Company Formation – Romania

Most investors and business owners in Romania choose to operate their business in Romania by using a limited liability company (“SRL”). The article is prepared on the basis that a decision has already been taken to open a company. Forming a company is important for companies and persons who are not resident in the European Union as non-residency has an impact on how the business is conducted and its taxation and payment of dividends.

Any person can be a shareholder in a Romanian company. There is no limitation on citizenship or residency of the shareholders. The only limitation is that a single shareholder company cannot be the sole shareholder of a Romanian company.

Steps in the legal process:

1) The initial step is an application to the Romanian Trade Registry (the “Trade Registry”) for the reservation of the required name and any logo of the proposed company. They review electronically the names and issue a confirmation of name availability. Normally they accept the first name requested. In certain cases, although the name maybe initially accepted, there are circumstances when at the time of registration the name will be refused.

2) Preparation and signature of the Constitutive Act in English and Romanian as required. (Memorandum and Articles of Association).

3) Application to the Trade Registry for the registration of the proposed company.

4) Approval of the registration of the proposed company; and

5) Publication of the incorporation of the company in the Official Gazette.

Application to the Romanian Trade Registry for the reservation of the name and any logo of the proposed company. A request is filed with the Trade Registry, indicating the preferred name for the proposed company. The Trade Registry will reserve the name. The reservation is valid for ninety days from the date the confirmation is issued by the Trade Registry. During this period, the registration of the proposed company must be completed. If registration is not completed in the ninety days, then a fresh reservation application must be made to preserve the name of the proposed company. Should the proposed name include the word “Romania” an application must be made to the Romanian Government for the right to incorporate a company which includes the word Romania in its name.

Preparation and signature of the Constitutive Act (Memorandum and Articles of Association)
The Constitutive Act is prepared and must be signed by the prospective shareholder(s) in front of a lawyer. In the Constitutive Act, the capital of the company is expressed in RON. The minimum share capital is two hundred RON divided into twenty social parts of ten RON each. If there has been a contribution in kind to the capital of real estate, the Constitutive Act must be signed in front of a notary and a valuation of the in-kind asset prepared by a registered valuer must be supplied. The Constitutive Act can if required to be signed in Romania by the lawyers acting on the incorporation of the company under a lawyer’s power of attorney.

Application to the Trade Registry for the registration of the proposed company
An application for the registration of the proposed company is made to the Trade Registry. The application includes the documents listed below. The Trade Registry will review all the documents submitted and approve or reject the registration of the proposed company.

The application to the Trade Registry for the registration of the proposed company must be submitted with inter alia with the following documents:

a) The signed Constitutive Act of the proposed company. This must include the business objects of the company; the law requires a detailed list of the activities that will be carried on by the company, including the main business domain and the main activity (CAEN codes); the names of the shareholders and the full names of the administrator/s of the company.

b) If applicable, the decision of a foreign company to establish the proposed company in Romania.

c) Copies of the corporate documents of the foreign company that is to be the shareholder of the proposed company.

d) In the case of a corporate shareholder an up to date extract from the relevant commercial registry confirming the valid registration of the corporate shareholder. This document must be legalized and apostilled.

e) A banks reference letter, when the shareholders are non-resident.

f) The reservation of the name and the logo (if the company is to have a logo) of the proposed company.

g) Details of the address of the headquarter of the proposed company together with a copy of the rent contract, which must be for at least one year. If the lessor is an individual and the premises are rented even if by a lease or sublease agreement this must be registered with the Romanian tax office.

h) In accordance with Romanian Law Romanian lawyers can supply a virtual office for the first 12 months of a company’s life in Romania. This enables a company to be formed quickly. This does not allow a company to be registered for VAT. An actual physical office rented by the company is required.

i) Details of the capital – the amount of the capital and how it will be contributed, in cash or in kind.

j) If the capital is to be contributed in cash, proof that the capital contribution has been made. The minimum capital as mentioned previously for an SRL is two hundred (200) RON. Approximately forty-three Euro. The capital must be deposited in a blocked account with a recognized Romanian Bank.

k) In respect of in-kind contributions to the capital of the company proof of ownership and a valuation report in relation to such contribution must accompany the application for formation.

l) A declaration made by the individual shareholders in front of a notary that they are aware of the provisions of the Romanian Penal Code referring to the false declaration and that they have complied with the provisions of Romanian Law.

m) A declaration made by the proposed administrators made in front of a notary that the conditions required for their appointment have been fulfilled.

n) The signature of the proposed administrator signed in front of a notary.

o) A declaration made by foreign administrators in front of a notary that they do not have outstanding tax obligations to the Romanian authorities.

p) Receipts proving the payment of the registration fees, and

q) If necessary, a power of attorney in favour of the person or persons empowered to deal with the registration of the proposed company in Romania.

The documents do not have to be signed in Romania and can be signed outside of Romania and legalized for use in Romania.

Where the shareholders are foreign individuals or legal persons, any documents required for the incorporation of the proposed company, which are supplied in any other language other than Romanian must be translated into Romanian and the translation notarized.

If the Trade Registry approves the incorporation of the proposed company, it will then be registered in three days. The Trade Registry can approve or reject the registration of the proposed company. In case of rejection of the application, an appeal against the decision can be made within fifteen (15) days.

After the Trade Registry has approved the incorporation of the company the Trade Registry arranges for the publication of an announcement of the registration of the company in the Official Gazette of Romania. The rules provide that the decision concerning the formation of a company must be dealt with within 3 days of the lodging of all the required documents.

The Administrators
The administrator of a company may be Romanian or foreign citizen; resident or a non-resident person. The Company Law provides that it is prohibited for an administrator to manage more than one Romanian company without the prior consent of the shareholders of the company.

Time for incorporation
Provided a complete set of documents have been lodged with the Trade Registry the period required to complete the registration of a limited liability company in the Trade Registry is three (3) working days. A certificate confirming any amendments of the constitutive act is issued within five (5) working days from the date the request is registered with the Trade Registry.

Supplementary Provisions
In order to carry out its activity in Romania, a company maybe required to obtain certain authorizations that are necessary irrespective of a company’s business object.
These authorizations relate to utility-service providers. Additional authorizations may be required depending upon the nature of the business to be carried on by the company.

Registration with fiscal authorities
At the time of registration of the company, it is allotted a registration number (“Fiscal Code”) with the Romanian fiscal authorities. The value-added tax number is the Fiscal Code pre-fixed with the letter “R”. Currently, a company with a turnover of less than one million (1,000,000) Euro pays a tax of 1% on its turnover (subject to rules regarding employees). There is no tax on profit. A company must be registered for VAT if its turnover is greater than sixty-five thousand (65,000) Euro. If the turnover is less, it can apply to be registered as a VAT payer. Currently, registration occurs the day following an application.

Statutory Fees on incorporation
The registration fees, which must be paid to complete the registration, are the followings:
– Stamp taxes;
– The notarization fees for all the documents required to be notarized
– The publication fee for the Official Gazette; and
– Registration fee with the Trade Registry, which is to be calculated at the date of the filing of the application for registration, taking account of the objects of the proposed company.
At the time of lodging, the file with the Trade Registry it is necessary to deposit the capital contribution to the capital of the company is an authorized bank and to prove that it has been deposited. The minimum initial capital is two hundred (200) RON deposited with a bank who is normally to be the initial bankers of the company.

Shareholder
The maximum number of shareholders in an SRL cannot exceed fifty and can be one. Any person can be a shareholder in a Romanian company. The Law provides that a limited liability company can have one shareholder provided that the shareholder is not a limited liability company with only one shareholder. I would not advise a foreign investor to have another shareholder in the SRL who are not closely connected with the majority shareholder as under Romanian law unanimity of shareholders is required for certain decisions. If there is not a close relationship between the shareholders, there is the possibility in the event of a dispute that the minority shareholder will be in a ransom or blackmail position against the majority shareholder.
After formation, a company needs to appoint an accountant to deal with the Ministry of Finance as to the monthly, quarterly and annual filings as well as keeping the company accounting records.