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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.

A decision regarding the interest clause in credit contracts

On 19th December 2019, the European Court of Justice gave a judgement for consumer protection concerning the interpretation of Directive 2008/48/EC of the European Parliament and of the Council of 23rd April 2008 on credit agreements for consumers in the case C‑290/19 (RN vs. Home Credit Slovakia a.s.)

The main issue was whether Article 10(2)(g) of Directive 2008/48 must be interpreted as precluding, in a consumer credit agreement, the annual percentage of the total amount of credit from being expressed not as a single rate but as a range referring to a minimum and a maximum rate.
It should be noted that the indication of the annual percentage of the total amount of credit in the form of a range of two figures is not consistent with the wording of several provisions of Directive 2008/48, in particular Articles 3 and 19, nor with the general scheme of that directive. It follows from those provisions that the annual percentage of the total amount of credit must be expressed as a percentage, by reference to a precise figure.

Moreover, according to the Article 3(i) of Directive 2008/48, which defines the annual percentage of the total amount of credit as ‘the total cost of credit to the consumer, expressed as an annual percentage of the total amount of credit’, requires a precise percentage to be fixed.
It is apparent from Article 19(1) of Directive 2008/48, read in conjunction with Part I of Annex I to that directive, that the annual percentage of the total amount of credit is calculated in accordance with the mathematical formula set out in that annex and should reflect, to one decimal place, all existing or future commitments agreed by the creditor and the consumer. In addition, the second subparagraph of Article 19(5) states that the annual percentage of the total amount of credit must be calculated in a uniform manner.

In its judgment the European Court has considered that in case of annual percentage of the total amount of credit does not have a precise percentage the consumers’ right to information is broken. Considered from that perspective, the obligation to provide information set out in Article 10(2) of Directive 2008/48, under which the credit agreement is to specify in a clear and concise manner, the annual percentage of the total amount of credit, contributes to the attainment of the objective pursued by that directive.

The Court has pointed out that, for a consumer, the total cost of credit, presented in the form of an annual percentage of the total amount of credit calculated according to a single mathematical formula, is of critical importance. That rate enables the consumer to assess, from a financial point of view, the extent of the commitment associated with the conclusion of the credit agreement. It should be noted that, if it were permissible to provide in a credit agreement that the attainment can be expressed by reference not to a single rate but to a range referring to a minimum and a maximum rate, the criterion of clarity and conciseness laid down in Article 10(2) of Directive 2008/48 would not be met. That criterion is essential for the consumer to be able, as stated in recital 31 of that directive, to know his rights and obligations under the credit agreement. The use of such a range may not only make it more difficult to assess the total cost of credit but may also mislead the consumer as to the actual extent of his commitment.

Therefore, the conclusion of the court was that Article 10(2)(g) of Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers and repealing Council Directive 87/102/EEC, as amended by Commission Directive 2011/90/EU of 14 November 2011, must be interpreted as precluding, in a consumer credit agreement, the annual percentage rate of charge from being expressed not as a single rate but as a range referring to a minimum and a maximum rate.

Published by

Nicholas S. Hammond (Hammond-Partnership)