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.
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:
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:
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:
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.
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 founding act may also include:
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:
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:
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:
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:
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:
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:
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:
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.
6.1. Dissolution
The company is dissolved by:
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:
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.
© Talpes.Law 2023