PLC Doing Business in Romania 2013
Published on the “Doing Business in… 2013” website by Practical Law Company (PLC) and Lex Mundi.
1. What are the key recent developments affecting doing business in your jurisdiction?
The new Civil Procedure Code of Romania became effective on 15 February 2013.
The new Civil Code of Romania entered into force on 1 October 2011, but there is a lack of relevant case law and doctrine relating to this. The new Civil Code introduced many new concepts (for example, trust companies, , specific regulation of standard clauses, special protection of legal entities under adherence contracts, freedom to agree contractually on prescription terms, and so on). In addition, other concepts that already existed through doctrine and jurisprudence are now expressly regulated (for example, sale of movable assets belonging to third parties, hardship, the unilateral termination of a contract for no-cause, regulation of specific types of contracts, and so on).
The Social-Liberal Union won the parliamentary elections. Presidential elections are expected to take place in 2014.
2. What is the legal system based on (for example, civil law, common law or a mixture of both)?
Romania has a civil law system.
3. Are there any restrictions on foreign investment (including authorisations required by central or local government)?
There are a few restrictions on foreign investment. For example, foreign nationals cannot acquire land, subject to a limited number of conditional exceptions (however, they can set up Romanian limited liability companies to acquire land).
4. Are there any restrictions on doing business with certain countries or jurisdictions?
Romania must observe:
- Mandatory EU trading or monetary restrictions, or other restrictive measures adopted at EU level.
- United Nations Security Council international trading or monetary restrictions and sanctions.
- Trading or monetary restrictions and sanctions adopted by other international organisations or by unilateral decisions of other states, provided they are adopted or ratified by Romania by law.
The following web pages contain particular information on certain of these restrictions:
- Foreign Affairs Ministry: www.mae.ro.
- Department for Export Controls (ANCEX) (that is, the Romanian authority responsible for the control of dual use exports, and the control of military exports, imports, transits and transshipments): www.ancex.ro.
5. Are there any exchange control or currency regulations?
There are certain limited exchange control and currency regulations to deter money laundering. In addition, certain reporting requirements apply to foreign currency money market transactions and to loans from foreign lenders to Romanian private borrowers.
6. What grants or incentives are available to investors?
Generally, there is no difference in the legal treatment of local and foreign investors. Financial and/or tax incentives are provided for small- and medium-sized enterprises.
7. What are the most common forms of business vehicle used in your jurisdiction?
The most common forms of business vehicle used by local and foreign companies are private joint stock companies and limited liability companies. This is due to the limitation of shareholders’ liability to the value of the share capital. Listed companies can only take the form of joint stock companies.
Certain business activities can only be carried out by entities organised in a particular legal form (for example, insurance and banking entities can only operate as joint stock companies).
8. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, what are the main registration and reporting requirements?
The shareholders must prepare the company’s bye-laws (in a notarised form in limited cases) to be submitted together with a completed registration application form and various other documents, to the local Trade Registry Office. Registration takes about three to five working days from the submission of all required documents.
The minimum share capital for joint stock companies is RON90,000 and for limited liability companies is RON200.
There are no maximum share capital requirements.
Cash consideration is mandatory when establishing any type of company. Shares can be issued for contributions in kind, which are evaluated by authorised experts. Prohibited or restricted contributions include contributions of services or labour, and contributions of accounts receivables.
Rights attaching to shares
Restrictions on rights attaching to shares. Voting and dividend and distribution rights (under insolvency and tax laws) can be restricted, and agreements under which a shareholder undertakes to exercise voting rights in accordance with the instructions or proposals of the company, or of the persons representing the company, can be void.
Automatic rights attaching to shares. Shareholders have the right to:
- Participate in the general meeting of shareholders and to vote on aspects of the corporate life of the company (for example, the object of activity, headquarters, working units, share capital, mergers, acquisitions and divisions, dissolution, issuance of bonds, amendment of the company bye-laws and changes of nominal shares into bearer shares).
- Appoint the directors and auditors of the company.
- Vote on the budget of the company and approve the financial reports.
- Cash the dividends.
Shareholders must exercise their rights within the limits of the company bye-laws and of their shareholding.
9. In relation to the most common form of corporate business vehicle used by foreign companies in your jurisdiction, outline the management structure and key liability issues.
Joint stock companies can adopt a one-tier (that is, board of directors) or a two-tier (that is, directorate and supervisory board) management structure. Limited liability companies are managed under a one-tier structure.
There are no restrictions on foreign managers.
Directors’ and officers’ liability
With certain exceptions, directors are jointly liable to the company for any mismanagement. They can be held criminally liable for embezzlement, forgery, use of forgery, bribery and fraudulent management.
Shareholders’ liability in joint stock and limited liability companies is limited to their contribution to share capital. However, in certain conditions, a shareholder can be held jointly liable for the financial obligations of an insolvent company. For example, a shareholder taking advantage of the limited character of the company’s liability and of its distinct legal personality.
Parent company liability
A parent company is generally liable for actions undertaken by its branch, but not for the actions undertaken by its subsidiary (unless the subsidiary is insolvent and the conditions of Article 27 of the Fiscal Procedure Code’s conditions are met), where the branch does not enjoy legal personality and the subsidiary does.
From a competition perspective, a parent company’s 100% shareholding in a subsidiary creates a rebuttable presumption that the parent company exercises decisive influence over the subsidiary’s commercial policy. This enables the competition authority to hold the parent company liable for the subsidiary’s infringement of the competition rules.