As a rule of thumb, foreign investors are not required to respect any specific investment criteria in order to register a Romanian company. However, in certain economic sectors, the authorities will require a special permit.
The registration procedure consists of certain legal requirements such as registering with the Trade Registry of Romania and Fiscal Administration (this is automatically carried out by the Trade Register). The incorporation of a company is achieved by filing the company’s articles of association with the Trade Register.
Once registered in the Trade Register, the company will become legally recognized as a merchant and can commence with its economic activity. Law nr.31/1990 is the Romanian law that controls the types of commercial companies that are allowed set up, their formation and the way they must conduct their business activity. There are five options of legal entities investors can choose from if they wish to register a Romanian company:
- The Romanian Limited Liability Company – (Societate cu Raspundere Limitata) or SRL
This is the most common way to start a business in Romania and is the preferred method for foreign investors. It can be incorporated with a capital of RON 200 and can be set up by a single shareholder.
In a limited company, the liabilities of social debts is limited to the contributions of subscribed and paid shares. As mentioned, the minimum amount for a share in a Romanian limited liability company is RON 200. The shares must be divided and have a minimum value of RON 10 each. A maximum of 50 partners can associate with a limited liability company at any one time.
These shareholders or associates can either be legal entities or natural persons. A company can have one or more directors and they may have either full or limited powers. Shareholders can be either Romanian or foreign citizens. And the director may be in place for a limited or unlimited amount of time. If the LLC has only one shareholder, then they must also be an employee of the company and a Labor Agreement should be written out and filed with the Labor Chamber in Romania.
2.The Romanian Joint-Stock Company – (Societate pe Actiuni)
This is a type of company which could be incorporated by people wishing to list the company on the local stock exchange. The joint-stock company in Romania represents legal entities that have complex structures. These companies are generally set up with the intention of entering into investment projects.
This is designed to help large companies who in addition, must be registered by at least two founders. Companies must have a minimum share capital of RON 90,000. The General Assembly of Stockholders makes all important decisions relating to the company on matters such as:
- legally changing the company’s status or headquarters
- the focus of its business activity and the addition/dissolution of any secondary registered offices
- prolongation of the society duration and any increases in registered capital
- issuing of new social shares
- any modifications of the articles of association are carried out by “The General Assembly of Stockholders” who can either be a sole administrator or a board of administrators.
3.The Romanian Collective-Name Company (Societatea in Nume Colectiv)
This is quite a rare type of Romanian entity. These companies are based on the full trust of all the associates involved. Collective Name Companies must be registered by a minimum of two shareholders or founders. The share capital consists solely of interests that are not transmissible, and the company guarantees all of its obligations through any assets owned.
The law does not state a minimum amount for the share capitals in a Collective Name Company, so shareholders are allowed to decide the amount of capital required according to the needs of the company. One obligation is that the shareholders of the Collective Name Company do not compete against the activity of the company.
The shareholders are not allowed to be a member of another unlimited liability company in the same field of work. The shareholders are also personally liable for any of the obligations of the company.
However, in the case of debt, the creditors of the company must first try and recover any debt from the company. Only then if the company does not pay can the creditors attempt to recover debt from the shareholders. All shareholders have certain rights:
- the right to participate at any company meetings
- the right to make management decisions regarding the company
- the right to receive dividends and make use of the company’s financial funds
(the rules regarding the use of the company’s financial funds will be clearly stated in the company’s statutory document)
- the right to receive the assets which they have personally contributed to the event of a liquidation.
4.The Romanian Sleeping Partnership Company – (Societate in Comandita Simpla)
This represents another uncommon type of company. It is significant in that these companies have two types of shareholders – ones who are personally liable for the obligations of the company (comanditati) and ones that are only liable relating to the amount of the shared capital to which they subscribe (comanditari).
There are no minimum numbers of shareholders allowed, but it’s compulsory for the company to have at least one shareholder who is personally liable for the company’s debts and one other who is only liable only to the amount of the shared capital to which they subscribe.
Company decisions are made via a majority vote of the shareholders. Only shareholders can appoint administrators and they are personally liable for the obligations of the company. The company’s interests may be transferred to other entities, but only if the company’s statutory document states they have the right to do so.
5.The Romanian Partnership Limited by Shares Company – (Societatea in Comandita pe Actiuni)
This is a fairly rare type of entity. It is similar to the “Sleeping Partnership Company” in that it has to be incorporated by a minimum of two shareholders who have different types of liability.
However, a key difference is that the Partnership Limited by Shares Company uses a shared capital formed from stocks. Some shareholders are personally liable for the obligations of the company (comanditati), whilst other shareholders (comanditari), are only liable for the company’s debts to the amount with which they have participated at the company’s share capital. Businesses of this type can only be incorporated with a minimum share capital of RON 90,000 (EUR 19,042) and administrated by the shareholders who are personally liable for the company’s obligations.
Management structures for Romanian joint-stock companies
Romanian joint-stock companies are managed by either a unitary system or a dual one. In unitary systems, the management is established by at least one administrator. The administrators will form a board that must have an odd number of people. This council can delegate the company’s management to the company’s directors.
For companies whose financial statements need to be audited, this delegation is compulsory, and the minimum number of directors required is three.
The dual system differs in that it has an executive board and then a supervisory board, which must both have a set of differing responsibilities.
Directors oversee the activity and management within the company and report the Supervisory Board. The Supervisory Board is responsible for controlling the Executive Board and must answer to the General Assembly of Shareholders.
Advantages of a Romanian SRL
The Romanian SRL provides several advantages to its founders:
- it allows for a speedy registration procedure (a company can be formed in a minimum of three days);
- it can be incorporated by a single foreign shareholder
- shares can’t be divided or sold off to the general public;
- if the company is incorporated by a single shareholder, it can’t be registered by another company.
- the company can receive post at an official business address.
- It can be formed with 100% foreign ownership
What documents are requires for starting a Romanian SRL?
The registration process for each of the company types is similar. The main difference is in the types of documents the investors have to prepare upon registration.
When forming a Romanian limited liability company, the investors must provide the following documents in addition to the standard application form and the representatives’ identification documents:
- articles of association and the certificate of incorporation. (This should be sent to the National Trade Register Office)
- Where shareholders are corporate investors, they must deposit the articles of association for their respective companies
- Any excerpts issued by the Trade Register Office where the corporate shareholders are normally registered
- A reference letter of creditworthiness which has been issued by a financial institution
Total number of companies in Romania
In 2017, Romania registered a total number of 525,660 companies. A large proportion of these was registered in the services sector, according to official data provided by the National Statistics Institute (INS). The services sector is the largest employer type in Romania. Any potential foreign investors should consider:
- the services sector accounts for 46.7% of the total number of registered companies
- 4% of the total workforce in Romania is employed in this sector
- There were 525,660 Romanian companies in 2017 – an increase of 5% from the previous year
- The trade sector comprises a total of 172,000 registered companies
- In the capital, Bucharest, 79% of employees work in the services sector;
- In August 2018 Bucharest had more than 1 million employees (the population of the city is more than 2 million).
Foreigners interested in setting up one of the legal entities described in this article should bear in mind the country has around 73,000 multinational companies operating in the local market. Only around 5,300 companies are founded by Romanians.
Data from INS, states that most of these multinational companies are involved in sectors such as manufacturing, construction or trade.