Personal Liability under Article 19 TSSPC: Managers, Partners and Shareholders

A Bulgarian commercial company is a separate legal entity. In a limited liability company, members are liable for company obligations through their capital contributions, while a joint-stock company answers to its creditors with its own assets. As a general rule, company assets are therefore legally distinct from the personal assets of managers, partners and shareholders. 

This separation is not absolute when public liabilities are collected. Article 19 of the Bulgarian Tax and Social Security Procedure Code (TSSPC) establishes specific grounds on which a third party may become liable for unpaid company taxes and mandatory social security contributions. Liability does not arise merely because the company has unpaid public liabilities or has suffered a commercial failure. All statutory elements of the relevant Article 19 ground must be established. 

A manager, member of a management body, procurator, commercial representative or commercial proxy may incur liability under Article 19(1) where that person conceals facts or circumstances which he or she was legally required to disclose to the revenue authorities or a public enforcement officer and, as a consequence, company tax or mandatory social security liabilities cannot be collected. 

Not every tax return error, accounting mistake or incorrect interpretation of tax law constitutes concealment. The courts examine whether facts that were legally required to be disclosed were actually concealed and whether a causal connection exists between that conduct and the inability to collect the public liability. The Supreme Administrative Court has also reiterated in 2026 that the revenue administration bears the burden of establishing each cumulative element of Article 19 liability. 

Holding the title of manager is therefore not sufficient. The National Revenue Agency must establish the relevant conduct, the legal duty of disclosure, the inability to collect the company's liability and the required causal link. 

Article 19(2) contains a separate ground of liability. A manager, member of a management body, procurator, commercial representative or commercial proxy may be liable where that person acts in bad faith in one of the ways specified by law, thereby reducing the company's assets and causing taxes or mandatory social security contributions to remain unpaid. 

The provision covers payments in money or in kind constituting a hidden profit distribution or dividend, transfers of company assets, including the enterprise, without consideration or at prices materially below market value, and the encumbrance of company assets to secure another person's debt where the assets are subsequently realised for the benefit of that third party. 

Liability under Article 19(2) is subject to a statutory cap. Under Article 19(4), it is limited to the amount of the payments made or the reduction in the company's assets. An individual does not therefore automatically become liable for the entire public debt where the relevant reduction in assets was lower. 

Importantly, liability under Article 19(1) and (2) is not limited to the principal amount. In Interpretative Decision No. 5 of 29 March 2021 in Interpretative Case No. 7/2019, the General Assembly of the Chambers of the Supreme Administrative Court held that the third party's liability also includes the established default interest owed by the principal debtor. The Supreme Administrative Court continued to apply that interpretation in 2026. 

Absence of formal registration as a manager does not exclude Article 19 liability in every case. The TSSPC does not, however, establish a general rule that anyone exercising practical influence over a business is automatically treated as a manager. 

Article 19(12) extends specific statutory categories. A person authorised to exercise a manager's powers is also treated as a procurator for these purposes. A person satisfying the requirements applicable to a commercial proxy under Article 26 of the Bulgarian Commerce Act, except for the remuneration requirement, may also fall within the provision, as may a person acting under the conditions of Article 301 of the Commerce Act. 

Practical control over bank accounts, execution of contracts or management of payments may therefore be relevant evidence, but liability must still be connected to a statutory capacity covered by Article 19. A power of attorney alone is not necessarily sufficient to establish the status of commercial proxy in every case. 

Article 19 provides separate grounds of liability for partners, shareholders and other owners of capital. The applicable conditions and the amount of liability depend on the particular statutory provision. 

A majority partner or shareholder may incur liability under Article 19(3) where conduct falling within Article 19(2) was carried out on that person's decision. Partners and shareholders who did not vote or voted against the decision are excluded. Liability remains subject to the Article 19(4) limit corresponding to the relevant payment or reduction in company assets. 

Article 19(5) separately addresses bad-faith transfers of majority holdings. A majority owner, partner or shareholder who held that status when the public liabilities arose may incur liability where the person transfers shares or equity interests in bad faith so as to cease being a majority owner. Liability is proportionate to the person's participation in the transferred part of the capital. 

For this provision, the legislation expressly links bad faith to knowledge that the company was over-indebted or insolvent where the transfer took place before the earlier of the publication in the Commercial Register of the debtor's application for insolvency proceedings and the registration of the court decision opening insolvency proceedings. 

Article 19(6) extends the transfer-liability regime to minority partners and shareholders where, simultaneously or successively within a period not exceeding three months, they transfer equity interests or shares in bad faith which together constitute a majority interest in the capital. 

The rule does not apply to companies whose shares are subject to a public offering. This is the wording of the current statutory exception and should not be replaced with the narrower formulation referring only to shares traded on a regulated market. 

Liability under Article 19(5) and (6) ceases where the insolvency court terminates the insolvency proceedings following approval of a rehabilitation plan or on the basis of an agreement for settlement of monetary liabilities under Article 740 of the Commerce Act. 

Any owner of capital, including a partner or shareholder, who has received a hidden profit distribution may incur liability under Article 19(9). This ground is not limited to majority owners. 

Liability covers the company's unpaid taxes and mandatory social security contributions for the period during which the recipient held the relevant status and is limited to the amount actually received. The legislation expressly provides an exception where the hidden profit distribution has been declared. 

Article 19(8) establishes a separate regime for persons acting in hidden participation with an insolvent legal entity. Such a person is jointly and severally liable with the insolvent company for unpaid taxes and mandatory social security contributions as those liabilities would arise for the company itself. 

Hidden participation should not be equated automatically with any informal involvement in management. Case law examines whether a person behind the formal corporate structure effectively uses the insolvent legal entity as a front while concealing his or her own role in organising and controlling the business activity. The assessment remains fact-specific. 

The liability cap under Article 19(4), which applies to paragraphs 2 and 3, does not govern the separate hidden-participation ground under Article 19(8). 

Under Article 19(10), bad faith for the purposes of paragraphs 2 and 3 is deemed to exist where the relevant act takes place after the liabilities have been declared and/or established and within one year of the declaration and/or issuance of the act establishing the liability. 

Article 19(11) contains a further rule for conduct under paragraphs 2, 3 and 5. Bad faith is deemed to exist where the act takes place after commencement of a tax or social security control procedure and up to six months after its completion. Where an inspection is carried out, the period begins upon receipt of the request or record under Article 110(5) TSSPC. 

Outside these statutory periods, bad faith must be established on the basis of the specific facts and evidence in the proceedings. 

Article 19 liability does not arise automatically when the company fails to pay. Under Article 21 TSSPC, third-party liability is established by a tax audit act. The revenue authorities must establish all cumulative elements of the particular statutory ground relied upon, a requirement reaffirmed in Supreme Administrative Court decisions issued in 2026. 

Article 20 establishes a specific order of enforcement. Security and compulsory enforcement must first be directed against the assets of the company whose tax or social security liability is concerned. Article 19 liability may then be enforced against the responsible third party where the statutory conditions are met. 

For Article 19(1) and (2), the scope of liability includes the established interest owed by the principal debtor, following the binding interpretation in Interpretative Decision No. 5 of 29 March 2021. 

It would not be legally appropriate to state that every Article 19 audit is governed in an identical manner by the five-year period under Article 109 TSSPC. Different approaches have appeared in the case law regarding the application of Article 109 to proceedings establishing third-party liability. Limitation and assessment periods should therefore be analysed by reference to the specific public liabilities, the audit dates, the limitation of the principal debt and the applicable case law. 

Managers and owners should maintain a clear separation between personal and company finances. Cash withdrawals, personal expenditure paid with company funds and financing of related parties should have a clear legal, accounting and commercial basis. 

Where significant assets are sold or transferred, the legal basis and market terms of the transaction should be documented. Before a dividend is distributed, the company's financial statements and outstanding or upcoming public liabilities should be reviewed. 

Transfers of shares or equity interests should be preceded by an assessment of the company's financial condition and supported by proper handover of corporate and accounting documentation. Where a TSSPC control procedure has already commenced, requested records and evidence supporting the commercial rationale of relevant transactions should be provided in a timely manner. 

Vassilev & Chisuse Law Firm provides legal assistance in corporate structuring, tax planning and procedural representation under the TSSPC. Assistance may include prior legal analysis of management actions and asset-disposal transactions, structuring acquisitions and transfers of company interests, and representation before the National Revenue Agency and the administrative courts in proceedings concerning personal liability under Article 19 TSSPC. 

This material is provided for general informational purposes only. It does not constitute individual legal, tax, financial or investment advice. The current consolidated version of the TSSPC as of that date incorporates amendments published up to State Gazette No. 85 of 15 September 2026. This article is provided for general informational purposes only and does not constitute individual legal or tax advice.