Economy in Figures

SETTING UP COMPANIES IN ROMANIA

A new investor in Romania has a number of options available when considering the legal form its investment may take. The allowed types of business presence range from limited liability companies and joint stock companies to partnerships, as well as branches and representative offices.

 
The establishment, functioning, dissolution, merge, division and liquidation of the commercial companies are regulated mainly by Company Law No.31/1990, recently republished, and Government Emergency Ordinance no. 76/2001 regarding the simplification of certain administrative formalities for the registration and authorization of business operations, republished, as further amended, whereby a unified procedure for registration and authorizing of businesses was established.

 
Forms of Business Organization

 
The commercial companies may be established in one of the following forms:  
      1. Limited Liability Company (SRL) - are the most popular vehicles for carrying on business activities in Romania by local and foreign investors, because:

     2. Of the low administrative requirements;

     3. The greater flexibility compared to other types of companies;

     4. Low initial capital requirements.

 
DESCRIPTION: MINIMUM EQUITY CAPITAL: is currently ROL 2,000,000 (about USD 60). The maximum number of shareholders in such a company is 50. An SRL is managed by one / more administrators which may have full / limited powers and which may be Romanian / Foreign Nationals. Please note that there is no distinction in Romania between companies operating with / without foreign share capital.

 
Joint-stock company (SA) - the number of joint stock companies (SAs) and their attractiveness to investors is increasing in Romania.

 
DESCRIPTION: MINIMUM EQUITY CAPITAL: is currently ROL 25,000,000 (about USD 700). There is no maximum number of associates. However, such a company should have at least 5 shareholders.

 
When an SA is established, at least 30% of the subscribed share capital, or 100% in respect of contributions in kind, must be immediately contributed upon formation of the company and all subscribed share capital must be fully paid in within 12 months of formation.
 
One or more "Board of Directors" members, who may or may not be shareholders of the company, govern the daily operations of the SA.

 
a.  Limited partnership - the partnerships' liabilities are guaranteed by the capital and by the unlimited joint liability of all unlimited partners; limited partners are liable only up to the value of their share contribution

b. General partnership - the partnerships' liabilities are guaranteed by the capital and by the unlimited joint liability or all partners

 
For both partnership types, taxes are applied at entity level, not at the individual level.
 

 
 Registration Procedure

 
Company registration procedure was simplified and amended in August 2001 and thereafter in October 2004.

 
The registration procedures for limited liability companies and joint stock companies requite similar and consist of the following main steps:

 
1. The constitutive documents (by-laws) must be prepared, approved, and signed by the shareholders;

2. The subscribed capital must be paid upon registration of the company. In the case of a joint stock company (SA), each shareholder must pay at least 30% of its subscribed capital. The registered capital may be subscribed and paid in by the shareholders by contributions in cash, in kind and/or in receivables;

3. The company is registered with the Trade Register by issuance of a Registration Certificate. This provides registration Code valid for both the Trade Register and the tax authorities. The Registration Certificate also includes in a certificate of acknowledgement stating that all conditions for carrying out commercial activities are fulfilled. The company legally exists and has the right to start and run its activities from the date of its registration with the Trade Register.

 
According to Law no. 359/2004 regarding the simplification of the registration procedure with the Trade Registry of individuals, family associations and legal entities, as well as the authorization of the functioning of legal entities, as further amended and supplemented, the Trade Registry shall issue the registration certificate and the mention registration certificate based on the statement on own liability given by the associate/director regarding:

 
a.  The legal entity does not perform operations at the head/secondary office;
 
b.  The legal person fulfilling the operating conditions provided by the legislation regarding the fire prevention and extinction, sanitary and sanitary-veterinary field, environment and labor protection for the activities specified in the statement forms.
 
Pursuant to the Government Ordinance no.75/2001 on the Organization and Operation of the Fiscal Record (“Fiscal Record Ordinance”), as amended and supplemented, for incorporation and registration purposes, the company shareholders and its legal representatives are required to produce a fiscal record certificate. Foreign legal entities and individuals not fiscally registered in Romania have no obligation to produce the fiscal record. In this case, a mere fiscal statement given before the notary public stating that they have no fiscal debts towards the Romanian budgets replaces the requirement of such certificate

 
A subsidiary’s registration procedure is essentially similar to the one described above.
 

 
Branches
 
Branches are corporate entities with no legal status, set up by Romanian or foreign companies subject to registration with the relevant trade registry. The legal status of the branch applies to any other secondary office (agency, working points, etc.) established as branch by the foreign parent company.

 
Branches must be registered using the same procedures for SRLs and SAs. The setting-up of a branch requires the following documentation:

 
      -  Record of the existence of the parent company (i.e. company memorandum and articles of association, setting-up certificate of foundation, trustworthiness letter from bank);

      -  Decision of the Board of Directors to establish a branch in Romania, listing the activities of the branch and appointing a General Manager.

 
Branches must have a General Manager appointed by the Board of Directors of the parent company, who will represent the branch in dealings with third parties in Romania. The General Manager can be a foreign citizen. Branches can only operate in the same field of activity as their parent companies.

 
Representative Offices

Representative Offices are established and operate in accordance with the provisions of the Law-Decree no. 122/1990 on the Authorization and Functioning in Romania of Foreign Companies’ Representative Offices and of Foreign Economic Entities, as further amended and supplemented.

Foreign companies and economic entities may open Representative Offices in Romania, subject to authorization by the Ministry of Economy and Commerce. Upon registration, an operation authorization is issued, stipulating, inter alia, the activity object, the terms and conditions for carrying out the activity, the duration and headquarters of the Representative Office.

Representative Offices are often established as a first step. The Representative Office may undertake on behalf of the parent company only transactions that are consistent with its object of activity and set forth in the authorization. A Representative Office cannot commit to any contractual engagements in its own name but can perform the following activities without being considered a permanent establishment for profit tax purposes:
 
          - Using facilities only for the purpose of storage or display of goods or merchandise belonging to a nonresident;

         - Maintenance of a stock of goods or merchandise belonging to a non-resident only for the purpose of storage or display;

          - Maintenance of a stock of goods or merchandise belonging to a non-resident only for the purpose of being processed by a third party;

          - The sale of goods or merchandise belonging to a nonresident displayed at exhibitions or trade fairs which are not permanent or are occasional, if the merchandise or goods are sold not later than within a month after the closing of the trade fair or exhibition;
 
          - Maintenance of a fixed place of business solely for the purpose of acquisition of products or goods or collecting information for a non-resident;

          - Maintenance of a fixed place of business solely for the purpose of carrying out activities of a preparatory or auxiliary nature by a non-resident;

 
          - Maintenance of a fixed place of business solely for a combination of the activities mentioned above, under the condition that the whole activity carried out through the fixed place of business is of a preparatory or auxiliary nature.