Every new business starts with the opening of a company. Part of the procedure for establishing a company is the opening of a collection account. Let’s say you and I want to start our own company to provide software services. Here’s what we need to know:
What is a fundraising account?
This type of account is provided for the purpose of contributing cash to the capital of a company that is in the process of being established. The capital can consist of monetary and non-monetary contributions and represents the total value of the shares belonging to the co-founders. In order to register the company in the Commercial Register, it is necessary to pay at least the statutory minimum of the capital or the entire capital. A savings account also allows for capital growth. The law makes it possible to increase the capital at any time by adding additional shares, creating new shares or entering new co-founders.
Why open a fundraising account?
To start your business, you must first register your company as a merchant. This requires opening a fundraising account and depositing the mandatory minimum capital. The minimum amount required for the establishment of an EOOD is BGN 2. If you decide to register the company with a larger capital, you must deposit 70% of it in the collection account. Otherwise, the registration procedure will be invalid. This means that the absence of the required deposit amount will result in the unsuccessful registration of the company.
How is the fundraising account created in practice?
The collection account you create must be in the name of the company. The opening of such an account is possible both by the co-founder and by the appointed person for management. You may also authorize third parties to perform these actions. For this purpose, it will be necessary to provide the following documents to the bank:
• Founding agreement and document of the general meeting.
• Decision to appoint a manager
• Sample of the signatures and copies of the personal documents of the persons who will have rights to manage the account
• Notarized power of attorney to a third party, in the provided hypothesis
In the event that the sole owner of the capital is a legal entity, a certificate of current status is also required. After depositing the required amount of capital, the bank will provide a certificate to serve before the Registration Agency. This document confirms that the relevant amount has been deposited in the bank and is maintained in the company’s account.
What are the fees?
Opening a collection account requires the conclusion of a contract with the bank specifying the rates for opening and servicing the account. These fees may vary depending on the bank and their current rate. A good practical solution is to thoroughly familiarize yourself with the bank’s conditions before opening an account. Usually, the specific contract for the account is concluded when the current account is converted into a checking account after the actual creation of the company, but this is subject to the requirements of the specific bank and can vary accordingly. The structure of the owners, the presence or not of foreign persons and, if there are, where they are from – from EU countries or from third countries, which third countries to be precise, can be of great importance. All of this plays into the creation time and fees.
In what cases does the bank conduct research and why? How long it might take.
In cases where one or more of the beneficial owners are persons of foreign origin, regardless of their status., commercial banks usually need some time for the “know your customer” procedure. This is the so-called research. It could take from a few days to a few weeks, possibly ending with the institution refusing to open an account. It is possible that this procedure has a different name in different banks. Remember that banks are commercial companies and have the right to operational autonomy in developing their business, although it is quite regulated.
If the manager is a foreigner who does not live in the country, how should he/she plan to stay in Bulgaria?
Be careful from the point of view of planning the manager’s time, as there may be a certain and not small time difference between the moment of signing documents for a collection account and the issuance of the certificate of open collection account, which is provided to the Commercial Register to pass registration successful. It is possible that in these cases, the manager will have to visit Bulgaria at least twice.
Documents certifying actual ultimate owners
These documents are part of the set when there is a foreigner among the owners. It is possible that what you would be asked to vary due to differences in the way individual banks operate. A legalized translation of some documents will also be required.
Is there a time of year when we should be more cautious about bank conditions?
Interesting, but true. There is. Be cautious whenever you want to open a collection account right after the New Year in the first days of January. This is usually the time to change the rules and you may be surprised.
Conversion of the fundraising account into a working bank account
After the successful registration of the company in the Commercial Register, you must convert the collection account into a current account or close it depending on whether you want to continue working with the same bank. Usually, in practice, if you want to close an account, a fee is charged higher than the one for converting the account, because for the bank it is a lost customer. All funds are subject to withdrawal or transfer to the already newly opened current account of a commercial company. It is best to combine the conversion with the creation of electronic banking. Consider the method of authorization of payments, so that it corresponds to the personal regime you have. If you travel often, an electronic token will probably be more convenient instead of SMS. Now is the time to consider which other people will work with the company account, as part of the accounting or administration team. You could also open accounts in other currencies depending on the type of business. In our software services example, it may be necessary to open an account in dollars and euros, since often this type of activity works with the US and the EU, for example.
Can I terminate the registration procedure with an already created fundraising account?
In case of termination of the registration procedure, but after the account has been created, you must submit to the bank a protocol or a decision of the general meeting on the termination of the company. You will then be entitled to withdraw the deposited funds. We recommend that you consult with your partners in advance as much as possible so that you do not have to terminate a procedure that is already underway.
Working with the newly created bank account
Our advice is to inform yourself about certain situations such as how banking is blocked /to avoid this option as much as possible/, how the account is unblocked, how other users can operate daily and calmly, what should you advise them in relation to the correct procedure of daily operations, what are the working hours of the bank’s support and other specifics.
Next steps
Now our company is ready. You can proceed to a consultation with your accountant in connection with the start-up of the company’s activities, providing a manager and appointing persons, forming the first transactions, issuing revenue invoices, switching to or leaving for a later stage of VAT registration, planning the monthly activities of the company.
And start: the provision of software services can begin.
