Important changes to Companies Law to simplify share transfers and payment of share capital
On 6 October 2020, a draft bill (“Draft Bill”) amending Companies Law No. 31/1990 (“Law No. 31/1990”) was passed in the Romanian Chamber of Deputies and then, on 30 October 2020, this Draft Bill was promulgated by the President of Romania thereby becoming Law No. 223/2020 (“Law No. 223/2020”) on simplifying and eliminating the bureaucracy surrounding share transfers and payment of share capital. Law No. 223/220 was published in the Official Gazette no. 1018 dated 2 November 2020 and will come into force within three days as of the publishing date.
Romania had one of the most restrictive systems in the EU regarding share transfers in limited liability companies, and the amendments brought in by Law No. 223/2020 are intended to simplify these transactions and bring Romania into line with the practice of the other EU states.
Prior to its amendment, Law No. 31/1990 stated that any transfer of shares to a person who is not an existing member of the company must be approved by shareholders holding 75% of the share capital of the company. Law No. 223/2020 repeals this requirement and allows the members to establish, under the articles of association, a smaller percentage as being necessary for the approval of share transfers or even to remove such a requirement completely.
Law No. 223/2020 also makes important changes to a creditor’s right of opposition to the transfer of shares. Up until now, the transfer of shares to third parties has been carried out under a procedure involving registration with the Trade Registry and the publication, in the Romanian Official Gazette, of the shareholders’ resolution to approve the transfer. The shareholders then had to wait for the expiry of the challenge period of 30 days from the date of publication of the shareholders’ resolution in the Romanian Official Gazette.
The impediments created in practice by this excessive formalisation are removed under Law No. 223/2020, which completely repeals the challenge procedure. Consequently, once Law 223/2020 comes into force, the transfer of shares to third parties can take place at a date agreed between the parties, provided only the prior approval of shareholders holding 75% of the share capital, or with whatever majority has been provided for in the articles of association, without any challenge period being required.
It is also important to emphasise that in order to simplify the process of share transfers, Law No. 223/2020 also provides for the removal of the obligation to register with the Trade Registry the document attesting the transfer of shares and the updated articles of association of the company including the identity data of the new shareholders.
As regards the incorporation of a limited liability company, Law No. 223/2020 repealed the requirement for a minimum share capital of RON 200 and the need to prove that the payment of the share capital had been made in accordance with the provisions of the articles of association.
Moreover, in respect of the registration of a company and the change of a company’s registered office, Law No. 223/2020 removes the obligation to register in advance, with the National Agency for Fiscal Administration, the document proving the right of use of the registered office.
We welcome all the above amendments and we expect them to have a significant impact in Romania regarding its’ adherence to a standard of practice already used in other EU countries. We also expect the adoption of Law No. 223/2020 to have an undeniable impact on the Romanian business environment, both in terms of domestic and cross-border transactions.