Constitutional Court Decision on the unconstitutionality of certain provisions of Law no. 359/2004 on the simplification of registration formalities with the Trade Registry of natural persons, family associations and legal entities, their fiscal registration, as well as on authorizing the functioning of legal entities

By the decision no. 382 dated 28 May 2019 published in the Official Gazette no. 566/July 10, 2019 (the “Decision”), the Romanian Constitutional Court has upheld an objection of unconstitutionality raised with respect to Article 31 paragraph (7) of Law no. 359/2004 (“Law no. 359/2004”), in the version of the law existing before the amendment brought in by Law no. 360/2006.

The Article in question stated that the assets left in the estate of a legal entity dissolved by law and further deregistered from the Trade Registry are considered abandoned assets. Thus, such assets were transferred to the Romanian State and not to the shareholders of the dissolved company. Dissolution followed by deregistration and transfer of company’s assets to the Romanian state was a sanction for failure to observe an obligation imposed on the companies to change their registration certificates within a certain term.

The Romanian Constitutional Court decided that such provision violates the private property right of such a legal entity and of its shareholders. To reach this conclusion, the Romanian Constitutional Court reasoned that although under the Constitution of Romania (which is the fundamental law), the Romanian state has the right to regulate the content and limits of the property right, it cannot however fully abolish this right. When imposing limitations to the property right, the State must enact only measures within the limits of what is reasonably required to reach a purpose, without questioning or threatening the existence of the right itself. In the view of the Romanian Constitutional Court, the challenged article did not have a legitimate purpose and triggered in fact a significant imbalance between the interests of the State on the one hand, and of the legal entity and its shareholders, on the other hand.

The issue raised under the unconstitutionality objection was in fact remedied in 2006 by properly amending this Article through Law no. 360/2006. The current form of the challenged article clearly and correctly states that such assets will be transferred to the shareholders of the dissolved legal entity.

Nonetheless, the effect of the Decision is important, as it also settles this issue for any legal claims that had been initiated before the amendment in 2006 and which have not been yet been finally settled by the courts of law.