Updated last 18.06.2025
What is commercial agency?
Commercial agency is the case, when a trader (commercial agent) provides professional services, supporting the performance of the business operations of another trader (principal). The commercial agent (natural person or legal entity) may be authorized to conclude transactions on behalf and at the expense of the principal, but it is also possible that the agency is limited to merely providing support in the search for new clients within a certain geographic territory and preparation of transactions, which the principal concludes himself.
| Important to know | |
 | Commercial agency must be clearly distinguished from the representation, carried out by the management body of a business company. The commercial agent is not part of principal’s company, but a separate, independent person and his representative powers are exclusively limited to support in the performance of the principal’s business operations. It is possible that the commercial agent represents multiple traders, if the represented traders are not competitors with each other. It has to be noted that the commercial agency, as regulated by the Commercial Act (CA), is different from the trade representation offices of foreign commercial entities (traders), regulated by the Investment Promotion Act and is subject to registration in the Bulgarian Chamber of Commerce and Industry. Concerning the latter, it is appropriate to note that the trade representation office of a foreign trader is not a separate legal entity and may not perform an independent business activity, the commercial representative office of a foreign entity is not a legal entity and cannot carry out independent economic activity, but only preparatory or representative actions aimed at facilitating future investments in Bulgaria. |
The relations between the principal and the commercial agent are regulated in a written contract, usually regulating significant matters and issues, regarding the agency – key rights and obligations of both parties, area of operation of the commercial agent, whether or not the commercial agent may conclude transactions on behalf or at the expense of the principal, the amount of the commercial agent’s fee, etc. The commercial agent is obliged to keep the commercial secrets of the trader and his reputation, including after termination of the contract, and in case of non-fulfilment of this obligation he shall be liable under the Trade Secret Protection Act (art. 52 CA).
How is the commercial agency terminated?
A commercial agency is terminated upon:
- Termination of the commercial agency contract.
- The commercial agency contract may be signed for a fixed term. In this case, the commercial representation is automatically terminated upon expiration of the agreed term.. Тhe contract, signed for a fixed term may be terminated earlier, by either party, with compensation for damages caused to the other party. It is possible, however, that despite the expiration of the contract, the parties continue to exercise their rights and perform their obligations, as agreed in the contract. In this case, the contract is considered to be extended for an indefinite term (art. 47, para. 4 of the CA).
- The contract may also be signed for unlimited period of time, in which case it is terminated with written notice.. During the first year of the contract, each party may terminate it by means of a one-month written notice, and during the second year – by means of a three-month notice. Тhe parties may not agree on shorter notices, and if they agree on a longer notice, the notice period must be identical for both the principal and the commercial agent (art. 47, para. 1 of the CA). If the contract was initially for a fixed term but was subsequently extended without an explicit new agreement, the regime for an indefinite-term contract applies. In this case, when determining the period of the termination notice, the duration of the contract until its expiration will also be taken into consideration. For example, if the contract was signed for a five-year period and after its expiration, it was extended without limitation in time, at least a three-month notice will be required for its termination.
- Termination of commercial agent’s activity.
- Upon ceasing to conduct business as a trader, the commercial representative will be required to request de-registration in the Commercial Register.
- If the commercial agent is a natural person, it is possible to terminate the agency due to his death or compulsory judicial disability[1]. In this case the heirs or guardian must request de-registration of the representative from the Commercial Register.
- If the commercial agent is a legal entity, the commercial agency is also terminated upon its bankruptcy. In this case the court of insolvency shall order ex officio the deletion of the commercial representation from the Commercial Register (art. 47, para. 6 of the CA).
What are the consequences of the termination of the commercial agency?
After termination of the contract, the commercial agent is entitled to a one-off compensation from the principal, if the latter continues to benefit from the client base, established by the commercial agent or if the commercial agent has significantly increased the volume of the transactions with clients. The heirs of the agent are also entitled to such compensation, if the commercial agency is terminated due to the agent’s death (art. 40 of the CA). Compensation cannot exceed an amount equal to one year’s remuneration, calculated on the basis of the average annual sum received by the representative over the last five years (or a shorter period if the contract has lasted less).
The trader and commercial agent may agree limits in the activity, to be carried out and the commercial agent after the termination of the contract. These arrangements must be made in writing. The limitation must cover the same area and type of goods or services, subject matter of the commercial agency contract and cannot continue for more than 2 years after the termination of the contract. In this case, the commercial agent has to be compensated for the period of the limitation (art. 41 of the CA).
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 | For more information on the commercial agency and the related regulatory framework, please refer to the websites of the: |
[1] Judicial disability is a special regime, which the court can impose to a person, who cannot take care of himself and his business (e.g. due to a mental disorder, insufficient mental and physical maturity, etc.) persons, placed under complete judicial disability, cannot conclude transactions and bind themselves and their business is taken care of by a guardian.