jurisdiction

1. Are members of the armed forces permitted to hold shareholdings in private companies, including startups, provided that they do not participate in management?

Bulgarian law imposes strict restrictions on military personnel engaging in commercial activities.

Under Art. 188, para. 2, point 2 of the Republic of Bulgaria Defence and Armed Forces Act ("RBDAFA"), it is incompatible with military service for a servicemember to act as a sole trader, shareholder in a limited liability company (Ltd), manager, commercial agent, procurator, commercial representative, commercial broker, receiver, trustee in bankruptcy, or member of the management or supervisory bodies of a commercial company or cooperative. Engaging in commercial activities or working under an employment contract is also prohibited (Art. 188, para. 2, point 3 RBDAFA).

In addition, working under a services contract is generally prohibited, except in limited areas such as teaching, medical practice, scientific research, information technology research and development, sports and other creative activities (Art. 188, para. 2, point 4 RBDAFA).

However, the RBDAFA contains an important carve-out. The possession of shares, participation in cooperatives holding agricultural land or forests and participation in residential construction cooperatives are not deemed commercial activities for the purposes of these restrictions (Art. 188, para. 4 RBDAFA).

The critical distinction therefore lies in the type of participation. Being a shareholder in a limited liability company (Ltd) constitutes an incompatibility with military service under Art. 188, para. 2, point 2 RBDAFA. By contrast, holding shares in a joint-stock company (JSCo) is expressly excluded from the definition of commercial activity under Art. 188, para. 4 RBDAFA and is therefore generally permissible.

This creates a somewhat unusual outcome whereby a purely passive minority interest in a Ltd is prohibited, while a shareholding in a JSCo is permitted, even where the degree of actual involvement may be comparable.

Participation in non-profit organisations is expressly permitted (Art. 188, para. 5, point 1 RBDAFA). Furthermore, no incompatibility arises where a servicemember participates, under a civil contract, in projects related to the activities of the Ministry of Defence, the Bulgarian Army or other structures subordinated to the Minister of Defence, where such projects are financed under EU programmes, international programmes or international agreements (Art. 188, para. 5, point 2 RBDAFA).

2. Is notification or approval required before acquiring a shareholding or establishing a company?

Bulgarian law does not operate on the basis of a prior approval regime. Instead, it relies on a mandatory declaration framework.

Upon entering military service, a servicemember must submit a declaration confirming the absence of any circumstances giving rise to incompatibility under Art. 188 RBDAFA.

In addition, servicemembers must declare any relevant change in circumstances within seven days of its occurrence (Art. 188, para. 6 RBDAFA).

Certain categories of servicemembers, including officers and individuals holding specified positions, are also required to submit annual declarations of assets and interests to the Minister of Defence under the Combating Corruption Among Public Office Holders Act (Art. 188a RBDAFA).

Failure to comply with these obligations may have significant consequences. In addition to potential criminal liability for false declarations, incompatibility may result in termination of military service.

3. Are there any notable limitations, thresholds or conflict-of-interest rules?

Several additional restrictions may be relevant.

First, military service is incompatible with certain direct hierarchical relationships. A servicemember may not be in a direct command relationship with a spouse or certain close relatives (Art. 188, para. 2, point 1 RBDAFA).

Secondly, conflict-of-interest rules apply under the Combating Corruption Among Public Office Holders Act. Where a conflict of interest is formally established by a final act, the military service contract may be terminated (Art. 165, para. 1, point 11 RBDAFA).

Thirdly, post-service restrictions apply. Servicemembers who exercised management, control or disposal functions during their service are prohibited, for a period of three years after discharge, from becoming partners, shareholders, managers or board members of companies with which they had official dealings during the final year of service (Art. 327a RBDAFA).

Additional restrictions apply in relation to public procurement. Individuals who participated in procurement procedures or projects involving EU funds during their final year of service may, for three years following discharge, be restricted from representing individuals or companies in such procedures before the authority in which they previously served (Art. 327b RBDAFA).

Particular conflict-of-interest obligations also apply to members of procurement commissions involved in defence and security procurements, who must declare the absence of financial interests, related-party relationships and other private interests that could affect their impartiality.