24 August 2020
With thanks to Hammond & Associates, Bucharest.
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.