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Less bureaucracy for Company Incorporation in Romania
Many articles have been written in Romania for Romanians about the changes in Romanian law regarding Romanian companies but not so many articles for foreign investors. These articles have been written to advise about the changes in the formalities required for the incorporation of limited liability companies (“S.R.L.”) in Romania.
It has taken the Covid 19 pandemic for the Romanian authorities to realize that to stimulate businesses you need to relax the formalities that are needed to be completed to incorporate a Romanian company.
There is still room for improvement in this regard, but if the current changes yield good results in terms of more companies being incorporated, then, perhaps, the authorities will finally find a solution to reduce further the cumbersome bureaucratic formalities to incorporate a company.
I outline below some of these changes to highlight the position now. Firstly, although not directly related to the actual company incorporation formalities, the Romanian companies’ law has been amended to allow for individuals/legal entities to be a sole shareholder in more than one S.R.L.
The companies’ law previously stated that a person/entity irrespective of their nationality can only be a sole shareholder in one legal entity. This legal provision led to situations where for the purpose of a foreign company’s acquisition of a Romanian S.R.L. a circumvention of the provision was required. This situation occurred when the foreign company interested in purchasing a Romanian company was itself a sole shareholder company of another company. For the transaction to take place in such a situation another subsidiary of the buyer was incorporated to be an additional shareholder of the Romanian company to enable the purchase to take place. Thus, circumventing the one shareholder rule.
Another formality which was not abolished but significantly simplified is the requirement to open a bank account for the purpose of depositing the share capital prior to the incorporation of the company.
Another two changes have been made in respect of the share capital. The first one reduces the minimum amount of share capital which a S.R.L. must have at incorporation. Previously the minimum amount required for incorporation was two hundred (200) Ron. Approximately, forty-one (41) euro. The law now provides that there is no minimum share capital required for a company to have, meaning that in the case of a sole shareholder company the share capital can be as low as one (1) Ron.
The second change abolishes the requirement for proof that the share capital is deposit in a bank is to be submitted at the time of incorporation. Therefore, when submitting the file for the company registration now the Deed of Incorporation must state what is the amount of share capital in cash, but the Trade Registry does not require proof of that amount being deposited in a bank account.
Currently there is a temporary change which greatly helps individuals in the process of incorporating a S.R.L. Previously when incorporating a S.R.L. both the intended shareholder/s and the director/s in front of a notary public or a lawyer had to give a statement by which they declare that they comply with the legal provisions to hold such a position.
This operation took time and generated delays in the incorporation process due to shareholders/directors not being able to quickly give such statements. In addition, the statements given by the foreign shareholders must be apostilled or super legalized depending on the country where these statements are taken. Currently, the law allows for these statements to be only signed by the respective shareholders/directors without the need of them being taken in front of the public notary.
This, however, is a short-term relief as this provision is only in force until three months from the moment when the end of the state of alert is declared by the Romanian authorities due to Covid 19 pandemic. After this period there is no long-term project for the authorities to keep this provision in force and finally abolish the need for the notarial statements to be submitted to the Trade Registry.
These provisions regarding signature also apply to the real beneficiary statement. According to the last change of the law, these statements can be filled until 1st October 2021 with the Trade Registry. It would be a pity not to benefit from these provisions and enable another bureaucratic step to be eliminated.
These changes constitute in our opinion the first steps in the long process of finally reducing the bureaucracy of incorporating limited liability companies in Romania, making the procedure as easy as in any other European or international jurisdictions.
The changes are welcomed not only for the commercial lawyers in Romania, but also for the clients especially as there are foreign investors who decide to start a business in Romania and wish to do so quickly and efficiently.
COSTIN BOTNĂRENCO, Romanian lawyer, (Author of this article - in the opening picture)
Costin Botnărenco graduated from Nicolae Titulescu University in Bucharest and has a master’s degree in Judicial Career, during which he studied Civil and Criminal Procedure Law, Civil and Criminal Law. He followed this with an internship with Criminal Investigation and Forensics at the Public Prosecuter’s Office attached to the Supreme Court of Justice. Costin has collaborated with a number of law firms in Bucharest.
Costin’s work advices a number of international companies and local businesses in respect of setting up their businesses in Romania and ensuring compliance with Romanian law. He has also advised companies on the re-organisation and transfers of their assets as well as restructuring both their business and shareholdings. He has experience in corporate law mergers and acquisitions as well as high value litigation. He also advises on employment matters citizenship and visa applications. He speaks English and French.
Hammond and Associates trading as Hammond Partnership is a Romanian law Firm based in Bucharest. The Firm Hammond and Associates has been in existence since 2004 and is registered with the Bucharest Bar. The lawyer of Hammond and Associates are all registered with the Romanian bar and are authorised to practise in Romania. The managing partner of the Firm is a solicitor registered with the Law Society of England and Wales and the Bucharest Bar.
The Firms client base is both Foreign and Romanian. Its clients consist of SME’s as well as major companies who have invested in Romania. In addition, it advises individuals both Romanian and Foreign on all aspects of Romanian law as well as providing English law advice when required.
The Firm’s clients come from many fields and countries. Our clients ranging from international banks and companies. It advises clients in the fields of aviation finance, employment, building and real estate, manufacturing, service industries, renewables, IT and computing, agriculture, and shipping .
The Firm advises on M&A and associated transactions including employment matters from the perspective of employees and employers. The Firm deals with comm as well as commercial matters ranging from formation of companies to distributorship and commercial agreements.
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