Law no. 223/2020 on simplifying and eliminating the bureaucracy involved in transfer of shares and payment of share capital by amending Romanian Companies Law No. 31/1990 (“Companies Law”) was published in Issue no. 1018 of the Official Gazette of Romania dated 2 November 2020 and entered into force on 5 November 2020.
The new law has brought a series of significant amendments to the Companies Law, all meant to improve and facilitate certain corporate procedures concerning both existing and new companies by either simplifying certain formalities or eliminating previously required conditions. These amendments concern aspects such as:
- share transfers to third parties in limited liability companies;
- subscription of initial share capital and simplifying the incorporation process of a limited liability company;
- required documentation upon registration or relocation of a company’s headquarters and other procedural matters, as detailed below.
1. Elimination of the two-step procedure for transferring shares to third parties
Law no. 223/2020 has simplified share transfers to third parties by removing previously mandatory conditions and changing time-consuming steps regarding the following aspects: (i) obtaining the approval of shareholders holding at least ¾ of the share capital – as a mandatory level of majority – with regard to the transfer of shares, (ii) submitting the shareholder resolution of approval to the Trade Registry Office for publication in the Official Gazette of Romania, (iii) waiting for the expiry of a legally mandated 30-day period as of publication of the shareholder resolution during which creditors or other persons negatively affected by this decision could file applications to challenge the share transfer.
Under the new legal provisions, limited liability companies may now provide for a different level of majority in the company’s articles of association to approve share transfers outside the company. The requirement will not necessarily be ¾ of the share capital, but rather the provisions agreed upon by the shareholders in the articles of association.
Moreover, starting with the entry into force of Law no. 223/2020, share transfer procedures will be performed regardless of the 30-day period, which will significantly accelerate the process without depriving social creditors and other persons who claim to be negatively affected by the transfer of their right to file challenge applications and request compensation for the damage they have suffered.
The share transfer registration with the Trade Registry Office is now performed in one step, based on the registration application and the documents justifying the share transfer.
2. Simplification of the incorporation process of limited liability companies and structuring of the initial share capital
The previous provisions of the Companies Law requiring minimum share capital of RON 200, comprised of equal shares of a minimum value of RON 10, have been eliminated by Law no. 223/2020. Also, the previously required document proving that a company’s initial share capital was paid in when the company was founded no longer needs to be submitted to the Trade Registry Office, as an exception has been introduced in this regard.
However, it is still mandatory under the current version of the Companies Law to ensure that the subscribed share capital is paid in on pain of a criminal penalty to be imposed upon any director who conducts business operations in the name and on behalf of the new company before the share capital has been fully paid in.
3. Clarifications regarding the procedure for registering headquarters
Law no. 223/2020 expressly provides that the documents attesting the right to use certain premises as a company’s headquarters are to be submitted to the competent Trade Registry Office, which will submit these to the relevant tax authority.
This eliminates the previous uncertainties and differences from one territorial Trade Registry Office to another, as the new law has clarified the order in which the aforementioned documents are to reach all relevant authorities.
4. New procedural rules for challenge applications and other matters
Any natural or legal persons who claim to have suffered damage due to the decisions of the governing bodies of a company may file challenge applications with the competent court of law in order to obtain compensation for their losses.
Unlike the previous procedural rules, the new amendments no longer provide for a suspensive effect on the contested corporate procedures that the governing bodies have resolved due to challenge applications that have been filed, with the consequence that these procedures are no longer delayed until the extent of the damage is clarified by a court of law.
As regards other administrative formalities, companies that have an annual turnover of over RON 10 million are no longer obliged to publish in the Official Gazette of Romania, Part IV an announcement confirming the submission of their annual financial statements and corresponding reports, and for companies whose annual turnover does not exceed RON 10 million, announcements regarding the submission of the aforementioned documentation will no longer be published on the website of the National Trade Registry Office.
In conclusion, the latest amendments to the Companies Law by means of Law no. 223/2020 are more than welcome in the Romanian corporate and business environment, as they contribute to a simpler and more coherent approach to establishing companies and to day-to-day business operations.
By Catalina Maria Oancea, Associate, and Denisa Loredana Moldovan, Associate, Noerr