Law No 265/2022 on the Trade Registry and on the amendment and completion of other acts of law affecting the registration with the Trade Registry (“Law No. 265/2022”) was published in the Romanian Official Gazette on 26 July 2022 and will enter into force on 26 November 2022.
The normative act introduces important changes to the legal regime of founding, operating and winding up companies in Romania, amending Companies Law No 31/1990 (the “Companies Law”), including the Trade Registry laws, simplifying the formalities required for this purpose and reducing administrative burdens by ensuring efficient procedures adapted to globalisation and modern, digital trade registry services.
According to the explanatory memorandum of the draft bill, these amendments aim to simplify procedures, and it proposes a uniform approach to the process of registration with the Trade Registry, including standardising the procedures used by local Trade Registry offices.
In the context of the above, and until the publication of the Methodological Norms regarding the procedures at the Trade Registry, we will present and summarize the most relevant changes.
- One of the novelties that will have a significant impact on establishing limited liability companies concerns deferral of the full payment of the share capital.
According to the current provisions of the Companies Law, a limited liability company’s share capital must be fully paid in when the company is established, but in practice, the process of opening a bank account to transfer these amounts of money often involves excessive red tape due to cumbersome banking procedures. “Know Your Customer” (KYC) bank policies, applicable when bank accounts are opened by individuals or entities, require banks to provide a complex set of documents and forms, and obtaining this documentation, especially for foreign entities, is usually a laborious and lengthy process.
The diversity of documents (in terms of form and information contained in the corporate statements issued by the competent foreign authorities), alongside with the occasional lack of flexibility of Romanian banks, make banking procedures longer in an excessive, unpredictable and impractical manner.
However, banking procedures remain unchanged for the time being, as they are governed by the policies established by the National Bank of Romania, but also by the banks' internal policies.
In this context, the legislative amendment allowing the full payment of share capital to be deferred is very welcome. In concrete terms, it gives limited liability companies the option of paying in only 30% of the amount of the subscribed share capital within the first three months from the date of registration, provided that the company does not commence business until this amount of capital has been paid up. The difference in share capital may be paid in (i) in the form of a cash contribution, within 12 months from the date of registration, and (ii) in the form of a contribution in kind, within a maximum of two years from the date of registration.
Basically, this deadline for postponing the payment of share capital for a maximum of three months supports legal entities for which the KYC procedure is more time-consuming but must be completed within this period.
For the reasons mentioned above, if the share capital is not completely paid in on the company’s registration date, we consider it appropriate to include in the articles of association the manner in which the share capital will be paid in.
General partnerships and limited partnerships remain obliged to pay in the full amount of the share capital subscribed on their founding date.
- Another important change introduced by Law No 265/2022 requires declaring the company’s beneficial owners, as well as the way in which they exercise control over the company, in the articles of association, where applicable, when provided by the law. This provision covers all types of companies stipulated in the Companies Law.
In view of the provisions of Law No 129/2019 on preventing and combating money laundering and terrorist financing, as well as amending and supplementing certain regulatory acts (“Law No 129/2019”), all private entities must have adequate, accurate and up-to-date information on their beneficial owner. We consider the phrase “where applicable, when provided by the law” in the proposed form of the Companies Law to be ambiguous, as it is not clear what will apply when this provision is not mandatory.
At the same time, the new provision raises certain practical issues. For example, if the beneficial owners are to be declared in the articles of association, it will have to be clarified who the signatories will be, taking into account that Law No 129/2019 stipulates that designating beneficial owners is the sole responsibility of the directors. Also, will the obligation to file the beneficial owner affidavit under Law No 129/2019 still apply?
- From the perspective of simplifying Trade Registry procedures, we would like to mention that the requirement to issue certain documents, such as founders’ affidavits and directors’ specimen signatures, has been eliminated.
- Another new element introduced by Law No 265/2022 is that future directors expressly accept their mandate, regardless of the type of company, and that the first directors, members of the management or supervisory board are no longer required to submit affidavits upon submission of the company's founding file. According to the current provisions of the Companies Law, express acceptance of the mandate is compulsory only for joint stock companies when they appoint a director or a member of the management or supervisory board. According to the new provisions of the Companies Law, all representatives of the companies (regardless of the company’s legal form) will be obliged to expressly accept their mandates, which is tantamount to attesting to the fulfilment of the conditions imposed by Article 6 of the Companies Law and assuming responsibility for them.
In the context of eliminating the obligation for the first directors and members of the management or supervisory board to submit their affidavits with the submission of the file to establish the company, they will have to either (i) be signatories of the articles of association, together with the founding members, in order to accept their mandates and certify the fulfilment of the conditions of Article 6 of the Companies Law, or (ii) issue a separate declaration of acceptance of the mandate, but this would contradict the purpose of the new regulation.
For legal representatives of foreign natural persons/entities, an affidavit is currently required certifying that the person concerned is not registered for tax purposes in Romania, that he/she is not in debt to the Romanian state and that he/she has not committed any acts of the kind that are recorded in the tax record. In the context of the new changes, it is unclear how this will be dealt with formally, since affidavits are no longer required. One possibility could be to incorporate this affidavit into the articles of association to accommodate the new provisions or to keep the declaration as a separate document.
- Another change eliminates the requirement that all shareholders of a limited liability company must vote on resolutions to amend the articles of association. This amendment aims to avoid the bottlenecks that previously existed in limited liability companies.
Now, decisions will be taken by an absolute majority of members and shares unless the articles of association provide otherwise.
It also introduces a new penalty: a fine of RON 5,000 to RON 15,000 for joint-stock companies that do not comply with the obligation to maintain a register of shareholders as required by law.
With regard to company reorganisations, we note that the expected changes regarding the competence to pass resolutions regarding mergers and spin-offs have not been included in the Companies Law. According to the draft bill’s explanatory memorandum, the intention is to extend the competence of the Trade Registry to the final settlement of mergers and spin-offs, i.e. to eliminate the competence of the courts. Naturally, the new regulation should have included an amendment to the Companies Law for this purpose, although this aspect of competence is currently included only in the Methodological Norms on how to maintain the commercial registers, implement registrations and issue information. Thus, it remains to be seen what provisions will be added to the new Methodological Norms on the change of jurisdiction in the case of mergers and spin-offs.
- By far one of the most anticipated changes brought by Law No 265/2022 concerns the digitalisation of procedures at the Trade Registry. This means that essential procedures in the work of the authority, such as setting up companies or registering new branches, will be able to take place entirely online.
This initiative, useful at first glance, leaves room for a number of practical questions, such as whether everyone interested in opening a company or a branch will have access to this platform, or whether it will be necessary to open an account and meet special conditions in addition to having a qualified electronic signature. It also remains to be seen what significant advantages the online founding procedure will bring compared to the current procedure of electronic transmission of documents.
According to Law No 265/2022, in the procedure of online founding of companies, both the execution of the articles of association and the registration with the Trade Registry will take place entirely by electronic means. The procedure makes it necessary to have a qualified electronic signature issued within the framework of an electronic identification system included in the list published by the European Commission as a means of electronic identification. In order to further simplify the founding process, the online platform of the Trade Registry will provide users with model articles of association, which will contain a predefined set of essential clauses that can be completed online and signed with a qualified electronic signature. Thus, a key advantage of the new procedure, especially for businesspeople who do not rely on professionals for these registrations, could be online filing by completing all the necessary documents and complying with the registration steps for each document until the online file is fully completed.
However, it is not clear whether the standard form will allow for new clauses to be inserted, or whether investors will have to choose from the existing predefined options, or whether subsequent updates to the articles of association will have to follow the same digital procedure. Another novelty in the area of digitalisation introduced by Law No 265/2022 is the introduction of a direct channel of communication and transmission of information between the trade registers of the Member States of the European Union. To this end, the trade register kept by the ONRC will be part of the interconnected system of the trade registers of the Member States of the Union.
Thus, the Trade Registry will make documents and information on the professionals registered in its records available to the public, ensuring better transmission of this data throughout the European Union. It will also allow for free exchange of documents and information between the trade registers of the Member States of the European Union in the case of cross-border mergers and branches set up by companies established in a Member State.
- In order to ensure unified practice of the ONRC and of the court registry offices, Law No 265/2022 establishes the ONRC's Commission for Analysis and Unified Practice (the “Commission”), which includes registrars and legal specialists to be chosen annually by the general manager of the ONRC.
The Commission will have the task of drawing up opinions on a variety of legal aspects of the activity of the Trade Registry, which will be brought to the attention of the structures within the ONRC and the territorial offices of the Trade Registry.
In actual practice over time at Trade Registry offices in various territorial districts, different requirements have often been set by different offices, giving rise to non-uniform practice, which leads to a lack of predictability and delays in working with the Trade Registry. We consider it very appropriate to set up a body to be responsible for monitoring and optimising the offices’ practices by standardising them in a way that supports professionals in their cooperation with the authority.
In conclusion, Law No 265/2022 creates a modern and digitalised approach to the Trade Registry’s operations, but it also gives rise to many questions, the answers to which can only be a matter of conjecture at this point until the Methodological Norms are amended.
By Denisa Loredana Moldovan and Ruxandra Robu, Associates, Noerr