Corporate Governance in Bulgaria: Best Practices

Published on October 1, 2025 and written by Cyril Jarnias

In an ever-evolving economic context, corporate governance in Bulgaria stands out through practices that deserve particular attention. As the country continues to strengthen its European integration and attract foreign investment, it becomes essential to understand how Bulgarian companies adapt their governance strategies to address current challenges while complying with international standards. This article explores the best practices that not only ensure transparency and accountability but also promote sustainable growth and greater investor confidence. By examining the mechanisms implemented by leading companies in Bulgaria, we highlight the innovative strategies shaping the Bulgarian corporate landscape and offering valuable lessons for other emerging markets.

Analysis of Management Standards in Bulgaria

Regulatory and Legislative Framework for Corporate Governance in Bulgaria

Bulgaria has significantly strengthened its corporate governance regulatory framework in recent years, gradually aligning with international standards. The Bulgarian Institute for Standardization (BDS) plays a crucial role in developing standardization and certification laws, aiming to harmonize local practices with those of the European Union.

The country has adopted several key laws, including the Commercial Companies Act, the Financial Markets Act, and the Accounting Act, which form the legal foundation of corporate governance. These texts define company obligations regarding transparency, accountability, and shareholder protection.

Adoption of International Governance Principles

Bulgaria has made significant progress in adopting G20 and OECD corporate governance principles. These principles, recently revised in 2023, emphasize shareholder rights protection, information disclosure, and board responsibilities. Bulgarian listed companies are particularly encouraged to follow these guidelines to improve their access to capital market financing.

However, integrating these international standards into the local context remains challenging. Bulgarian companies often need to balance global requirements with national market specificities, which can sometimes create tensions in implementing best practices.

Regulatory Bodies and Impact on Transparency

The Financial Supervision Commission (FSC) of Bulgaria is the main body responsible for overseeing and regulating the country’s financial markets. It works closely with the Sofia Stock Exchange to promote transparency and investor protection.

The Bulgarian Patent Office also plays an important role in intellectual property protection, a crucial aspect of corporate governance in an increasingly innovation-driven economy.

These bodies have significantly contributed to improving the transparency of Bulgarian companies. For example, all companies are now required to submit detailed annual reports, and those exceeding certain thresholds must have their accounts audited, ensuring greater reliability of financial information.

Impact of Recent Reforms on Board Effectiveness

Recent reforms have positively impacted board effectiveness in Bulgaria. The introduction of stricter rules on board composition, including the requirement for independent directors, has helped improve decision-making quality and management oversight.

Moreover, adopting ethics and conduct codes has become common practice in large Bulgarian companies, thereby strengthening ethical leadership conduct. These codes address issues such as conflicts of interest, corruption, and corporate social responsibility.

Challenges and Recommendations for Improving Corporate Governance

Despite this progress, Bulgarian companies face several challenges in implementing governance standards:

• Ownership concentration remains high, which may limit minority shareholder protection
• Effective implementation of laws and regulations can sometimes be hampered by limited institutional capacity
• Transparency culture is not yet fully embedded in all companies, particularly SMEs

To address these challenges, several recommendations can be made:

Strengthen monitoring and enforcement mechanisms for existing laws, particularly by equipping regulatory bodies with adequate resources. This could draw inspiration from the British model, recognized for its effectiveness in financial market supervision.

Encourage greater diversity within boards of directors, drawing inspiration from gender quotas implemented in some European countries like France or Norway.

Promote continuous training for executives and directors on corporate governance best practices, leveraging programs similar to those offered by the Institute of Directors in the United Kingdom.

Develop tax or regulatory incentives for companies that voluntarily adopt higher governance standards, similar to the corporate governance rating system implemented in South Korea.

By implementing these recommendations, Bulgaria could significantly strengthen its corporate governance framework, thereby improving its market attractiveness for international investors and stimulating long-term economic growth.

Transparency in Bulgarian Corporate Governance

Definition and Principles of Transparency in Corporate Governance

Transparency in corporate governance refers to the practice of openly and honestly disclosing information about company operations, financial performance, decision-making processes, and corporate behavior to stakeholders. It aims to provide a clear and accurate view of company activities and build trust among investors, shareholders, employees, customers, regulators, and the general public.

Key aspects of transparency in corporate governance include:

• Financial transparency: open sharing of financial data and accounting practices
• Operational transparency: disclosure of company strategies and objectives
• Material information disclosure: timely sharing of updates that may affect stakeholders
• Governance transparency: disclosure of governance structure, executive compensation, and policies
• Environmental and social responsibility transparency: reporting on sustainability efforts and social impact
• Regulatory compliance: publication of compliance with relevant laws and regulations

Bulgarian Regulatory Framework for Corporate Transparency

In Bulgaria, the legal framework for corporate transparency primarily relies on the law on combating corruption and confiscation of illegally acquired assets, in force since 2018. This law contains provisions on transparency and integrity requirements applicable to public officials, as well as the institutional framework for overseeing implementation.

Additionally, Bulgaria recently introduced obligations for companies to provide information about their beneficial owners. Since 2019, companies must file this information with the commercial registers and BULSTAT. These measures were introduced as part of Bulgarian anti-money laundering legislation.

Listed companies are subject to additional disclosure requirements according to Bulgarian capital market regulations, which align with broader European financial directives.

Information Disclosure Practices by Bulgarian Companies

Financial and non-financial information disclosure practices vary among Bulgarian companies. All companies are required to submit an annual report detailing their financial activities throughout the year. This ensures a certain level of transparency and compliance with tax regulations.

Companies exceeding certain thresholds in terms of revenue, assets, or number of employees must have their accounts audited. This enhances financial transparency and compliance with international accounting standards.

However, disclosure of non-financial information, such as environmental, social, and governance (ESG) practices, is not yet widespread among Bulgarian companies, particularly small and medium-sized enterprises.

Examples of Good Transparency Practices in Bulgaria

Some large Bulgarian companies have adopted exemplary transparency practices. For example, the Bulgarian Development Bank (BDB) recently signed a loan agreement with the European Investment Bank, committing to enhance transparency in its operations and support small and medium-sized enterprises in the country.

Other listed companies have established independent audit committees, published detailed sustainability reports, and held regular investor meetings to improve transparency and communication.

Challenges and Solutions for Bulgarian Corporate Transparency

Despite progress made, Bulgarian companies face several transparency challenges:

• Lack of resources and expertise, particularly for small businesses
• Reluctance to disclose certain information for fear of losing competitive advantage
• Complexity of reporting requirements, which can be perceived as an administrative burden

To overcome these challenges, Bulgarian companies can:

• Invest in training and reporting tools
• Collaborate with professional associations to share best practices
• Adopt a gradual approach to transparency, starting with the most critical areas

Role of Regulators and Investors

Bulgarian regulatory bodies, such as the Commission for Protection Against Discrimination and the National Revenue Agency, play a crucial role in strengthening transparency. They establish and enforce disclosure standards, conduct inspections, and impose sanctions for non-compliance.

Investors, particularly institutional investors, are also exerting increasing pressure on Bulgarian companies to improve their transparency. They demand more detailed and frequent information about companies’ financial and non-financial performance.

Comparison with International Standards

Compared to international transparency standards, Bulgaria has made significant progress in recent years, but there is still room for improvement. The country is gradually aligning with European Union best practices in corporate governance and transparency.

However, the level of corruption remains concerning. Bulgaria must continue to strengthen its institutions and governance practices to reach the transparency levels observed in the most advanced economies.

Impact on Investor Confidence and Corporate Performance

Improved transparency positively impacts investor confidence in Bulgaria. Companies that adopt transparent governance practices tend to attract more investment and benefit from better market reputation.

Moreover, transparency helps improve corporate performance by promoting better decision-making, reducing fraud risks, and strengthening stakeholder trust. This translates into better company valuation and more sustainable economic growth for the country as a whole.

Social and Ethical Responsibility in Bulgarian Companies

The Rise of Social Responsibility in Bulgaria

Bulgaria is experiencing significant evolution in integrating social responsibility within its companies. Since joining the European Union in 2007, the country has undertaken major reforms to align its practices with European standards, while preserving its cultural and economic specificities.

The Bulgarian legislative framework has seen notable advances, particularly with the introduction in 2019 of CFC (Controlled Foreign Company) rules in accordance with the OECD’s ATAD directive. This evolution has encouraged companies to rethink their structures and practices to maintain competitiveness while adhering to stricter ethical standards.

Pioneering Initiatives in the Private Sector

Some Bulgarian companies stand out through their innovative social and environmental commitments. For example, ZMM Bulgaria has implemented a comprehensive Code of Ethics that goes beyond mere statements of intent. This code integrates principles of responsible governance, respect for workers’ rights, and environmental protection in all company operations.

Other notable initiatives include:

• Adoption of enhanced transparency policies
• Implementation of ethics training programs for employees
• Investment in green technologies to reduce carbon footprint

These actions demonstrate growing awareness of the importance of social responsibility in the Bulgarian economic landscape.

Challenges and Opportunities

Despite this progress, Bulgarian companies face several challenges in integrating ethical practices:

The transition toward sustainable business models often requires significant investments, which can be difficult for small and medium-sized enterprises that form the backbone of the Bulgarian economy.

Lack of public awareness about social responsibility issues may limit recognition of company efforts in this area.

Nevertheless, companies that manage to overcome these obstacles report tangible benefits. They note improved brand image, increased employee retention, and in some cases, enhanced economic performance through resource optimization and innovation stimulated by sustainable practices.

Influence of Local Culture

Bulgarian culture, with its traditional emphasis on community and solidarity, plays a crucial role in how social responsibility is perceived and implemented. The most successful companies are those that manage to align their CSR initiatives with local values, thereby creating stronger bonds with their stakeholders.

For example, many Bulgarian companies emphasize support for local communities and preservation of cultural heritage in their social responsibility programs, reflecting Bulgarian society’s priorities.

Future Prospects

The growing importance of social responsibility in the contemporary Bulgarian economy is undeniable. Companies increasingly recognize that adopting ethical practices is not just a moral obligation but also a key competitiveness factor in national and international markets.

As Bulgaria continues to strengthen its regulatory framework and public awareness increases, accelerated adoption of social responsibility practices can be expected. This evolution could position Bulgaria as an emerging leader in ethical corporate governance in the Balkan region.