“This fall Moldova is facing parliamentary elections and so, for the moment, we are just coping with the current political reality and trying to keep a record of all the new legislation – which the Parliament is passing at quite a fast pace,” reports Vladimir Iurkovski, Managing Attorney at Law at Schoenherr Moldova.
In Iurkovski’s opinion, this accelerated rhythm may rise from parliamentarians’ fear of not getting reelected in November.
“Some laws are actually negative for the existing investor community,” Iurkovski says. “One example that I could give you is connected to the recent changes to the Customs Code. The state basically wants to create special zones on the borders, in addition to the already-existing duty free shops, where operators can retail their products without being subject to taxes. The list of such products will likely be very broad.” He adds that this is likely going to be detrimental to the companies already operating inside the country. “Petroleum companies, for example, will face competition from new operators appearing now in such zones, as petroleum products retailed there will be exempted from VAT and excise tax. It will be like a bigger duty-free area, but besides alcohol and sweets, now you will find petroleum products and other stuff as well.”
“Another good example would be the recent changes to our insolvency legislation,” Iurkovski notes. “Until recently the Courts of Appeal was the competent body to examine matters relating to companies' insolvency. But they have now shifted down the competence to first instance courts, even though the judges there, professionally speaking, are not sufficiently prepared and don’t have the required experience to make these kinds of decisions in an expedited and professional manner.” As a result, Schoenherr’s Moldovan Managing Attorney says, “insolvency cases are lasting longer and are more often resulting in deadlock.”
However, he insists, not all is bleak. “I must also emphasize that some of the recent legislative initiatives are doing good things for the business market and are serving the country’s EU commitments,” he says. Recent changes to the country’s Code of Civil Procedure serve as an example. “The main goal is to expedite the civil processes and to bring the parties to an agreement or judgment in a shorter time," he says. "They implemented the changes to make sure that there are fewer delaying possibilities from the parties, especially those acting in bad faith.”
“The government has also made voluntary dissolution processes easier,” he continues. “If someone wants to close down a business, they can do it in a more transparent and much easier way than one year ago. Back then the tax audit could prolong the process, but now there are clear deadlines in the Tax Code as to when the audit has to be performed, and in absence of such, the dissolution process can continue,” he explains, going on to describe these amendments as definite pro-business changes which will significantly help the activity of local companies.
Finally, Iurkovski notes that, this being an election year, the country is seeing the inevitable decrease in the number of deals, as investors are waiting for the new parliament to be elected. As a result, firms are trying to find new clients in this period of stagnation. “Still, from what I see, there are plenty of M&A deals on the market and quite a lot of assistance projects to get the country in line with EU’s acquis.”