What is the main source of law authorising this entity form?

Companies Law No. 31/1990

Give a brief summary of the entity form:

Does the entity possess separate legal personality?

A SRL has legal personality.

(Maximum) period of existence

There is no maximum period of existence for SRL

Governing document(s)

A SRL is governed by its articles of association.

Liability of incorporators / shareholders

A shareholder’s liability is limited to the subscribed capital contribution. However, the shareholders abusing the limitation of their liability and the distinct personality of the company, thus deceiving the company’s creditors, will be in theory held liable without limitation for the company’s outstanding debts. The law deems abusive the shareholder’s using the company’s assets as if they were his own, or diminishing the company’s assets for his own or third parties’ benefit, while aware that in doing so the company is hindered in performing its obligations.

(Governing) bodies

The main management body in a SRL is the General Meeting of Shareholders (GMS). A SRL is managed by one or several directors who can act jointly or separately.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions, equity acquisitions, etc.)?

International restructurings are possible, subject to the conditions imposed by EU and national regulations. Cross-border mergers are addressed in an extensive manner in the Companies Law.

Can this type of entity be publicly listed or held?

A SRL cannot be listed on the stock exchange.

Can this type of entity be used for a non-profit or charitable organization?

No. Pursuant to Article 1(1) of Companies Law, the individuals and legal entities may associate and set up companies with legal personality only for the purpose of carrying out profit-generating businesses.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required

First, one must obtain/draft the documents required for the registration procedures (e.g. certificate issued by the Trade Registry proving the availability and reservation of the company name, articles of association, etc).

Involvement of notary, company register, governmental authorities

Romanian companies are incorporated by registration with the Trade Registry. After the registration formalities with the Trade Registry are completed, the company must also be registered for VAT purposes with the competent fiscal authority, if applicable, and with the labour authorities before starting to employ personnel

Timing (estimate)

The incorporation certificate will be issued within three days after the documentation for registration was submitted with the Trade Registry.

Main costs, including registration and similar fees (excluding legal fees)

The registration costs are about EUR 200. Notary fees are not applicable unless an immovable asset is contributed in-kind to the share capital upon the incorporation

Is a description of the anticipated business or purpose of the entity required for incorporation, formation or organization?

The company can operate almost any kind of business, except for the activities where the applicable law requires the entity to be organized as a joint-stock company (e.g. banking or insurance). The articles of association of an SRL.must include the company’s scope of business, mentioning the area and main line of business.

Minimum number of incorporators / shareholders and residency requirements

The Companies Law permits establishing a SRL with a sole shareholder. However, two particular limitations need to be observed: (i) an individual or a legal entity may be the sole shareholder in one SRL only; and (ii) the sole shareholder of an SRL may not be itself an SRL owned by a sole shareholder.

An SRL may have maximum of 50 shareholders.

The owners of Romanian companies may be Romanian or foreign legal or natural persons, in any proportion, no residency restrictions/ prohibitions being applicable thereto.

Minimum number of directors (or other applicable officers) and residency requirements

The SRL can have one or more directors. There are no residency restrictions/ prohibitions applicable.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

Until recently, the minimum value of the social capital in a limited liability company was RON 200. With the entry into force of the Law 223/2020 on 2nd of November 2020, this requirement has been eliminated. However, according to the Company Law 31/1990 (i) the social capital of a company is divided into equal shares, and (ii) cash contributions are mandatory for the establishment of any form of company. This means that the social capital cannot be less than 1 RON. Thus, an LLC with a sole shareholder shall have a minimum social capital of 1 RON (in this case the sole shareholder will have a single share in the amount of 1 RON, representing a total of 1 RON contribution to the share capital). In case of an LLC with two shareholders, the contribution to the share capital must be at least 2 RON (2 shares, each of 1 RON). Indeed, contributions in receivables are not permitted for limited liability companies. Moreover, work services cannot constitute a contribution to the formation or to the increase of the social capital in a limited liability company.

Is the physical presence of incorporators / directors required in the jurisdiction for incorporation, formation or organization?

No.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

The tax identification number is issued by fiscal authorities upon registration of the company with the Trade Registry.

What is the title of the applicable company registry?

National Trade Registry Office (“Oficiul Național al Registrului Comerțului”)

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.:

The Trade Registry provides, upon request, certificates of status that shows the following information:

• company name (firm);
• company logo;
• registration number in the trade register;
• unique registration code;
• company's status (e.g. insolvency status);
• legal form;
• registered/professional office;
• term of existence;
• object of activity – area and main line of business;
• share capital (subscribed and paid), number and amount of parts of share capital;
• for private limited companies, limited or general partnerships as shareholders: partners, identification data, amount or portion of share capital given to each partner for his/her contribution, participation in share capital and in profit and losses;
• auditors/financial auditors;
• secondary offices (puncte de lucru in Romanian), branches (sucursale in Romanian) or subsidiaries (filiale in Romanian) (if the case);
• authorized activities and offices;
• information from annual financial statements;
• other amendments regarding protective measures and criminal convictions.

 

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

What is the title of the executive body and its members: main tasks / responsibilities? The executive body is constituted by one or several directors. The directors cannot receive, without authorization from the GMS, the mandate to be a director in a competing business or in companies having the same object of activity. Directors cannot perform the same kind of trade or another competing trade on their own behalf or in behalf of another physical person or company, under the sanction of their revoking their position and liability for damages. The main obligations of the directors are:

1. to manage the current activity of the company;
2. to maintain correct accounting for the company, insuring the existence and correct filing of the accounting records;
3. to fulfil the obligations of the companies they represent (e.g. trade regulations);
4. to inform the shareholders regarding the company’s activity;
5. not to act in any way as a competitor of the company and to follow the company’s interests (the administrator’s fidelity obligation to the company).

The director can perform any operation necessary to fulfill the company’s activity. The director is able to sign documents related to the internal management of the company as well as fully represent the company in relations with third parties. Limitations may be imposed in the articles of association.

How are the members of the executive body appointed, dismissed and replaced?

The director can be a natural person or a legal entity. Directors are appointed initially in the Articles of Association and, thereafter, during the current operations of the company, through a GMS decision. The Directors can also be replaced or dismissed through a GMS decision. /p>

Is it possible to appoint corporate directors or must all directors be natural persons?

Yes it is possible to appoint corporate directors.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, there is no requirement for having non-executive directors. The two-tier management system is not available for SRLs.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

General Meeting of Shareholders (Adunarea Generala a Asociatilor in Romanian). There is no statutory provision distinguishing between an ordinary GMS (AGA in Romanian) and an extraordinary GMS. However, shareholders may establish through the Articles of Association the two types of GMS with different duties and voting requirements. Article 194 of the Companies Law provides that a GMS has the following main duties:

• approve the annual financial statements and establish the allotment of net profit;
• appoint the directors and censors/auditors (who are part of the surveillance body of the company), remove/dismiss them and discharge them of liability, as well as decide to contract financial auditors if this is not mandatory under the law;
• decide on the filing of legal action against the directors and censors for damage caused to the company, also designating the person in charge of such legal action;
• amend the articles of association.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

Unless otherwise provided in the company’s articles of association, the decisions may be passed within the GMS with double majority: over 50% of the shareholders and over 50% of the share capital. The unanimous vote is required for amendments to the articles of association, except otherwise provided by the incorporation document. In the event that the GMS cannot validly take a decision due to lack of quorum, the GMS may decide at the second call irrespective of the number of the shareholders attending the meeting and of their holding of the company’s share capital.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

Not as a matter of principle, but special governance regimes may apply in certain regulated sectors where it is acceptable that a company may be organized as an SRL.

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

It is compulsory that companies organize and maintain their own accounting records, according to the provisions of the Accounting Law no. 82/1991. The accounting records are meant to reflect and measure the assets, the liabilities, and the capital as well as the results obtained from operations. The companies are bound to submit their annual financial statements to the tax authorities.

Is the entity permitted to determine its own financial year?

Yes

Is the entity subject to any statutory (external) auditor obligations?

The annual financial statements of medium and large entities must be audited. Companies that meet at least two of the following criteria are considered medium or large entities:

1. the value of aggregate assets is at least RON 17,500,000 (approximately EUR 3, 950,000);
2. net turnover amounts to RON 35,000,000 (approximately EUR 7,900,000);
3. the average number of employees within the financial year is 50.

Moreover, companies that meet at least two of the following criteria are obliged to have their annual financial statements audited:

• the value of aggregate assets is at least RON 16,000,000;
• net turnover amounts to RON 32,000,000;
• the average number of employees within the financial year is 50.

The obligation indicated above is applicable only in case the limits are exceeded for two successive financial years.

 

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

The control over the company may be exerted by one or several censors elected by the GMS. The appointment of censors is mandatory only if the number of shareholders is greater than 15. The term in office of a censor is 3 years. Censors must be registered with the Trade Registry. When the company is subject to external financial audit, the role of the censors is taken-over by internal auditors. In the absence of appointed censors, the control is exerted by the shareholders that are not directors.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Shares (Parti Sociale).

Are different classes of ownership interests possible? If so, what are some examples of different classes?

No.

What documentation is required for the transfer of ownership interests?

Shares may be freely transferred among shareholders; transfer to persons outside the company is only allowed if approved by the shareholders representing at least ¾ of the registered share capital, in the absence of derogatory provisions under the articles of association.

The GMS resolution approving the transfer must be submitted within 15 days to the Trade Registry Office for publication in the Official Gazette of Romania. The company's creditors and any other persons deeming themselves prejudiced by the shareholders’ resolution may oppose the share transfer in court. Absent an opposition, the shares are deemed transferred upon the expiry of the 30-day opposition term; where there is an opposition, the transfer takes place on the date the court decision dismissing it is communicated to the parties.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

The transfer must be recorded in the shareholders register and must be registered with the Trade Registry.

Are there any applicable stamp duties imposed when transferring ownership interests?

No.

How are shares issued? (including information on payment obligations, registration requirements)

Any share issue must be adopted by the GMS and must be recorded in the shareholders register. The capital increase must be registered with the Trade Registry.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

The registered share capital may be increased by issuing new shares or by increasing the nominal value of the existing shares in exchange for new contributions in cash and/or in kind. The share capital increase with a share premium refers to the issuance of new shares at the face value equal with the one of the existing shares of the company, while the contribution of the shareholders per each new shares is made at a higher value than the face value (premium). Also, the new shares may be fully paid-up by incorporating the reserves, except for the legal reserves, as well as the profit or share premiums, or by setting off liquid and payable claims against the company with shares thereof.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The registered share capital may be reduced by reducing the number of shares or by reducing the nominal value of shares or participations. Also, should the decrease not be motivated by losses, the registered share capital may also be reduced by total or partial exemption of the shareholders from their obligation to make their due and payable deposits; refund to the shareholders of a share of their contributions, proportionally to the reduction of the registered share capital equally calculated for each share or participation; other methods provided by law.

Any requirements with respect to distributions to shareholders?

 

Dividends are distributed to shareholders in proportion to their share of participation in the share capital, unless the articles of association provide otherwise.

Dividends must be paid within the period of time which is prescribed by the GMS.

Dividends can only be distributed from profits determined according to law.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Shareholders’ agreements are not explicitly regulated under Romanian law. Unlike the articles of association, shareholders’ agreements are deemed confidential among the shareholders, rather than a public deed subject to publicity requirements. Consequently, a shareholders’ agreement may not be enforced with respect to third parties unless they were aware of the agreement.

Lacking a legal framework to condition the contents of a shareholders’ agreement, shareholders are at liberty to stipulate in their agreement any provisions they consider necessary for the good functioning of the company, to the extent they do not contradict or violate the Companies Law or the company’s articles of association.

A shareholder failing to observe a shareholders’ agreement may be held liable for damages towards the other shareholders.

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

Approx. EUR 1,000. This figure does not include also audit costs.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The standard corporate income tax rate is 16%. Various exemptions and special rules may apply.

Summary of any specific matters, e.g. recent or prospective major legal developments

No major legal developments are expected in 2021 and 2022.

Using a SRL is preferred by a large number of foreign investors in Romania. The main advantages of incorporating a SRL are:

• generally, the creditors of the company cannot seek the personal goods of the shareholders for covering the debts of the company;
• it takes only about one week to do the formalities for incorporating a SRL;
• a SRL can have between one and 50 shareholders;
• the management of the company only consists of the GMS and the director/directors, so the decisions can be taken easier and faster.