First pageArticlesThe romanian government decides to defer payments of rent and utilities for small and medium enterprises (smes) and other types of business entities, in the context of the covid-19 pandemic

The Romanian Government decides to defer payments of rent and utilities for Small and Medium Enterprises (SMEs) and other types of business entities, in the context of the COVID-19 pandemic

In the socio-economic context caused by the spread of the Coronavirus, the Romanian Government has adopted, through GEO no. 29 dated 18 March 2020, in relation to various economic and fiscal-budgetary measures, as published in the Romanian Official Gazette no. 230 dated 21 March 2020 (“GEO 29/2020”), several measures in order to sustain the business sector.

One of the measures refer to the postponement of payment, during this state of emergency [1], of rent and utilities borne by certain types of business entities.

We have detailed below what these measures consist of, which are the targeted entities, and the conditions to be met in this respect.

1. What is deferred?

Utilities - electricity, natural gas, water, telephone and internet services and rents due for buildings designated for head offices and secondary offices, are deferred for payment.

2. Who can benefit from these measures?

These measures are targeting, in particular, SMEs, but also other categories of business entities [2]:

  • notary public forms of practice, lawyer’s profession forms of practice and bailiff’s profession forms of practice;
  • family doctors' clinics and dental clinics wherein they operate, in any form, at most 20 people;
  • national sports federations and sports clubs that hold a sports identity certificate.

By SMEs, we refer to those companies that cumulatively fulfill the following conditions:

a) have an annual average number of employees less than 250;

b) perform an annual net turnover of up to EUR 50 million, RON equivalent, or hold total assets that do not exceed the RON equivalent of EUR 43 million, as per the last approved financial statement.

3. What are the conditions that SMEs must meet in order to benefit from this postponement measure?

The Ordinance also establishes a number of conditions that must be met cumulatively for the target entities to benefit from these conditions:

a) To have stopped its activity totally or partially following the decisions issued by the competent public authorities;

b) To hold the certificate of emergency situation issued by the Ministry of Economy, Energy and Business Environment [4].

As a separate note, but relevant to all economic operators, including those in the real estate sector, the Ordinance provides for an exemption from the rule set by the Civil Code in relation to invocation of force majeure in the ongoing agreements entered into by SMEs.

In order to protect the SMEs, GEO 29/2020 derogates from the provisions of the Civil Code by regulating that, for the agreements in progress, other than those subject to deferred payment as per point 1 above, the force majeure can be invoked against them (the SMEs) only after the attempt, proved by documents communicated between the parties by any means, including by electronic means, to renegotiate the agreement terms, to adapt their clauses by considering the exceptional conditions generated by the state of emergency.

Furthermore, with respect to the force majeure that can be invoked as per the above, GEO 29/2020 provides for the following:

  • it is presumed to be an unforeseeable, absolutely invincible and inevitable event, as per Article 1,351 para. (2) of the Romanian Civil Code, arising from an action taken by the authorities in order to prevent and fight against the Covid-19 pandemic caused by the coronavirus, which harmed the business of the SMEs, such harm being certified by the certificate of emergency situation;
  • the presumption can be overturned by any means of evidence;
  • the unforeseeable nature is related to the moment the harmed legal relationship has emerged, and the measures taken by the authorities in accordance with the legal deed that established the state of emergency will not fall within the unforeseeable nature.

[1] GEO 29/2020 does not expressly regulate the moment when the payment obligations that are subject to deferral would become due and payable; at the moment, it can be reasonably construed that the payment obligations will become due at the time the state of emergency will end, but most likely the competent authorities will revert with clarifications in this regard.

[2] In order for these entities to benefit from the deferral measure, their business must be directly affected by the measures ordered by the public authorities in order to prevent and combat the spread of Covid-19. The applicable criteria to determine the beneficiaries of this measure will be subsequently set out by Government decision.

[3] As per the Law no. 346/2004 on stimulating the establishment and development of the SMEs.

[4] The decision regarding the certificates of emergency situation (“CES”) is still in the “project” phase following its publication on 18 March 2020, on the Romanian Government web-site. As per the decision, the certificate will be granted by the Ministry of Economy, Energy and Business Environment, upon request, to the economic operators whose activity is harmed in the context of the Covid-19 pandemic.

  • CES is an instrument by which economic operators can benefit from fiscal facilities, offered by central or local public administration authorities or by which it can renegotiate certain agreements, with the option to use such CES in their relationship with the financial-banking institutions and leasing institutions or with any other public institutions, exclusively during the state of emergency;
  • In order to obtain the CES, the economic operator will submit a series of supporting documents to its request, including a certified accounting balance corresponding to the month whereby a revenue decrease of at least 40% compared to the similar period of the previous year, was identified. In this regard, the time limit to communicate the certificate will be of maximum 5 business days;

  • However, if the economic operator does not fulfill the aforementioned condition, it will provide supporting documents attesting the poor situation, caused by the triggering of the state of emergency, in such case the period of issuance of the certificate being extended up to a maximum of 20 business days;

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