general terms and conditions (including vesting terms and conditions) may need to be specified in the employer's internal salary rules, and the decision of the general meeting granting the plan. The specific vesting requirements that apply for executives of a Bulgarian listed company discussed in Question 6 also apply to this type of share plan.

 
20. What are the tax and social security implications when performance or time-based vesting conditions are met?

Phantom share plan

No tax or social security contributions are due if no award payment is made. Tax and social security obligations arise on payment of the award to the employee (see Question 21).

Payment

21. What are the tax and social security implications when the phantom or cash-settled award is paid out?

Phantom share plan

On settlement of the award, the employee owes income tax, social security and health insurance contributions for the received benefit.

If the award income is included in the employee's monthly salary, the local employer must withhold and pay income tax (at the flat rate of 10%) and the mandatory social security and health insurance contributions, on behalf of the employee (see Question 7).

If the income on exercise of the award is granted by a non-Bulgarian group company that is not the employer of the Bulgarian employee, the income is subject to reporting in the annual tax return and the tax is payable by the employee.

 

Corporate governance guidelines, market or other guidelines

22. Are there any corporate governance guidelines, market rules or other guidelines that apply to any employee share plan?

No such guidelines have been adopted in Bulgaria.

 

Employment law

23. Is consultation or agreement with, or notification to, employee representative bodies required before an employee share plan can be launched?

No specific consultation or notification proceedings are required before an employee share plan is launched by a Bulgarian listed company, unless it is launched as a part of the employer's internal salary regulations and/or collective employment agreement/s. In such cases, prior consultations with the employees' and trade unions' representatives must be carried out.

In addition, when the general meeting of a Bulgarian company with more than 50 employees adopts a decision related to employment matters such as share plans, representatives of the employees are entitled to be informed of the agenda in advance and attend the meeting with a consultative vote only. If the employer is a limited liability company, regardless of the number of its employees, the general meeting of shareholders can only decide to offer share plans to employees after hearing statements from the employees' representatives.

 
24. Do participants in employee share plans have rights to compensation for loss of options or awards on termination of employment?

There are no legal requirements to compensate for loss of options or awards on termination of employment. However, such compensation can be payable under:

  • An agreement between the employer and the employee.

  • The share plan.

  • The employer's policy.

 

Exchange control

25. How do exchange control regulations affect employees sending money from your jurisdiction to another to purchase shares under an employee share plan?

Employees can transfer money from Bulgaria to another jurisdiction to purchase shares under an employee share plan by using banks established in Bulgaria. If the amount to be transferred exceeds BGN30,000, or its equivalent in another currency, the servicing bank must be provided with information (grounds for the transfer) in accordance with the regulations issued by the Bulgarian National Bank. A separate statistical form must be submitted to the bank if the transferred amount exceeds BGN100,000. This statistical reporting is a precondition for the bank to execute the ordered wire transfer, although it only serves statistical purposes and does not constitute an application for approval.

 
26. Do exchange control regulations permit or require employees to repatriate proceeds derived from selling shares in another jurisdiction?

Employees of Bulgarian companies do not need prior approval from any government authority to purchase and hold foreign shares in Bulgaria or to sell shares in another jurisdiction and repatriate the proceeds to Bulgaria.

Employees can open securities accounts with local banks, regardless of whether they are local or foreign residents. Individuals who are foreign citizens but permanently reside in the country are considered local residents for this purpose.

Bulgarian resident employees (including non-nationals, subject to certain domicile criteria) must file an annual return for statistical purposes (due by 31 March for the preceding year) to the Bulgarian National Bank for any bank accounts opened with foreign banks outside Bulgaria, if the funds deposited exceed BGN50,000.

 

Internationally mobile employees

27. What is the tax position when an employee who is tax resident in your jurisdiction at the time of grant of a share option or award leaves your jurisdiction before any taxable event affecting the option or award takes place?

If the employee leaves Bulgaria at the time of grant of a share option or award but before payment of cash or a benefit-in-kind (that is, leaves before the taxable event) and stops qualifying as a Bulgarian tax resident before the taxable event, Bulgarian taxation is not triggered on the taxable event, unless the benefit is treated as Bulgarian-source income. Whether this is the case depends primarily on whether the Bulgarian employer bears the cost for the share plan in relation to the taxable event.

 
28. What is the tax position when an employee becomes tax resident in your jurisdiction while holding share options or awards granted abroad and a taxable event occurs?

If the employee moves to Bulgaria after the grant of share options or awards and the taxable event occurs while he qualifies as a Bulgarian tax resident, taxation is triggered, even if the source of payment under the plan is not Bulgaria. The employee's income while a Bulgarian tax resident is taxed as part of his worldwide income, but a double tax treaty may apply and reduce the Bulgarian tax payable.

 

Securities laws

29. What are the requirements under securities laws or regulations for the offer of shares under, and participation in, an employee share plan?

Public offerings in Bulgaria require a prospectus to be filed with the Bulgarian Financial Supervision Commission (Commission). The offering must be published at least seven days before its start by a notice in the Commercial Register held at the Registry Agency, in at least two central daily newspapers and on the web page of the issuer and the investment intermediaries participating in the offering. The notice must include:

  • The beginning and end date of the offering.

  • The registration number of the Commission's approval.

  • The place, time and manner in which the prospectus will be made available.

  • Other data as required by the Commission.

Securities offered by foreign issuers to Bulgarian employees and others also fall within the regulations on public offering.

Bulgaria is an EU member state and transposed into local law Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (Prospectus Directive).

If the prospectus requirement applies, the company must pay a state fee for the prospectus confirmation by the Commission, as follows:

  • For a public offering of shares with a total value of up to BGN200,000: a fee of BGN900.

  • For a public offering of shares with a total value of more than BGN200,000: a fee of BGN900 plus 0.1% of the difference above BGN200,000, but not more than BGN5,000.

  • For a public offering of shares by an open-type investment company: a fee of BGN5,000.

The costs due by the company generally depend on the:

  • Type of the company.

  • Amount of offered shares.

  • Investment subsidiary's fees.

  • Newspapers' fees.

A prospectus authorised in another EU member state may be passported into Bulgaria (that is, approval by the Commission is not required). The term for prospectus confirmation by the Commission is ten working days from the date of filing the application. The Commission can prolong this term by ten working days if additional documents must be presented.

Generally, the frequency of filings depends on the frequency of offerings made by the company.

However, if during a calendar year, a company makes more than one grant for shares of one class, each of which is addressed to less than 100 recipients, the prospectus requirements will only apply to grants that have more than 100 recipients, calculated as a total sum of all grants' recipients for the respective year.

 
30. Are there any exemptions from securities laws or regulations for employee share plans? If so, what are the conditions for the exemption(s) to apply?

There are no prospectus requirements for employee share plans offers, if one or more of the following general exemptions apply:

  • The options are non-transferrable. There is no public offer in this case as the Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading (Prospectus Directive), and therefore the Bulgarian law, applies only to transferable shares.

  • The shares are offered to less than 150 persons in each EU member state. The number of qualified investors (see below) is deducted from this.

  • The shares offered have a total value of the equivalent in BGN of EUR100,000 over a 12-month rolling period.

  • The shares are offered only to qualified investors (typically high net-worth individuals and institutional investors).

  • The minimum value for which securities can be acquired is the equivalent in Bulgarian lev of EUR100,000 per investor for every separate proposal.

  • The single nominal value of the proposed securities is at least the equivalent in Bulgarian lev of EUR100,000.

There is no need to meet the above conditions if the shares are offered to current and former employees, executives or members of supervisory bodies. For these shares there are no prospectus requirements, if the offering company:

  • Issues shares of the same class as those already admitted to trading on the same regulated market and provides the eligible employees or executives with a written document containing information about the:

    • grounds for the offering;

    • number and nature of the offered shares;

    • exercise rights;

    • conditions and procedure for the acquisition of the shares; and

    • any other relevant information.

  • Is based in an EU country.

  • Is based in a non-EU country and listed in an EU-regulated market.

  • Is based in a non-EU country and is listed in a non-EU regulated market, recognised by the European Commission as an equivalent.

 

Other regulatory consents or filings

31. Are there any other regulatory consents and filing requirements and/or other administrative obligations for an offer of shares under, and participation in, an employee share plan?

Generally, every employer must register as a personal data controller with the Commission for Personal Data Protection (CPDP) before starting personal data processing. There is an exemption procedure that, on request, applies to employers who collect personal data from less than 15 employees (including executives).

The written consent of employees or executives must be obtained before the collection, use, and transfer of their personal data.

When processing and transferring the personal data of an employee or executive, the data controller (that is, the local subsidiary) must notify the employee or executive of the following (unless the employee or executive has already been notified of this information):

  • The nature of the data.

  • The purpose of processing the data.

  • The recipient of the data.

  • Information on the mandatory or voluntary nature of providing the data and the consequences of failure to provide it.

  • Information on the right to access and correct his or her personal data.

From 1 January 2007, the local entity (in its capacity as a personal data controller) can freely transfer the personal data to third parties located in other EU member states without CPDP approval in compliance with the requirements of the Bulgarian Personal Data Protection Act (PDPA). However, the consent of the employee or executive for the data processing and transfer must be obtained in advance.

The local entity can transfer the personal data to third parties in non-EU countries after obtaining CPDP approval and in compliance with the requirements of the PDPA. The CPDP approves the transfer of personal data to non-EU countries only if the third country ensures an adequate level of protection. The adequacy of the level of protection afforded by a third country is assessed by the CPDP.

The CPDP will only approve the transfer of personal data to a non-EU country that does not ensure an adequate level of protection, if:

  • There is prior written consent of the individual concerned.

  • The transfer is necessary for the performance of obligations under a contract between the employee/executive and the employer, as well as for actions preceding the contract's execution and performed at the individual's request.

  • The transfer is necessary for the conclusion or performance of a contract concluded in the interest of the employee between the controller and a third party.

The CPDP may approve a transfer of personal data to a non-EU country that does not ensure an adequate level of protection if the controller and the recipient put in place safeguards to protect the personal data. Such safeguards can in particular result from contractual clauses.

 
32. Are there any data protection requirements or obligations for an offer of shares under, and participation in, an employee share plan?

According to the Bulgarian Commission for Personal Data Protection (CPDP), the employer is qualified as an administrator of personal data. Therefore, it is obliged to comply with all data protection requirements under the Bulgarian Personal Data Protection Act (PDPA) and subordinate legislation (see Question 31).

An employee's prior written consent is required before the employee's personal data can be sent to an overseas parent company or plan administrator (see Question 31).

 

Formalities

33. What are the applicable legal formalities?

Translation requirements

There is no legal requirement on the language of the share plans or for their translation into Bulgarian, unless a prospectus is required (see Question 29), in which case the prospectus must be translated into Bulgarian (subject to certain exceptions for passported prospectuses). In practice, most of the competent state authorities that may be involved in the share plans implementation and/or its subsequent supervision (such as tax and social security authorities, labour inspection, and so on) require the share plans to be translated into Bulgarian.

E-mail or online agreements

There is no legal obstacle to employees entering into binding electronic agreements under share plans. In general, if an agreement is executed as an electronic document or by exchange of electronic messages, the agreement is deemed as having been executed in writing. However, it is advisable that all eligible employees have the documentation in paper copies in addition to any posting on the web or other online resources that the granting company may use.

Witnesses/notarisation requirements

There are no legal requirements for witnesses or notarisation of the relevant agreement for it to be binding.

Employee consent

The employee must explicitly give his consent to the employer to deduct contributions for the shares from the employee's salary. It is advisable for such consent to be given in writing. The employee may also have to give consent for a personal data transfer to a parent company or plan administrator (see Question 31). The value of monthly deductions must not exceed the amounts set out in the Bulgarian Civil Procedure Code.

 

Developments and reform

34. Are there any current trends, developments and reform proposals that have or will affect the operation of employee share plans?

Trends and developments

Multinational corporate groups are increasingly offering participation in employee share plans to their Bulgarian personnel. Generally, these share plans are offered to the senior management (directors and senior officers) of their respective Bulgarian subsidiary, establishment or another office.

Local business groups, even if they include a listed company, offer share plans on an extremely limited basis, despite the tax exemption for capital gains on the Bulgarian Stock Exchange.

However, there is an increase of interest in participation in employee share plans, mainly from local companies from the IT and outsourcing sector.

Reform proposals

There are currently no reform proposals that will affect the operation of employee share plans.

 

Online resources

Financial Supervision Commission website

W www.fsc.bg/Zakoni-bg-67

Description. This is the official website of the Financial Supervision Commission.

W www.fsc.bg/Legal-Framework-en-65

Description. This is an English version of the official website of the Financial Supervision Commission.

National Revenue Agency website

W www.nap.bg/page?id=428

Description. This is the official website of the National Revenue Agency.

W www.nap.bg/en/page?id=522

Description. This is an English version of the official website of the Financial National Revenue Agency.

Commission for Personal Data Protection (CPDP) website

W www.cpdp.bg/?p=rubric&aid=2

Description. This is the official website of the CPDP.

W www.cpdp.bg/en/index.php?p=rubric&aid=2

Description. This is an English version of the official website of the CPDP.


Contributor profiles

Vesela Kabatliyska

Dinova Rusev and Partners Law Office

T +359 943 4350/+359 879 60 95 66
F +359 02 946 3418
E vesela.kabatliyska@drp-legal.com
W www.drp-legal.com

Professional qualifications. Bulgaria, 2010

Areas of practice. Employment; company and commercial; dispute resolution.

Recent transactions

  • Performing a legal review for compliance of employee share purchase plans, incentive plans and share option plans of multinational groups of companies with local subsidiaries.

  • Providing legal services to IT and outsourcing companies on employment and data protection matters.

  • Advising on the establishment and development of the employment structure of a large multinational company during its business incorporation in Bulgaria, including the introduction of a share option plan for high executives.

  • Advising on the tax and social security implications as regards foreign employees in Bulgaria and personal data protection and transfer.

  • Advising on the transfer of undertaking procedures as regards the employees of multinational companies merging their subsidiaries in Bulgaria.

  • Advising on the employees' information and consultation procedure with regards to the establishment of Societas Europaea and the rules for the Workers Council.

Gergana Antonova

Dinova Rusev and Partners Law Office

T +359 943 4350/+359 879 60 95 68
F +359 02 946 3418
E gergana.antonova@drp-legal.com
W www.drp-legal.com
Professional qualifications. Bulgaria, 2014

Areas of practice. Employment; company and commercial; dispute resolution.

Recent transactions

  • Advising on the development of the employment structure of a large IT company.

  • Advising former high executives of a large media company in Bulgaria during the court proceedings following the termination of their employment.

  • Advising a foreign investor in the process of acquiring Bulgarian citizenship.

  • Advising on the personal data protection and transfer as regards multinational companies operating in Bulgaria.


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