Assets and shares confusion in real estate deals

Very often foreign investors make joint venture companies. This type of investment has to be specially analyzed by a specialized council, solicitor or barrister. Ask your lawyer a lot of questions and never hesitate to do so.

What is the problem? I will give you a an example with the fictive Mr. And Mrs. Smith.

Mister Smith with his wife Mrs Smith own a beautiful house and a green garden in the Bulgarian countryside. In order to do that deal they have incorporated a Bulgarian company (Smith Real Estate LTD). Mr Smith has a friend his name is Mr. Peterson. Both of them are very close friends. They decide to buy a new property together near the Sea.

How they have to proceed?

The first option is the use the established company of Mister Smith who will be the buyer in the deal.

In fact Mr. Smith and Mrs. Smith do not possess directly their house. They possess only shares in their company.And their firm is the owner of the house and the plot of land.

If their company buys the new plot of land they have to solve the shares property problem.
Mr. and Mrs. Smith have to transfer a fraction of their shares to Mr. Peterson. Otherwise he will not have any legal document conferring him any property rights for his purchase.

But doing so there will be Assets and Shares confusion. Mr Peterson will own shares of the company Smith Real Estate.

For example he will own 30% of the total shares of the company Smith Real Estate LTD. But legally that means that he owns 30 % of all the assets of the firm (the house of the family Smith and the new plots).

That is a problem and to solve this problem a better solutions is to create a joint venture company for the new deal. That may sound complicated but it means to start a new Bulgarian company for the new deal.

Ask your Bulgarian legal counsel before making any deal. Ask specific questions to your barrister or solicitor and explain in detail your situation. Do not just say "I want to do a real estate deal". On the other hand you will divide the costs for the new company and the solution is cost effective.