Corporate Law in Romania – An Overview

2024-07-14

Corporate Law in Romania – An Overview

Navigating the Romanian business landscape requires a keen understanding of its corporate law, which serves as the foundation for every commercial venture within the country’s borders. As of the current legislation, Romanian corporate law governs the establishment, management, and dissolution of companies, laying down the rules and regulations that businesses must abide by to thrive in this dynamic market.

The main relevant legal acts in the field of Romanian company law are Law no. 31/1990 on companies, Law no. 265/2022 on the Trade Register, as well as some provisions of the 2009 Civil Code. These acts cover a wide range of aspects related to companies, including the types of companies, company management and governance, share capital and shares, auditing and financial requirements, modifications of an existing company, the procedures of dissolution and liquidation.

For an overview, in the following we will go through all the stages of setting up, operating and dissolving a company under Romanian law.

1. Legal forms of companies in Romania

As a rule, for the purpose of carrying out profit-oriented activities, natural or legal persons may associate and set up companies with legal personality, in compliance with the provisions of the law.

According to the Companies Act, a company may take any of the following five forms provided by law: general partnership, limited partnership, partnership limited by shares, limited liability company and joint-stock company. But for a simpler approach these can be divided into three main categories, as it follows:

A) Partnerships (societățile de persoane) may opt for any of the following forms of organization recognized by law:

A.1. General Partnership (societate în nume colectiv, SNC): An SNC is formed by two or more individuals or legal entities who come together to carry on a business with a common purpose. One significant characteristic of an SNC is that all partners have joint and several liability for the partnership’s debts and obligations. This means that each partner is personally and fully responsible for the partnership’s debts, and creditors can pursue any partner individually to satisfy the partnership’s liabilities. In an SNC, all partners actively participate in the management and decision-making of the business, unless otherwise stipulated in the partnership agreement. Decisions are generally made on a consensus basis.

A.2. A more evolved form of the a company is the Limited Partnership (societate în comandită simplă, SCS), which combines elements of a general partnership (with at least one general partner) and elements of a limited liability partnership (with at least one limited partner). The Limited Partnership is a business structure where two or more individuals or entities come together to form a partnership to conduct business. This type of partnership has two distinct categories of partners:

General Partners: These partners are fully liable for the debts and obligations of the partnership. They also have the authority to manage the business and make decisions on behalf of the partnership.

Limited Partners: These partners, on the other hand, have limited liability, meaning their liability is restricted to the amount of capital they have contributed to the partnership. Limited partners are not involved in the day-to-day management of the business and usually play a more passive role.

A.3. Partnership Limited By Shares. An even more complex form of the abovementioned Limited Partnership is the Partnership Limited By Shares (societate în comandită pe acțiuni, SCA): Although the limited partnership limited by shares is not a common business structure in Romania, it is a legal form an enterprise the combines features of both a limited partnership and the joint-stock company. A SCA must have at least two types of partners:

general partners: these partners have unlimited liability for the company’s debts and obligations and are actively involved in managing the business;

limited partners: these partners have limited liability, restricted to the value of their contributed shares. They are not actively involved in the management of the company.

The conditions for setting up an SCA are identical to those for setting up a joint-stock company.

B) Limited Liability Company (societate cu răspundere limitată, SRL): An SRL is a legal form of business organization commonly chosen by entrepreneurs in Romania. The SRL is a type of private company with limited liability for its shareholders, which means the shareholders’ liability is restricted to the amount they have invested in the company’s capital. It is essential that the association in an LLC is made with particular regard to the person of the other associates, based on cooperation and mutual trust between them.

In Romania, an SRL typically requires at least one shareholder and can have up to 50 shareholders. It is the most common type of company due to the following reasons:

limited liability of shareholders;
ease of formation: the registration process is streamlined, and the required share capital is relatively low, making it accessible to a wide range of entrepreneurs;
flexibility: the shareholders can easily adapt the company’s structure to suit their specific business needs and goals. This flexibility allows for efficient decision-making and can be especially beneficial for small and medium-sized businesses.

In addition to these forms of company, there are other forms of commercial enterprise in the special laws, such as the authorised natural person (PFA), the individual enterprise (IE), the family enterprise (FI) or the civil (professional) partnership [societatea civilă (profesională)].

C) Joint-Stock Company. In Romania, the joint-stock company (societate pe acțiuni, SA) is a complex type of business entity characterized by its share capital, divided into shares, which are held by shareholders or stockholders. The shareholders’ liability is limited to the value of the shares they own, which means their personal assets are not at risk for the company’s debts and obligations beyond the value of their shares. Som of the key features of a joint-stock company are:

share capital: a minimum share capital of 90.000 RON (around 18.000 EUR) is required to establish a joint-stock company. The share capital is divided into shares, and shareholders are required to subscribe to and pay for these shares;
limited liability: shareholders’ liability is limited to the value of their subscribed shares. They are not personally responsible for the company’s debts and obligations beyond their contributions;
transferability of shares: shares in a joint-stock company are typically freely transferable, subject to any restrictions outlined in the company’s articles of incorporation or by laws;
shareholders’ meeting: major decisions affecting the company require approval from the shareholders during a shareholders’ meeting (AGA, Adunarea Generală a Acționarilor);
public offering and transfer of shares: in some cases, joint-stock companies may be listed on a stock exchange and offer their shares to the public for trading.

To establish a joint-stock company in Romania, specific legal procedures must be followed, including the drafting of articles of incorporation, registration with the Trade Register, and obtaining any required licenses or authorizations.

2. Establishment of companies

According to the legislation in force, general partnerships (SNC), limited partnerships (SCS) are set up by a partnership agreement, while joint-stock companies (SA), limited partnerships (SCA) and limited liability companies (SRL) are set up by a partnership agreement and articles of association. As an exception to this rule, the single-member limited liability company (SRL) is set up only by drawing up the articles of association. The partnership agreement and the articles of association are referred to as „founding act” or „articles of incorporation” (act constitutiv).

The founding act of a company must include:

the identification data of the partners; in the case of a limited partnership, the limited partners shall also be indicated;

the form, name and registered office;
the object of the company’s activity, specifying the main field and activity;
the subscribed share capital, stating the contribution of each partner, whether in cash or in kind, the value of the contribution in kind and the method of valuation; in the case of limited liability companies, the number and nominal value of the shares and the number of shares allotted to each partner for his contribution;
the method of adopting resolutions of the general meeting of members, with all members voting, if, because of the parity of the share capital, an absolute majority cannot be established;
the members who represent and manage the company or the non-associated directors, their identification data, their term of office, the powers conferred on them and whether they are to exercise them jointly or separately;
in the case of limited liability companies, if auditors or financial auditors are appointed, the identification details of the first auditors or financial auditors respectively;
each member’s share of profits and losses;
where applicable, where required by law, the identification details of the beneficial owners and the manner in which control of the company is exercised.

The founding act may also include:

the secondary offices – branches, agencies, representative offices or other such establishments without legal personality – where they are set up at the same time as the company, or the conditions for their subsequent establishment if such establishment is contemplated;
the duration of the company;
the manner of winding up and liquidation of the company; the arrangements for meeting liabilities or settling them in agreement with creditors in the event of dissolution without liquidation, where the members agree on the distribution and liquidation of the company’s assets.

3. Functioning of the company

3.1. Shareholders’ Meetings

Under Romanian corporate law, there are two main types of general meetings of shareholders:

a) Ordinary General Meeting (adunarea generală ordinară): The Ordinary General Meeting is held annually and must take place within six months from the end of the company’s financial year. It serves as a forum to address regular business matters and to ensure the proper functioning of the company.

b) Extraordinary General Meeting (adunarea generală extraordinară): The Extraordinary General Meeting is convened whenever there are specific matters that require the approval or decision of the shareholders, beyond the regular business matters addressed in the Ordinary General Meeting.

Both types of general meetings are vital in ensuring corporate governance and providing shareholders with a platform to participate in decision-making processes. The notice period, quorum requirements, voting procedures, and other rules regarding the convening and conduct of these meetings are prescribed by Romanian company law and the company’s articles of association.

The general meeting of members shall be convened by the administrator at least once a year. It may also be requested by a number of members who together hold at least one quarter of the share capital, provided they state the purpose of the meeting. A general meeting of the members shall be convened by the administrator at least once a year. The convocation may also be requested by a number of members who together hold at least one quarter of the share capital, with the obligation to state the purpose of the convocation. The actual convocation shall be effected as a rule by registered letter at least 10 days before the day fixed for the general meeting, indicating the agenda, or by the method laid down in the articles of association. …

For the general meeting to be valid, members holding together at least one quarter of the share capital must be present. If this quorum is not met at the first convocation, the meeting shall meet at a second convocation, irrespective of the proportion of the share capital held by those present.

Resolutions of the general meeting of members are adopted:

unanimously, when it is a question of amending the articles of association of the limited liability company, because this is based on the common interest and mutual trust of the partners;
by a vote of the partners representing at least three quarters of the share capital when approving the transfer of shares to a third party outside the company;
the other decisions are adopted by absolute majority, i.e. the majority vote of the shareholders who together hold the majority of the share capital;

The articles of association may lay down higher quorum and majority requirements, the shareholders being free to regulate the legal relations between themselves and the operation of the company.

3.2. Company Management

In a Limited Liability Company (SRL) under Romanian law, the company’s management is typically handled by one or more administrators (also known as directors or managers). The administrators are appointed by the shareholders and are responsible for overseeing the day-to-day operations and decision-making of the company. The appointment of administrators is typically outlined in the company’s Articles of Association. The decision regarding the number of administrators and their appointment is made during the General Meeting of Shareholders. The administrator of a legal entity can be another legal entity as well. The administrator’s role can be described by the following duties and responsibilities:

managing and representing the company: the administrators’ powers are defined by the founding act and may include tasks related to financial management, contractual agreements, strategic decision-making, and other operational matters;
powers and liabilities: administrators have a fiduciary duty to act in the best interests of the company and its shareholders. They are accountable for their actions and decisions and acting against the company’s interests can result in a legal liability before a court of law, in which case the administrator will bear the damage suffered by the company;
legal compliance: administrators are responsible for ensuring that the company adheres to all applicable laws, regulations, and legal requirements, especially tax laws, labor law and industry-specific regulations;
record-keeping and reporting: administrators are required to maintain accurate records of the company’s activities. This includes financial transactions, contracts, corporate governance documents, and other important records that may be needed for legal or regulatory purposes.

It is important to note that in the event of mismanagement or failure to fulfil the obligations laid down by law or the articles of association, the administrator may be held liable for the damage caused to the company. In current legislation there are two main cases of this kind:

the liability of the director under common law applies to damage caused by the directors or the company’s senior staff, if, with their care and supervision, such damage could have been avoided; the director is also liable for damage caused by his predecessor if he does not report his predecessor’s mismanagement;
order the administrator to bear all or part of the liabilities in insolvency proceedings if he abused his position in the company to the detriment of the company, failed to comply with the accounting rules or worsened the (already) precarious financial situation of the company.

A company may also opt for the introduction of a dual system of management (the management of the company is carried out by the management board, under the coordination of the supervisory board which has the exclusive right to decide on certain matters laid down in the articles of association), which is more common in joint-stock companies.

3.3. Shareholders’ Rights

Under Romanian law, shareholders in a company, including a Limited Liability Company (LLC), have a range of rights that are designed to protect their interests and ensure transparency and accountability in corporate governance. Here are some of the most important rights of shareholders in Romania:

right to vote in the general meetings: Shareholders have the right to cast their votes on various matters discussed during general meetings. Each share typically carries one vote, but the Articles of Association may specify otherwise, for example, a weighted vote proportional to the participation in the association; if the founding act specifies, the right to vote may be transferred a specific person, e.g., an attorney-at-law;
right to information: Shareholders are entitled to access relevant information about the company’s activities, financial position, and performance. This includes the right to review financial statements and balances, reports, and other corporate documents.
right to dividends/to participate in profits: the right to receive a share of the company’s profits in the form of dividends, provided that the company’s financial condition allows for it and it has been approved by the general meeting.
right to challenge corporate decisions: decisions made by the company that they believe to be in violation of legal or regulatory requirements in court of law, especially if the decisions the decision is contrary to the interests of the LLC/SRL;
the right to elect and remove administrators : they have the power to elect administrators (directors or managers) at the general meeting of shareholders to manage the company

4. Modification of companies

Modifying a company registered in Romania involves making changes to its structure, name, share capital, management, or other aspects that affect its legal status. The modification process can vary depending on the type of company (e.g., SRL, SA) and the specific changes required. Here are the general steps to modify a company registered in Romania:

Determine the Changes: Identify the modifications you want to make to the company. This could include changes to the company’s name, address, share capital, ownership structure, statutes, management, or other significant aspects.
Drafting Resolutions: Prepare the necessary resolutions outlining the proposed modifications. These resolutions should be approved by the company’s management, such as the Board of Directors or General Meeting of Shareholders, depending on the decision-making structure of the company.
Amend the Articles of Association (actul constitutiv): For substantial changes, you may need to amend the company’s Articles of Association (actul constitutiv). This document sets out the company’s fundamental details and rules. The amendments must be drafted and approved following legal requirements.
Shareholders’ Meeting: If the proposed changes require approval from the shareholders, convene a General Meeting of Shareholders (Adunarea Generală a Asociaților). Provide proper notice to the shareholders and present the proposed modifications for their approval through voting.
Registration: Some modifications may require specific legal procedures. Once the changes are approved, the updated documents must be registered with the relevant authorities. For instance, amendments to the Articles of Incorporation must be registered with the Trade Register (Registrul Comerțului) when they. Certain changes, especially those related to the company’s name, may need to be published in the Official Gazette (Monitorul Oficial) or other designated publications.
Obtain Necessary Permits and Licenses: If the modifications impact the company’s operations or activities, ensure that you obtain any necessary permits, licenses, or authorizations from the competent authorities.
Inform Stakeholders: Inform relevant stakeholders, including employees, suppliers, clients, and partners, about the modifications and any potential implications for their relationship with the company.

5. Withdrawal and exclusion of members

5.1. Withdrawal

In Romania, individuals may withdraw from a company or corporation under various circumstances, subject to the provisions in the company’s bylaws or shareholder agreements. The following are common situations where a person may choose to withdraw:

Amicable Withdrawal from the Company („Retragere amiabilă din societate”): This refers to the voluntary withdrawal of a shareholder from a company in a manner that is agreed upon and accepted by all parties involved, without the need for legal action or litigation. It typically involves negotiations and the drafting of an agreement that outlines the terms and conditions of the withdrawal;
Judicial Withdrawal from the Company („Retragerea judiciară din societate”): This refers to the process of a shareholder seeking to withdraw from a company through legal means, often because an agreement cannot be reached through negotiations or due to disputes. This could involve going to court to resolve the matter and obtain a judicial decision regarding the withdrawal;
Sell of shares and buyout: It is also possible to withdraw from the company by selling shares to other shareholders who buy them if this operation is approved by the general meeting of shareholders by a majority of three-quarters of the share capital.

5.2. Exclusion

A partner may be excluded from a general partnership (SNC), limited partnership (SCS) or limited liability company (SRL) or from a limited partnership limited by shares (SCA) if:

having been put in arrears, fails to make the contribution to which he has agreed;
a partner with unlimited liability who is bankrupt or has become legally incapable;
a member with unlimited liability who unlawfully interferes in the administration or contravenes the provisions of Articles 80 and 82;
a managing shareholder who commits fraud against the company or uses the company’s signature or share capital for his own benefit or for the benefit of others.

The exclusion of a partner from a company may be requested either by the company or by any of the partners and is decided by a court decision. If exclusion is requested by a partner, both the company and the partner concerned will be summoned to court.

Once exclusion has been ordered, the court will, by the same judgment, determine the structure of the shareholding of the other shareholders. The exclusion decision can be appealed, thus giving the possibility to challenge the decision of the court of first instance. Once a final decision has been obtained, it must be submitted within 15 days to the Trade Register Office for entry in the register and the operative part of the decision is published in the Official Gazette of Romania, Part IV, at the request of the company for opposability. This exclusion mechanism ensures the protection of the interests of the company and of the other shareholders against unfair or prejudicial behavior by a shareholder.

6. Dissolution and liquidation

6.1. Dissolution

The company is dissolved by:

the expiry of the time fixed for the duration of the company;
the impossibility of achieving the company’s object of activity or its realisation;
the nullity of the company;
a resolution of the general meeting;
a court ruling, at the request of any member, for good cause, such as serious misunderstandings between the members which prevent the company from functioning;
bankruptcy of the company;
other causes provided for by law or by the founding act of the company.

A commercial company may be dissolved before the expiry of the term fixed for its duration by the will of the members, expressed at the General Meeting.

According to the law, any partner may apply to the court for dissolution of the company for good cause. The law presumes that serious misunderstandings between the partners, which prevent the company from functioning, are grounds.

The court decision or the decision of the Shareholders’ Meeting on the dissolution of the company in Romania must be entered in the Commercial Register and published in the Official Gazette.

6.2. Liquidation of companies

The liquidation of a company in Romania is the process of winding up its affairs and distributing its assets to creditors and shareholders. The decision to liquidate a company may be voluntary, initiated by the company’s shareholders or management, or it may be involuntary, initiated by creditors or authorities due to insolvency or other legal reasons. The winding up of a company, following its dissolution, is mainly in the interests of the members and the creditors of that company. Once the distribution of the net assets among the shareholders has been completed, the liquidation of the company is completed. Here is an overview of the liquidation process under Romanian law:

Voluntary or Involuntary Liquidation: As mentioned earlier, liquidation can be either voluntary or involuntary. In voluntary liquidation, the decision to liquidate the company is made by the shareholders through a General Meeting. In involuntary liquidation, a court may order the liquidation due to insolvency or other legal grounds.
Appointment of Liquidator: In voluntary liquidation, the shareholders appoint a liquidator (administrator judiciar) responsible for overseeing the liquidation process. In involuntary liquidation, a court-appointed liquidator (Administrator judiciar sau Lichidator judiciar) takes charge of the process.
Notice to Creditors: Regardless of whether the liquidation is voluntary or involuntary, the liquidator must publish a notice in the Official Gazette (Monitorul Oficial) and in a national newspaper, informing creditors about the liquidation and setting a deadline for claims.
Inventory and Asset Valuation: The liquidator conducts a thorough inventory of the company’s assets and liabilities and assesses the value of those assets. The purpose is to determine the available resources for satisfying creditors’ claims and distributing any remaining funds to shareholders.
Settlement of Debts: The liquidator proceeds to settle the company’s debts with its creditors. Creditors’ claims are examined, and their validity is determined. Debts are paid in the order of priority established by law, starting with secured creditors and continuing with other categories of creditors.
Distribution of Assets: Once all the company’s debts have been settled, the liquidator distributes any remaining assets to the shareholders in proportion to their ownership shares or as prescribed in the company’s Articles of Incorporation.
Completion and Deregistration: After all assets have been distributed, the liquidation process is completed. The liquidator must file a final report with the Trade Register (Registrul Comerțului) and request the deletion of the company from the commercial register.
Termination of Legal Existence: Upon deregistration from the commercial register, the company ceases to exist legally. Its legal personality is terminated, and it no longer has the capacity to conduct business – so it is radiated from the Trade Register.

In Romania, a company may also be dissolved ex officio by the county court, at the request of the National Trade Register Office or any other interested person, if it can no longer operate or carry out any economic activity for a period of time prescribed by law.

In conclusion, Romanian Company Law forms the bedrock of the country’s business environment, offering a robust framework for company formation, operation, and dissolution. Compliance with this legislation is essential for business growth and safeguarding stakeholders’ interests.

Debt Recovery

2024-02-17

Blog Focus

Debt recovery in the Romanian legal system

Management and recovery of debts is an essential aspect of commercial and economic relations. In Romania, debt recovery is mainly governed by the Civil Code and the Code of Civil Procedure, but there are other specific laws and requirements for different types of debts. This guide explains the essential steps you need to take to recover your claim against a debtor based in Romania.

1. Out-of-court procedures

Before taking legal action in court to recover a sum owed by their debtor, creditors may follow an out-of-court procedure. It is recommended for the creditor to notify the debtor regarding his claim and demand voluntary payment. The payment notice should be clear, precise, and firmly request that the debtor performs their contractual obligation within a reasonable timeframe. It must be sent to the debtor in writing, by any means of communication which ensures confirmation of receipt. Issuing and delivering a payment notice to the debtor is a mandatory prerequisite for some types of court proceedings (e.g. payment order procedure), and – in any case – interrupts the running of the statute of limitations by 6 months, if it is followed by the filing of a court claim against the debtor.

Mediation represents an efficient and beneficial out-of-court means of resolving disputes between creditors and debtors regarding debt collection or debt repayment.

The Romanian statute regarding mediation (Law no. 192/2006, with subsequent amendments and additions), regulates this procedure and provides involved parties with the opportunity to resolve disputes in a faster, less costly, and less stressful manner than through the judicial system. To follow this procedure, it is necessary for both parties (the creditor and the debtor) to agree to participate in a mediation session, during which the mediator attempts to facilitate constructive dialogue between the parties and helps them identify acceptable solutions. The process is confidential, and the mediator remains neutral. After each session, the mediator will draft minutes of the meeting, and partial agreements can be closed, even if at the end of mediation the parties will not reach an agreement regarding all aspects / claims.

2. Enforceability of claims and enforceable titles

To initiate an enforcement procedure, the creditor must have a valid document, such as a court judgment or a decision from an authority, which constitutes an enforceable title according to the law. Generally, if the creditor does not hold an enforceable title against the debtor, he will have to follow the court procedure to obtain a court judgment.

Enforceable titles are an essential aspect of the legal system in Romania, as they enable parties to obtain the forced execution of court judgments and other claims.

According to the Civil procedure code of Romania, enforceable titles are legal documents issued by courts or other competent authorities, which give the creditor a right to seek the forced execution of a court judgment or a claim. There are several types of enforceable titles, such as:

Court Judgments: after a court issues a judgment in a civil or criminal case, it can become an enforceable title, meaning the successful party can request the forced execution of the judgment

Authentic Instruments: certain notarized documents can serve as enforceable titles. For example, an authentic contract can be used to seek the forced execution of the certain and determined contractual obligations stipulated therein.

Certain types of contracts: rent and loan contracts, for example, are enforceable titles, under certain conditions, in regard to the debtor’s obligation to pay the rent / repay the loan, even if these contracts are not notarized. In such cases, expressly stipulated by the law, private documents, signed between the parties, are enforceable titles.

Commercial papers / trade bills: certain documents used in commercial relations, such as the bill of exchange, the cheque, the promissory note, are enforceable titles.

Decisions of other authorities: other authorities, such as the Public Finance Administration or other state institutions with controlling powers, can issue decisions which may become enforceable titles.

3. Types of court procedures used for obtaining an enforceable title

The Romanian legal system provides various legal instruments to a creditor, as an effective remedy to recover his claim. The main types of court procedures used for obtaining an enforceable title according to Romanian legal provisions include:

Common court procedure

The common court procedure (Romanian: “acțiunea de drept comun”) involves filing a claim with the competent court, which must contain – among other information – the factual and legal basis for the claim. The trial procedure involves an initial written stage and then an oral stage, and in each stage ȚȚȚȚ the parties have rights and obligations which need to be addressed within certain time limits laid down by law. After the written phase, the court will then summon both parties to present their arguments and evidence before issuing a judgment.

The common procedure may take over a year or even longer depending on the complexity of the case and the evidence proposed to be submitted by the parties or ordered by the court. Also, after the case decided by the first instance, the decision may be reviewed by the higher courts if the parties decide to file an appeal, or in some cases, a recourse.

It is important to note that in this procedure the plaintiff have to pay court fee calculated based on the monetary value of the claim (generally between 1%-8%, depending on the claim, and even more, in case of low value claims), which will be paid again (reduced by 50%) in case of an appeal.

After obtaining an enforceable decision (usually the decision issued by the court which solves the appeals phase), the successful party can initiate the enforcement procedure.

Payment order procedure
(art. 1014-1025 Civil Procedure Code)

This applies in situations where the obligation to pay a sum of money arises from a contract or other document concluded with the debtor or acknowledged by the debtor.

A prerequisite for this procedure is to send a written payment notice to the debtor, which must be delivered under confirmation of receipt, and by which payment must be demanded in a term of 15 days after delivery if the notice.

If the debtor does not pay, the creditor can file a claim through this special procedure, which is processed faster by the court. If during the court investigation, it is found that the creditor`s claim is justified, the court will issue a payment order stating the amount of the sum that the debtor is obliged to pay and the deadline for payment. In this case, the time limit for payment may not be less than 10 days and may not exceed 30 days.

Compared to the standard procedure, this procedure is more advantageous because it is an accelerated one and the payment order issued by the first court is enforceable. Both parties have a period of 10 days within which to lodge an appeal, calculated from the date of communication of the first instance judgment, but this does not prevent the creditor from starting a forced execution procedure.

Also, the court tax for such a procedure is of 200 RON (approximately 40 EUR), regardless of the value of the claim.

Procedure for small claims
(art. 1026-1033 of the Code of Civil Procedure)

If the creditor has a claim worth less than 10.000 RON (approximately 2000 EUR), without taking into account the legal or contractual interest rate, it can be processed through another special procedure, which may be carried out only in writing, without court appearances. A court appearance can, however, be ordered by the judge, if deemed necessary.

According to this procedure, after receiving all the necessary information and clarifications, the court will pronounce the judgment within 30 days (this timeframe is sometimes surpassed, however). Similar to the payment order procedure, the first instance court judgement is enforceable, but the time limit for appeal is 30 days from the moment of communication of the judgment as in the standard procedure.

Court fees are lower than in the standard procedure, and the amount of the court fee is fixed and not variable as according to the standard procedure (may be of 50 RON or 200 RON, depending on the value of the claim).

It is also important to note that – in both the payment order procedure, as well as the small claims procedure – if the creditor decides to initiate the enforcement procedure based on the first-instance court judgment, and subsequently, the judgement is annulled by the higher court, the creditor will be responsible for the enforcement costs and he will have to pay back the debtor and compensate for any damages caused by the enforcement procedure.

4. Interim measures – temporary remedies to secure chances for claim recovery until obtaining an enforceable title

The interim measures refer to temporary legal actions or orders that a court can issue to provide immediate relief or protection to parties involved in a legal dispute or pending a final decision. These measures are often taken to prevent harm, maintain the status quo, or ensure that the rights and assets of the parties are safeguarded until a final judgment or decision is reached.

Interim measures can include various types of orders, such as injunctions (both prohibitory and mandatory), freezing orders (to preserve assets), and sequestration orders. The purpose of these measures is – generally – to prevent any party from suffering irreparable harm or having their rights undermined while the legal proceedings are ongoing.

For example, if one party believes that the other is about to sell off assets that might be needed to satisfy a judgment, they can seek an interim freezing order to prevent the sale until the case is resolved.

Interim measures are an important aspect of the Romanian legal system, necessery to ensure that the administration of justice is fair and equitable, and they serve as a means to protect the interests of the parties involved (generally, the interests of the creditor).

The court will examine the creditor’s application in an emergency procedure and decide whether there are good grounds for ordering any interim measures. If the application is justified and meets the legal requirements, the court may issue an order imposing these measures on the debtor’s money or properties.

Sequestration

Sequestration, also known as conservatory or provisional attachment, is a legal measure taken to prevent a debtor from disposing of or alienating their assets while a trial is pending. The purpose of sequestration is to secure the creditor’s claim, ensuring that if they win the case, there will be assets available for execution.

Sequestration can be ordered by a court if certain conditions are met. These conditions include the existence of a valid claim, the risk that the debtor may dispose of assets to evade execution, and the posting of a security deposit by the creditor to cover potential damages to the debtor. It can be applied to various types of assets, including bank accounts, real estate, vehicles, and personal property and it is typically temporary and remains in effect until a final judgment is issued. If the creditor loses the case, they may be liable for damages suffered by the debtor as a result of the sequestration.

Attachment of Property

Attachment of property, commonly known as “poprire,” is a legal procedure used to recover a debt by seizing the debtor’s assets. It can be applied to various types of property, including bank accounts, real estate, salaries, pensions, and personal property. This measure consists in the very fact that the sums of money or other securities owed to the debtor by a third party are frozen. It is applied in those situations where there is a well-founded fear that the debtor will not or will not be able to comply with the court judgment or agreement

Both sequestration and attachment of property are important tools for creditors to secure their claims and enforce judgments. In such cases, it is important to note that the court may request the creditor to provide a security deposit, calculated based on the value of the claim.

However, these measures are distinct legal mechanisms with specific conditions and procedures outlined in the Romanian Civil Procedure Code. It is essential for both creditors and debtors to be aware of their rights and obligations under these procedures, and seeking legal advice is often advisable to navigate these complex processes effectively.

5. Enforcement procedure

After going through the procedure before the court, the creditor will obtain the enforceable title which is the court decision. According to the enforceable title, which is the official document confirming the existence of the debt as well as the fact that the debt is owed by the debtor, the creditor may initiate enforcement procedure.

On the other hand, if the creditor holds another enforceable title, he is not required to follow the court procedure, so the debtor`s enforcement procedure can be initiated directly, without any other prior steps.

Thus, the first step in recovering the debt owed according to the enforcement procedure is to register a request for enforcement with the bailiff, accompanied by the enforceable title. The request for enforcement must contain details of the amount owed, the reason for enforcement and the way in which recovery is sought.

The bailiff will be able to use various methods to recover the debt, including seizure of assets, attachment of earnings, seizure of the debtor’s movable or immovable property, and the debtor will be compelled to perform his obligations.

In the Romanian legal system, there are two main methods of enforcement: direct enforcement and indirect enforcement. These two approaches aim at recovering claims or court judgments and can be applied depending on the specific circumstances of each case.

Direct enforcement is an approach that involves the debtor’s voluntary intervention to satisfy the claim. In this case, the debtor may agree to pay the owed amount or provide guarantees for the satisfaction of the claim without the need for forced intervention by the judicial executor.

In direct enforcement, the debtor may take the initiative to negotiate with the creditor and establish the methods of payment or fulfillment of the court judgment. This approach may be preferred to avoid the costs and delays associated with direct enforcement.

Indirect enforcement involves actions taken by the judicial executor or other competent authorities to recover claims or enforce court judgments. This is a method used when the debtor does not cooperate voluntarily and does not fulfill their obligations.

The procedure may include freezing the debtor’s bank accounts, seizing their assets, or selling them to satisfy the creditor’s claim. The judicial executor is responsible for implementing these measures and ensuring the recovery of the claim.

In both cases, the goal of enforcement is to ensure that the creditor’s claim is legally and efficiently recovered. The exact procedures and methods may vary depending on the nature of the claim, the court judgment, and the specific circumstances of each case.

In the end, if the debt is paid in full, the bailiff will terminate the enforcement proceedings, and if the debtor fails to meet his obligations, the enforcement proceedings may continue until the debt is satisfied in full.

Contestation of Execution According to the Romanian Civil Procedure Code

Contestation of execution is an important legal mechanism in the Romanian legal system, providing parties with the means to challenge or object to the enforcement of a court judgment or other enforceable titles. This process is governed by the Romanian Civil Procedure Code and plays a significant role in protecting the rights and interests of both debtors and creditors.

It is a legal procedure that allows a party, typically the debtor, to challenge the enforcement of a court judgment or other enforceable titles. It serves as a safeguard against potential abuses or errors in the execution process.

The Romanian Civil Procedure Code provides specific grounds on which a party can contest the execution such as : procedural errors or irregularities in the enforcement process, circumstances that render the execution unjust or impossible, sufficient payment or satisfaction of the claim.

It is important to note that the contestation of execution must be filed within a specific timeframe set by law. This timeframe is typically 15 days from the date of notification of the enforcement proceedings. It is essential to adhere to this deadline, as late submissions may be rejected. Also, it must include a clear statement of the grounds for contestation and any supporting evidence and, after that, it will be submitted to the court.

The court will hold a hearing to examine the contestation. During the hearing, both parties, the creditor and the debtor, have the opportunity to present their arguments and evidence. The court will assess the validity of the contestation and make a decision. Based on the evidence and arguments presented, the court will issue a decision either upholding the execution or halting it. If the court finds in favor of the party contesting the execution, it may annul or modify the enforcement measures. Judgements regarding contestation of execution can be appealed to a higher court instance if one party disagrees with the outcome.

Also, filing a valid contestation can lead to the suspension of the execution process until the court resolves the matter. This suspension is intended to prevent further actions that may harm the party contesting the execution and the court may request the creditor to provide a security deposit, calculated based on the value of the debt.

To sum up, the contestation of execution is an essential legal remedy that ensures the fairness and legality of the enforcement process in Romania. It provides a means for parties to address errors, unfairness, or changed circumstances that may arise during the execution of court judgments or other enforceable titles. Parties involved in execution proceedings should be aware of their rights and obligations under the Romanian Civil Procedure Code and seek legal advice when necessary to navigate the process effectively.

6. Statutes of limitation under Romanian law, in civil and commercial matters:

Also, it is important to note that, in Romania, there are limitation periods for debts, which means that, after a certain period of time, the creditor can no longer seek recovery of the amount owed in court. Limitation periods can vary depending on the type of debt and the applicable law.

Limitation periods for enforcement vary according to the nature and type of debt. According to the Romanian Code of Civil Procedure, limitation periods are as follows:

a.)The general limitation period is 3 years. It applies in most cases and is calculated from the date on which the creditor became aware that the debtor breached the payment obligation.

b.)The limitation period for tax claims is 5 years. This period applies to the recovery of debts owed to the State, such as unpaid taxes, duties or social security contributions.

c.)The limitation period for claims secured by mortgage is 10 years. It applies to debts secured by mortgage on immovable property.

Once the limitation period has expired, the creditor is no longer entitled to initiate enforcement procedure. This means that the debt becomes unenforceable, and the debtor is no longer obliged to pay the amount due. However, the creditor’s right to obtain a court judgment or an enforceable title for the time-barred debt is not affected. The debtor could therefore be obliged to pay the debt if he is sued for another claim.

7. The special situation of debt recovery when the debtor in insolvent. Liability of company managers

Insolvency is a financial condition of a company that is unable to meet its financial obligations and debt recovery proceedings are carried out in accordance with the provisions of Law No 85/2014 on insolvency proceedings. The main steps that a creditor have to follow to recover his debt from debtor company in insolvency are:

Establishment of claims: creditors who have to collect claims from the insolvent company must file an application for registration of claims with the insolvency administrator or liquidator, as provided by law. In this application, creditors must provide proof of their claims, such as invoices, contracts or other supporting documents.

Supervision of proceedings: Insolvency proceedings are monitored by the court and the insolvency administrator or liquidator must submit regular reports on the state of the proceedings and the evolution of the company’s assets and debts.

Reorganisation or liquidation: In the event of insolvency, a reorganisation plan may be adopted if the debtor company has a chance of financial recovery. The reorganisation plan may set out how claims are to be repaid, depending on the availability of funds and the company’s resources. If there is no prospect of recovery, the company may be liquidated and the claims will be divided according to the priority provided by law.

Recovery of claims after the end of the proceedings: If the company is reorganised and returns to business or if the assets are liquidated, creditors will be repaid in accordance with the reorganisation plan or in the order provided for by law.

Liability of the administrator: In a company, the administrator is responsible for managing the company’s affairs in a responsible manner and in the best interests of the company. However, in certain circumstances, the director may be held liable for the company’s liabilities, i.e. the company’s unpaid or unfulfilled financial obligations. This may occur if the director has acted negligently, unlawfully or failed to discharge his duties as the company’s legal representative. In order to incur the liability of the administrator, the creditor must follow a procedure that will take place in court. The trial will begin with the presentation of arguments and the submission of evidence of the administrator’s guilt before the court. The involved parties will have the opportunity to support their cases and present arguments. After evaluating all the evidence and arguments, the court will issue a judgment. This judgment may either establish or reject the administrator’s liability. If liability is established, the court can determine specific measures for the recovery of damages. If the court orders the administrator to pay damages or undertake other actions, the creditor will need to pursue the execution of the judgment to obtain compensation.

To sum up, the recovery of debts in the case of a debtor company in insolvency implies compliance with the legal procedures specific to this situation. Insolvency proceedings offer creditors the opportunity to recover their debts, depending on the reorganisation or liquidation, but this requires patience and involvement during the insolvency process.

To sum up, the recovery of debts in the case of a debtor company in insolvency implies compliance with the legal procedures specific to this situation. Insolvency proceedings offer creditors the opportunity to recover their debts, depending on the reorganisation or liquidation, but this requires patience and involvement during the insolvency process.

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Mandate Information

Corporate Law in Romania – An Overview

Debt Recovery

Corporate Law in Romania – An Overview

Corporate Law in Romania – An Overview

1. Legal forms of companies in Romania

2. Establishment of companies

3. Functioning of the company

4. Modification of companies

5. Withdrawal and exclusion of members

6. Dissolution and liquidation

Debt Recovery

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Debt recovery in the Romanian legal system

Mediation represents an efficient and beneficial out-of-court means of resolving disputes between creditors and debtors regarding debt collection or debt repayment.