By Sorin Strătulă (Partner)
1. Introduction to the legal framework governing the area.
The legal framework regulating the corporate activities area comprises a set of basic laws that cover all the aspects of a business set up and operation in Romania.The core laws in the field are the Company Law no. 31/1990 (“Company Law”) and the Trade Registry Law no. 26/1990 (“Trade Registry Law”).
Of these, the Company Law is the most important enactment, which expressly regulates the establishment and functioning in Romania of all commercial companies (i.e. registration procedures, companies’ administration, rights and obligations of the shareholders, mergers and spin-offs, dissolutions and liquidations, specific sanctions for the administrators, censors, directors and founders).
Company Law (as substantially amended by Law no. 441/2006) represents an important legislative step in Romania’s commitment to align its internal legislation to the European Union one, given Romania’s status as member of the Union starting January 1st, 2007. As such, the Romanian corporate governance environment became more similar to that in the EU, offering a friendly and safe legal background for the EU investors seeking to develop businesses in Romania.
2. Types of commercial companies that may be established and operated in Romania:
The Company Law regulates five types of commercial companies:
– Limited liability company (RO: “societate cu raspundere limitata – SRL”),
– Joint stock company (RO: “societate pe actiuni – SA”),
– General partnership (RO: “societate in nume colectiv – SNC”),
– Limited partnership (RO: “societate in comandita simpla – SCS”),
– Limited partnership on shares (RO: “societate in comandita pe actiuni – SCA”).
The most frequently used types of companies are the limited liability companies (“SRL”) and the joint stock companies (“SA”), which will be further on referred to.
3. SRL and SA registration procedure.
Setting up an SRL and an SA is subject to a similar procedure (with few particularities for each type of company). An SRL or an SA is incorporated following its registration with the Trade Registry Office (“Trade Registry”) of the Tribunal under the jurisdiction of which the headquarters of the future company are located. The written application for incorporation shall be filed with the competent Trade Registry in a period of 15 days following the conclusion of the company’s Articles of Incorporation and shall be signed by the appointed administrator/other representative of the company.
As of the date of its registration with the Trade Registry (performed by a minute of the judge delegated by the Tribunal to control registration activities) the company acquires full legal capacity and is allocated a unique registration code (RO: “Cod unic de inregistrare – CUI”). Starting with this date the company may enter into any commercial transaction, as per its declared object of activity.
An aspect to be carefully considered prior to incorporation of a company is the legal regime of company’s name. The name of any SRL must be personalized and may contain the name of one or more shareholders. In any event, it shall also have the indication that the company is an SRL. The name of an SA shall be composed of a personalized syntagm, different from other company names and shall be followed by the indication that the company is an SA.
If the new company’s name is not sufficiently differentiated from other existing company names, the Trade Registry may reject the request for that particular name. To avoid such an end the applicants usually request the Trade registry to issue a name availability certificate prior to start the registration procedure.
5. Social capital and shares. Shareholders.
The minimum share capital cannot be below RON 90,000 (the equivalent of at least 25,000 Euro) and is divided into shares having a minimum value of 0.1 RON. The amount of the minimum share capital may be modified by the Government so as to represent the equivalent of Euro 25,000. The founders must subscribe to the entire social capital of the company and must pay at least 30% of its value, the rest of to 70% having to be paid within 12 months following the incorporation of the company (in case the shares have been subscribed in cash) and within 2 years following the incorporation of the company, in case the shares have been subscribed by contributing with a plot of land. The minimum number of shareholders is two.
The minimum share capital is of RON 200 (approximately 60 Euro) and is divided into social parts that cannot have a value lesser than 10 RON. The founders are obliged to integrally pay the subscribed share capital prior to the incorporation. The number of shareholders cannot be higher than 50. It is possible to set up an SRL with a sole shareholder (either a natural or a legal person, Romanian or foreign). In this case, the Company Law forbids a person to be a sole shareholder in more than one SRL. The same interdiction is for the SRL with a sole shareholder to establish another SRL having it as sole shareholder.
Usually, the SRL with a sole shareholder is used as an investment tool when the investors need to launch an SPV (special purposes vehicle) for various preliminary investments purposes (e.g. for buying estate, which cannot be directly acquired by foreign legal entities).
1. Labour force or services cannot serve as contributions to the share capital of a company.
2. Financial institutions, leasing and insurance companies may be organized exclusively as SA’s and not as SRL’s.
3. SA may issue bonds, an attribution which is not provided for the SRL.
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