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We intend to introduce on this page some general data on the main legislation regarding the Romanian business environment, without it being in detail. In addition we will soon be making available to our present or potential clients a guide containing a panorama of the most important aspects of law and practice relating to the Romanian business, those interested can send a request to office@rrslawyers.com. * ** Five types of commercial companies are established by the Romanian Company Law. Of these, only two are most often used – limited liability companies and joint stock companies. The Romanian Company Law dates from 1990 but has been constantly modified to be up to date as far as the development of business and the demands pertaining to the European integration. In this sense, for example, the law recognizes the existence of the European society as well as that of the European economic interest groups. Foreign companies may have commercial or subsidiaries branches in Romania, for the purpose of economic activities, or representatives, for publicity purposes only (there is a distinct law for representatives). A limited liability company, referred to in practice as an SRL (societate cu răspundere limitată), has a minimum of 2 associates, which may be natural or legal persons, up to a maximum of 50 associates, number beyond which the company has to change to the status of a shares company. The minimum capital is of 200 RON (an official exchange rate may be found on the website of the National Bank of Romania), and it is requested that it be entirely subscribed and paid in full at the time of the establishment of the company. There is also the possibility of creating an SRL with a sole associate, natural or legal person, Romanian or foreign, but there is a limitation in that the given associate cannot have another limited liability company with a sole associate on the territory of Romania, the minimum capital being the same. Joint stock companies,referred to by Romanian law as societate pe acţiuni (SA) has known for many years a single management system, to which was added the second, referred to as the dualist system, introduced in 2006, although in practice a majority is currently using the first. The minimum associates required in a joint stock company is 2 associates, without limitation as to the maximum number of associates; the minimum capital of the company is 90.000 RON but the Romanian Government has the right to modify, at most once every 2 years, the share capital for the purpose of keeping an equivalent with the amount of 25.000 Euro. 30% of such share capital must be subscribed and paid the day of registration in the Trade register, and this with an obligation of paying what remains in less than 3 years. Under both types of commercial companies mentioned above – SRL and SA - the responsibility of the sole associates is limited to their capital. As a general rule, the Romanian law allows associates, natural or legal persons, foreign or domestic, in both SRL and SA, to be administrators. Special formalities are required as appropriate. In terms of practice, the choice between a company with limited liability and a joint stock company may prove important, because the rules are different and the assessment of opportunity between one and the other depends on the type of investment as well as how the participants place themselves in relation to many aspects, of which a few: the share capital, share transfer and changes in ownership structure, company termination. Therefore it is important to tailor the association to specific necessities. In the case of ample investments, the associates may also choose the drafting of additional, specific and more complex types of documents. In order to register a company, it is required to perform a number of formalities and deposit documents at the Trade Register. The formalities and documents required depend on the type of company and specific data. Generally, the lapse of time between availability of all documents and the registration of a limited liability company or joint stock company is between 7 and 14 days (from availability of all necessary documents). The formalities are also different depending on the nature of the intakes and the way the company was set up. In order for the company to function properly, the activities that will be held are very important. For some activities prior or subsequent permits are required, as well the fulfilling of other conditions. Also, some activities can only be authorized if associates fulfil a number of conditions. The employment legislation implies various duties for the employer, but also gives the right to protect the investment by determining, in agreement with the employee, the terms of the work contract (confidentiality agreements, non-compete agreements, etc.). Also of importance the interpretation and application in practice of such legal provisions. It is also necessary to register the documents with various authorities, and in some cases is mandatory the employment of a certain type of personnel in order to accomplish the business activities in compliance with the terms stipulated by the legislation. The company may be terminated for various reasons, despite the will of the associates, one of which could be for not respecting specific requests or deadlines established by Romanian regulations. As an example the company may be terminated by the Trade Register in case of the expiration of the head office, reducing of the number of associates below the minimum required, as well as lack of respect of obligations established regarding the company balance sheet. The company may also be dissolved or voluntarily enter into reorganization or bankruptcy. With respect to bankruptcy, it is important to know that in certain circumstances, the company manager may be obliged to cover the debts of the company; therefore compliance with legal regulations is not only mandatory but also well advised. Romania has a wide palette of opportunities in the real estate field, whether the purpose is construction, agriculture, educated investment, residential, tourism or others. For terrains, the main law, existent since 2005, but entered into force on the day Romania became a part of the European Union (1st of January 2007), established the rule that property right on terrains will be allowed to be acquired by European Union citizens starting on the 1st of January 2012. There are however, notable exceptions, that depend on the acquirer and the type of terrain. The acquisition of terrain is to be signed before a notary. In case the acquirer (a natural or legal person from EU or from the European Economic Space) cannot become owner of a terrain, there is a widely used solution which consists of creating a Romanian commercial company, be it even a limited liability company with a sole associate. Such company may perform various activities, in accordance with the regular law requirements for any Romanian commercial company. As a Romanian legal person, the new company will be entitled to acquire freely any terrain in Romania. It is important to know that the terrain will belong to this company and, upon termination and liquidation of the company, it will only be passed to the associate/ owner, if at the time of the liquidation, the associate himself (or the legal person) was allowed to acquire terrains in Romania. Regarding citizens or legal persons from non – EU states or not from the European Economic Space, international treaties must be considered in their case, but, as a general rule, they cannot acquire terrain in Romania. Please refer to the mentions regarding buildings above. Buildings may be bought freely by any natural or legal persons, EU or non UE (except when the building has a special legal regime). However, it is of importance to consider the regime of the terrain on which the building stands. That is because, if terrain cannot be bought since the acquirer does not fulfil the legal requirements, the acquirer may only obtain a permanent use (for the duration of the building) of the terrain in question, but not the property right. In case the property right on the terrain is of importance, it is highly advised to consider the legal ways that allow acquiring its property of the terrain as well as of the building. The Romanian fiscal environment is a flexible way of distributing the tax advantage to those who know how to choose the nature of their business. Tax in Romania is lower than many countries of the European Union. The main taxes are profit tax, income tax, tax on revenues of the micro enterprises, tax on the earnings in Romania by non-residents. Also there is VAT (currently 19% as a rule) tax for representative entities, value added tax, excise duty, local taxes. We refer here only to some general data for the profit tax, tax on incomes of micro companies Rate of profit tax is 16%. Also there is the option that the company is to apply a so-called "micro enterprises” which is current at is 3% and for which the application should fulfil conditions related to financial and business employees. Micro enterprises income tax is optional. Income tax is also 16% and is classified as coming from various sources, among which the most common: self-employment, wages, lease for goods, investments, transfer of real-estate goods. There are special rules for each category. There are also a number of special provisions regarding the persons who obtain foreign income in Romania and also for these international tax agreements must be considered. In taxing of real estate business, income from landlord-tenant agreements is to be considered, as well as the transfer of ownership; the tax is established according to the length of time before the seller had acquired the property himself and what the value that the property represents. The present page was updated on the 19th of March 2009. * For the information present on this page as well as for any use or access of this Site and request, access or use of any information we may provide by means of, or in connection with the present Site (our guide mentioned above included), our Terms of use will apply. It will be our exclusive opportunity to assess the content and communicating of any and every information in any manner within or connected to our Site as is the choice of responding to eventually interested parties. Not withstanding the above, our responsibilities towards our clients are regulated by our profession’s law. ** Our Firm expressly states that although there have been efforts to ensure that the information presented in this site is correct, this view is not a complete and comprehensive one of legislation, and we are not liable for any action or lack of action of any visitor, client or any third party, based or related thereof. All parties are advised to seek professional advice before taking any decision. |