Changes In Company Law Practice
One of the biggest complaints in relation to Romania over the last period has been its bureaucracy and the frustrations this has for investors or businessmen used to different way of doing business. The attitude in Romania has changed over time and has seen a further boost caused by Covid. The lockdowns and requirements of social distancing and the inherent risk of transport, both private and public has caused a number of institutions to change their work practises minimising face to face meetings and duplication of documentation.
A law at the end of 2020 (Law 223/2020) although not widely publicised has brought about a number of changes in respect of Company Law and coupled with Emergency Government Ordinance 195/2020 has changed in a good way certain practises in the Romanian Trade Registry. These changes have removed a number of idiosyncratic Romanian steps and brought the Company Law further into the modern world. Whilst the EGO 195 is only extending certain of these provisions for a period of nine months it is highly probable that these altered provisions will remain after the pandemic has passed.
In regard to Law 223 which came into force on the 5th November 2020 the most important provisions were the abolishment of a minimum share capital for limited liability companies. The figure previously was two hundred RON, and whilst not a large amount its reduction is welcomed. It is not now necessary to prove the payment of the capital by providing a bank extract if the statues provide for this. This provision has been deleted. The only requirement now is that a social part in a limited liability company has a minimum value of one RON. We do not think that this will lead to an increase in formations but will reduce the requirement to obtain another piece of paper.
The law also now allows the possibility to include a different majority as laid down in the law for the approval of the transfer of social parts provided this different majority is included in the statutes. This point will need to be considered at the time of registration. This will mean that lawyers and those preparing the documentation will need to review these provisions with their client at the time of registration rather than providing another boiler plate document.
Perhaps the most important from a practical perspective is the changes that have taken place which will now allow the transfer of social parts to a person who is not already a member of the company to become effective as soon as it is registered at the Trade Registry and no longer requires a waiting period, when any person affected could object and delay/prevent the transfer. This will allow many M&A transactions to proceed without the need for funds to be held in escrow or delay payment on the sale of social parts to third parties.
There has also been changes to the requirements to be included in the documentation lodged at the Trade Registry on the transfer of social parts, including the amended statutes. Again, allowing matters to proceed quickly.
All the above, together with the provisions of the Emergency Ordinance should allow the administration in relation to companies to be better implemented and therefore reduce the cost and expenses involved in transactions of the nature referred to above. Will the changes survive covid, only time will tell?