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Recent Changes to the Romanian Company Law

Since the Romanian Companies Law (Law 31/1990) was passed in 1990 there have been amendments to it to make it more up to date rather than continue it in its original format.

The original law was based on the French company law, and in 1990 there were very few advisors to the Romanian Government who understood corporate law or indeed commercial law.  This law was therefore a first attempt based on limited knowledge and experience of modern corporate law.  Over the next thirty years there have been changes to improve the law and the recent Law signed into effect on the 2nd July 2020 is another example of this.

Law no. 102/2020 brings major benefits and simplifies some of the registration process of companies in Romania, and the shareholders therefore benefiting from a more flexible legal framework regarding the establishment of companies.

The following are changes of which one needs to be aware in respect of formation of companies and the on-going reporting requirements.

Perhaps most important has been the removal of the prohibition and the requirement that a sole shareholder cannot hold the position of sole shareholder in more than one company.  This means that a sole shareholder can now hold the position of sole shareholder in more than one company.  This is very important to companies where they wish to have a number of subsidiaries in Romania.  Often foreign investor companies are themselves single shareholder companies and issues in the past have arisen concerning this when a Romanian company is incorporated.

Art.17.4 of the Law states that on the same premises in a building no more than one company can register their office unless the building or premises are designed in such a way to allow this.  This provision has been abolished.  This has meant that in the past there had to be compartmentation and a different room for each company.  In the previous form of the law the representatives of the company had to give a statement on their own responsibility stating that the building had separate rooms allowing for different companies to be registered.  In the new amended Companies Law such statement is no longer required.

The accommodation contracts allowing for the quick formation of companies (including the contracts using a lawyer’s office) now have to be registered with ANAF before incorporation and proof of such registration lodged with the file at the Trade Registry.  This has in our experience already caused some delay in registration, although other factors have also contributed to the delay.

In the past residential premises in block of flats have been used as office addresses.  This is now relaxed, and it is not now necessary to obtain the consent of adjoining owners of the premises if no activity is carried out at the office.

Finally, companies incorporated where the shareholders are all individuals and who are the ultimate beneficial owners of the company are no longer required to give a statement at the time of incorporation, or annually as previously if there is no change in the shareholding structure.  Companies with corporate shareholders will still be required to give such a declaration.

All these changes will allow the formation and then the on-going operation in relation to company in a more friendly and transparent manner and are changes that will be welcomed by all practitioners.

Setting up a Company in the EU to become easier

EU company law is being updated to reflect the digital age. The Council today adopted a directive that facilitates and promotes the use of online tools in the contacts between companies and public authorities throughout their lifecycle.

The directive will provide improved online procedures, creating a modern and safe way for businesses to dismantle the obstacles involving setting up companies, registering their branches or filing documents, especially in cross border operations.

Ana Birchall, Minister of Justice, Vice Prime Minister for the implementation of Romania’s strategic partnerships, interim

The new rules ensure that:

  • companies are able to register limited liability companies, set up new branches and file documents in the business register fully online;
  • national model templates and information on national requirements are made available online and in a language broadly understood by the majority of cross-border users;
  • rules on fees for online formalities are transparent and applied in a non-discriminatory manner;
  • fees charged for the online registration of companies do not exceed the overall costs incurred by the member state concerned;
  • the ‘once-only’ principle applies, meaning that a company will only need to submit the same information to public authorities once;
  • documents submitted by companies are stored and exchanged by national registers in machine-readable and searchable formats;
  • more information about companies is made available to all interested parties free of charge in the business registers.

At the same time, the directive sets out the necessary safeguards against fraud and abuse in online procedures, including control of the identity and legal capacity of persons setting up the company and the possibility of requiring physical presence before a competent authority. It maintains the involvement of notaries or lawyers in company law procedures as long as these procedures can be completed fully online. It also foresees exchange of information between member states on disqualified directors in order to prevent fraudulent behaviour.

The directive does not harmonise substantive requirements for setting up companies or doing business across the EU.