Romania

Romania

Romania Company Formation

Introduction

Romania is a sovereign state located in Eastern Europe. It borders the Black Sea, Bulgaria, Ukraine, Hungary, Serbia, and Moldova. It has an area of 238,391 square kilometers and a temperate-continental climate. With 19.94 million inhabitants, the country is the seventh-most-populous member state of the European Union. Its capital and largest city, Bucharest. Following rapid economic growth in the early 2000s, Romania has an economy predominantly based on services, and is a producer and net exporter of machines and electric energy, featuring companies like Automobile Dacia and OMV Petrom. It has been a member of NATO since 2004, and part of the European Union since 2007.

Language

The official and spoken language is Romanian.

Economy

In 2015, Romania had a GDP (PPP) of around $414 billion and a GDP per capita (PPP) of $20,787. According to CIA’s The World Fact book, Romania is an upper-middle income country economy.

Business Entities and Formation of Company in Romania

There are no general approvals for investments needed to set up a company in Romania (however there are areas in which a special permit is required). The registration procedure itself requires the fulfillment of certain legal formalities such as registration with the Trade Registry of Romania and Fiscal Administration (which is actually done automatically by the Trade Register). The incorporation of a company is done through the main step: filing the company’s Articles of Association with the trade register. From the date of registration in the Trade Register the company will acquire legal personality as a merchant and can therefore commence its economic activity.

The Law nr.31/1990 the Romanian law regulating the commercial companies their formation and the way they ought to conduct their activity, establishes 5 types of legal entities from which you can choose  in order to develop a business in Romania:

The Romanian Collective- Name Company

This is not a very common type of Romanian entity. This type of company is based on the full trust of the associates.  The Collective Name Company needs to have at least 2 shareholders. The shared capital is divided in interests which are not transmissible. The company’s obligations are guaranteed by the company’s assets but also by the joint and unlimited liability of the company.

When it comes to the shared capital of the Collective Name Company the law does not impose a minimum amount  for the shared capital which means that the shareholders are free to determine the amount of the shared capital according to the needs of the company.

One of the most important obligations of the shareholders of the Collective Name Company is not to compete with the activity of the company. So the shareholder cannot be a member in another unlimited liability company that operates in the same domain as the original company.

The most important feature of this company is the fact that the shareholders are personally liable for the obligations of the company. This liability is subsidiary, this means that the creditors of the company will first try and obtain the debt from the company and only if the company does not pay its debt only then the creditors can recover the debt from the shareholders.

The Romanian Sleeping Partnership Company

The characteristic element of this type of company is the fact that it has two types of shareholders the shareholders that are personally liable for the obligations of the company and they are called “Comanditati” and the shareholders that are only liable in the amount of the shared capital that they subscribe which are called “comanditari”

This company is based on the thrust between the two types of shareholders, the shared capital is formed of interests that are not represented by titles .The law does not establish a minimum number of shareholders but it’s mandatory for the company to have at least a shareholder that is personally liable for the obligations of the company and one that is liable only in the amount of the shared capital.

The decisions regarding the company are taken by the vote of the majority of shareholders. The administrators of the company can be appointed only from the shareholders that are personally liable for the obligations of the company. The interests can be transmitted only if the Articles of Incorporation allow this operation or is the other shareholders agree.

The Romanian Partnership Limited by Shares Company

This type of company resembles the “Sleeping Partnership Company” because it has two types of shareholders and just like in the case of the “Sleeping Partnership Company” they have different liability. The main difference between the two types of companies is that The Partnership Limited by Shares” Company has a shared capital formed of stocks.  The liability for the company’s obligations is different for the shareholders so there are shareholders that are personally liable for the obligations of the company and they are called ”Comanditati” and there are shareholders that are liable only in the amount that they participate to the shared capital and they are called “Comanditari”.
The minimum amount of the shared capital of the company needs to be 90.000 lei the equivalent of 25.000 euros.
The company can be administrated only by the shareholders that are personally liable for the company’s obligations.

 

The Romanian Joint-Stock Company 

The Joint Stock Company is the most complex type of legal commercial entity. This type of legal entity is used for the development of important investments and big businesses. A Romanian joint stock company needs to have at least 2 stockholders, and a minimum shared capital of 90.000 lei the equivalent of 25.000 euros. The General Assembly of stockholders is the most important decision and deliberation body of the company.

The decisions regarding the company status such as : legal change of the company’s status, the change of the company’s social headquarters, its object of activity, the creation or the dissolution of eventual secondary registered offices, the prolongation of the society duration, the increase of the registered capital, its decrease or its replenishment by issuance of new social shares as well as for any modification of the Articles of Association are taken by The General Assembly of Stockholders.

The company can be administrated by a sole administrator or a board of administrators if the administration system is unitary or by a Directorship and a board of supervisors if the company is administrated in a dual system of administration.

For the management of a Romanian Joint Stock company can be chosen one of these alternative systems: unitary system, or dualist system:

The unitary system – the company is managed by one or more administrators, always in odd numbers, organized into a board. Council may delegate the management of the company to one or more directors. For those companies whose financial statements are audited, this assignment is compulsory and the minimum number of directors is three.

 The Dualist system – the company’s management is provided by an Executive Board and a Supervisory Board with the following responsibilities:

  • Directorate ensure activity and management of the company and report the Supervisory Board
  • The Supervisory Board supervises the permanent control of the Executive Board and report to the General Assembly of Shareholders.

 The Romanian Limited Liability Company

It is the most popular form of association in Romania and is preferred by most foreign investors in Romania. The minimum shared capital needs to be at least 200 lei. The company can have a sole shareholder but a person can be sole shareholder in only one Limited Liability Company. For additional details on the Romanian Limited Company please see our related articles on SRL formation and micro company setup.

The main feature of a limited company is obviously that the liabilities of social debts is limited to contributions to subscribed and paid shares. As mentioned the hare capital of an LLC must be a minimum of 200 lei, divided into shares with a nominal value of at least 10 lei each share, and each party can hold any number of shares. A limited liability company may be founded by at least one partner (sole) and not more than fifty (50) of associates. These shareholders/associates may include among them individuals and / or businesses. If a person intends to form several companies, it is necessary for at least 1 share to be held by another natural person or legal entity. A limited liability company may not have as sole shareholder another limited liability company which is in turn owned by a sole shareholder. A Romanian LLC is managed by one or more directors, who may have full or limited powers and can be Romanian or foreign citizens. The term of director (in Romanian administrator) may be limited or unlimited. There is no difference between companies that work with or without foreign capital. In case the LLC has a sole shareholder then this shareholder can also be an employee of the respective company (in this case a Labor Agreement must be drafted and filed with the Labor Chamber in Romania.)

The Romanian Subsidiary

As per the Law No. 105/1992, the Romanian sub-company established overseas has a distinct nationality from the mother-company. The Romanian sub-company is conceived as an entity with legal personality in the sense that it is constituted by in the same manner as a company and depends economically on the mother-company. A Romanian sub-company owns its own patrimony, distinct in the entire patrimony of the company and is able to sign contracts with third parties in its own name, also owning one or more bank account.

Company Formation in Romania

Both foreign individuals and legal entities can establish corporate presence in Romania. Companies have their own patrimony, registered capital, management, registered offices, assets, names and bank accounts.

A foreign company can be sole shareholder (if LLC) or the foreign company can be shareholder together with at least one other shareholders which can be legal entities or private persons (if Joint Stock Company).

The most frequent types of are limited liability companies named SRL. Also there is an important number of general partnerships and joint stock companies. All companies must be registered with the National Trade Register Office, organized by the Romanian Chamber of Commerce and Industry. The National Trade Register Office is a public institution which has the function to maintain statistical information on business activities in Romania. Opening of a Romanian company does not impose any restrictions on shareholders and directors. Romanian law also allows corporate shareholders and directors.