proof of the money transfer according to the articles of incorporation;
documents concerning the ownership over the contribution in kind;
documents attesting the operations concluded in the company’s account and approved by the partners.
III. Establishing businesses in Romania
3.1.1. Types of companies
General partnership “societate in nume colectiv“ (SNC); Limited partnership “societate in comandita simpla“ (SCS); Limited liability company “societate cu raspundere limitata“ (SRL); Joint stock company “societate pe actiuni“ (SA); Limited partnership by shares “societate in comandita“ (SCA).
3.1.2. Company incorporation
According to Government Emergency Ordinance no. 76/24.05.2001, published in Romania’s Official Journal no.283/31.05.2001, part I, regarding the simplification of the administrative procedures needed to register and authorize the functioning of trading companies in Romania, a Unique Office is being created within the district subsidiaries of the Romanian Chamber of Commerce and Industry. This Unique Office shall carry out all the legal and administrative operations related to registration and authorizing trading companies to function properly.
The solicitant shall fill in the unique registration request, which shall then be submitted to the Unique Office as the main document triggering the procedures needed for registration and authorizing of functioning. The solicitant shall also submit all necessary papers and pay due taxes related to the registration and authorizing operations for the company’s incorporation. If necessary, the solicitant shall also present the following documents:
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proof of the money transfer according to the articles of incorporation; |
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documents concerning the ownership over the contribution in kind; |
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documents attesting the operations concluded in the company’s account and approved by the partners. |
The certificate of company incorporation shall be issued within 20 days of its submission and shall be made of the unique code of incorporation, as well as an enclosure containing the following:
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fire protection authorization delivered by the fire squads and military firemen departments |
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sanitary authorization delivered by the territorial public health directorates |
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sanitary-veterinary authorization delivered by the territorial sanitary-veterinary directorates |
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environmental protection authorization delivered by the territorial environment protection offices |
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authorization of operation complying with the labor protection norms, delivered by the territorial representatives of the State Labor Office. |
The receipt of the incorporation certificate and its enclosure gives the trading company the right to start its planned activity.
The Unique Office shall always provide, upon solicitant’s request and at the latter’s own expenses, the following services:
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reservation of the company’s name and trademark; |
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cash payment as contribution to the authorized capital; |
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drawing up the constitutive act and its legal authentication; |
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drawing up declarations of founders, administrators and censors that they abide by the legal conditions stipulated by law; |
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defending the company’s registration request before the delegate judge. |
In case of a contribution in kind to the authorized capital, the Unique Office shall have the obligation to evaluate the assets and to obtain a certificate of charges on the respective assets.
The constitutive act could be drawn up under private signature, excepting the following cases:
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when the contribution in kind represents a land |
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when the legal form of the company’s incorporation entails the unlimited liability of the partners for the social obligations, or |
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when the company’s incorporation is made by public subscription. |
In the above-mentioned specific cases, the constitutive act must be drawn up in a formal authenticated form.
The territorial offices of the Romanian Chamber of Commerce and Industry shall receive the unique incorporation code within 24 hours from the moment they have remitted to the Ministry of Public Finances the full set of information related to company’s registration request. This unique incorporation code shall be introduced in all information systems around the country, enabling coherent processing of data regarding trading companies, as well as company’s relationships with other companies, institutions and public authorities, throughout the period of its operation.
3.1.3. Partnerships
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Partners 2 or more partners - domestic or foreign legal or natural persons. |
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There are no requirements for minimum or maximum contributions. |
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Partners may contribute in cash, in kind as well as in rights or services. |
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All partners bear unlimited liability for the obligations of the general partnership but shall be claimed only after a creditor's unsuccessful claim against the general partnership itself. |
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In a limited partnership there must be at least one general partner who is fully liable (private assets included) and at least one limited partner whose liability is limited to the amount of the contribution agreed. |
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In a limited partnership by shares besides the corporation itself, one or several general partners assume full liability |
3.1.4. Limited Liability Company
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Members from 2 to 50 shareholders. Under certain conditions a sole shareholder may set up a limited liability company. |
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Minimum Capital: ROL 2,000,000. |
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Share and Contribution Requirements. The shares have registered value of no less than ROL 100,000. Shares cannot be freely traded; neither can be pledged as collateral for a loan. |
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Company Management Decisions are made by a majority vote in the general meeting of shareholders (one share equals to one vote). All shareholders must agree to decisions involving changes in the agreement of incorporation unless the agreement of incorporation provides otherwise. One or more directors/managers are appointed in the general meeting and are put in charge of the management of the company. |
3.1.5. Joint-stock Company
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Shareholders: 5 or more shareholders |
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Minimum Capital: ROL 25,000,000 |
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Share and Contribution Requirements. The face value of each share is minimum ROL 1,000. |
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At the time of registration of the company, each shareholder has to pay at least 30% of the registered share capital, and the rest of 70% can be paid in maximum 12 month. The shares can be either registered or at the bearer and can be freely traded or pledged. |
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Company Management Decisions are made by a majority vote in the general meeting of shareholders, held at least once a year, within no more than 3 months before the end of the financial year. A board of directors assumes the management of the joint stock company, although it is possible to have only one administrator. At least half of the directors must be Romanian citizens unless the articles of incorporation provide otherwise. The directors are elected by the general meeting of shareholders for a maximum of 2 years, unless otherwise stipulated in the articles of incorporation. They may be re-elected. The initial directors may be appointed in the articles of incorporation, for a maximum of 4 years and may be re-elected. Before starting their activity, the directors must deposit a guarantee, representing at least the value of ten shares or double the amount of their monthly remuneration. At least three auditors must be appointed by the general meeting of shareholders. At least one of them must be a Romanian chartered or certified accountant. |
3.1.6. Branches
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Specific Features: There are specific management requirements for joint stock companies with more than SIT 400 million of founding capital, or more than 500 employees, or more than 100 registered shareholders, or listed on the stock exchange. |
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Foreign companies may establish branches in Romania. Branches are working units with no legal personality and are registered at the Commercial Register in accordance with the location of their office. The legal status of the branch applies to any other secondary office (agency, working point) to which the foreign company confers the ranch status. |
3.1.7. Representative offices
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Legal framework: Decree-Law No. 122/1990 on the Authorization and Operation in Romania of Representative Offices of Foreign Companies and Corporation. |
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Registration: Foreign companies may open representative offices (agencies) in Romania following a straightforward registration procedure with the Ministry of Industry and Resources. Representative offices cannot carry out commercial activities on their own behalf, but are entitled to promote and supervise the business of their parent organizations. |
3.1.8. Bankruptcy
Legal Framework:
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Law No. 64/1995 on the Procedure of Judicial Reorganization and Bankruptcy, republished in 1999 and modified according to the provisions of the Order by the Chamber of Commerce and Industry of Romania and Bucharest municipality No. 4085/2000; |
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Law No. 83/1998 on Banking Bankruptcy Procedure modified and completed by Government Emergency Ordinance No. 186/1999. |
3.1.9. Anti-trust rules
Legal Framework:
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Competition Law No. 21/1996; |
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Unfair Competition Law No. 11/1991 |
3.1.10. Foreign Nationals
The legal framework establishing the regime of foreign nationals in Romania consists in the following regulations:
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Decision of the Government No.4/2001 on the organization and functioning of Ministry of Labor and Social Solidarity; |
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Law No.123/2001 on foreign citizens in Romania |
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Law No. 203/1999 on work permits, amended by Emergency Ordinance of the Government No.172/2000 |
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Law No.156/2000 on the protection of Romanian citizens working abroad. |
The Office for Foreign and National Investors was established following the Decision of the Government No.4/2001, being a specialized directorate under the co-ordination of the Secretary of State responsible for the European Integration and International Relations activities.
The office provides free information, counseling and documentation services to foreign and national investors concerning: the legal regulations in the area of labor and social protection; the legal framework regarding the employment of foreign staff; the social security benefits and eligibility conditions; the labor market development trends; the stage of implementation of the acquis communautaire in the social area; the stage of the agreements and Cupertino conventions in the area of labor force and social security concluded by Romania; the stage of implementation of the European Social Charter.
According to Law No. 123/2001, foreign citizens may carry out, according to the law, on their own or in association: economic, social, cultural, sport and commercial activities and they may be employed by legal or natural persons, Romanian or foreign, with the observance of the agreements concluded by Romania with other states, concerning the labor market. Hiring such people is achieved on the basis of work permits issued by the Ministry of Labor and Social Solidarity, according to the regulations established by Decision of the Government. The foreign citizens will not undertake activities in Romania that are opposite to the purpose for which they received visas.
According to the Law No. 203/1999, work permits may be issued to foreign citizens who comply with the conditions provided by the Romanian law on employment and who also have employment visa on their passports. The work permits are issued on a six-month period with the possibility of extension, upon request of the person concerned, on other six-month periods. On the basis of conventions or agreements concluded by Romania, the work permit may also be issued, respectively extended, for periods longer than six months. The work permits may also be issued in other situations and conditions, agreed upon by international conventions and agreements in which Romania is a part or by special laws. Foreign citizens having established, according to the law, their residence on Romanian territory, being employed abroad and are performing some temporary activities in Romania, or finding themselves in other situations established by conventions or agreements in which Romania is a part, or by special laws, may be employed without a work permit.
According to Law No. 156/2000, the Romanian Government, by its relevant authorities, shall take the necessary measures in order to conclude agreements, treaties or conventions with similar public authorities from other countries, in order to establish the conditions for protection of the Romanian citizens, residing in Romania, who work in the respective countries.
The concluded agreements, treaties or conventions shall be based on the principle of equal treatment and on the application of the most favorable clauses, provided for by the Romanian, foreign or international legislation, in which Romania is a part. In the future, the development of a Web site containing the main legal regulations in the field of labour and social protection, both in Romanian and English, is envisaged.
3.2. Foreign investment regime
The legal framework for foreign investment ensures that foreign investors are granted national treatment and free access to the domestic market.
3.2.1. National treatment
The Romanian legislation provides national treatment to foreign investors. Non-resident investors benefit from the same rights as any resident investor. There is no limit on the foreign participation in companies; a foreign investor may establish a 100%-owned enterprise in Romania.
When Romania is a party to bilateral agreements for the mutual promotion and protection of investment with other countries and the provisions of such agreements are more favorable than the Romanian investment legislation, investors from such countries will benefit from the provisions of these agreements.
3.2.2. Freedom of investment forms and methods
Pursuant to this principle, the investor may choose freely the type of investment to be performed. There are two investment forms in Romania:
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Direct investment; |
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Portfolio investment (under the provisions of Government Ordinance No.66/1997, amended and completed by Government Ordinance No.131/1998). |
The Romanian legislation allows foreign investors to engage in business activities in any of the following manners:
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to contribute to the capital in hard currency and/or in-kind for establishing a company, Romanian legal person, or in increasing the capital of such a company directly or indirectly through one of the company's subsidiaries; |
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to invest in Romania in Romanian lei (ROL) dividends to the end of increasing the share capital of the business in question and/or to start a new investment; |
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to purchase shares in a company operating on the capital market or from the State Ownership Fund according to the statutory provisions or to purchase shares held by the State in companies due to be privatised, shares held by Romanian natural or legal persons in other companies, or also the acquisition of certain corporate assets; |
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to invest in ROL, earned by trading products imported according to the legal provisions, in one of the methods stipulated above; |
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to convert gains resulting from exports into Romania or from granted credits, into shares owned or issued by corporate debtors. |
The capital of a foreign investor can take many forms, including foreign currency, equipment, means of transport, spare parts and other goods, services, rights of intellectual property, know-how and management expertise and the proceeds and profits from other businesses in Romania.
3.2.3. Guarantees against measures of nationalization and expropriation
The existing body of legislation in Romania provides investment guarantees against measures of nationalization and expropriation, and other similar measures. Such measures may be taken only when required for reasons of public utility, in accordance with express legal provisions and provided they are non-discriminatory. In this case, investors are entitled to receive a prompt, adequate and effective compensation.
3.2.4. Profit and capital repatriation
Foreign investors have the right to convert and transfer abroad, without any restrictions, after payment of taxes and fees; the incomes derived from their investment in Romania. The revenues may consist of:
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dividends or benefits obtained from a company, if the investor is a shareholder or an associate, or the profit is obtained from a branch set up in Romania; |
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incomes obtained from a partnership association; |
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incomes obtained from the shares sale; |
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amounts obtained from the voluntary liquidation of a company or from its liquidation according to the bankruptcy procedure; |
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amounts obtained as compensation following an expropriation or other similar measures; |
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other incomes according to the type of investment. |
3.2.5. Ownership rights over real estate
According to the Romanian Constitution and the Government Emergency Ordinance 92/1997, as amended by Law 241/1998, foreign citizens, stateless persons and non-resident legal persons may not own land in Romania. The above persons may acquire other real rights over land, such as the right of use, obtained by way of concession.
However, there is no restriction on foreign investors in Romania to acquire ownership rights over real estate, including land, via the establishment of a Romanian company, irrespective of the structure of the share capital of such a company (i.e. fully or partially foreign-owned). Within one year of closing the company, the foreign person must transfer his rights over land to a buyer with the legal right to purchase such an asset.
3.2.6. Investment policy and incentives
In 1999 the Romanian Government undertook a major fiscal reform conceived as an essential element in the policy of economic recovery. The Government implemented a generally applied tax reform, instead of granting complex and difficult-to-manage exemptions and exceptions from the payment of fiscal obligations. These reform measures came into effect on 1st January 2000 and resulted in lower corporate tax rates (from 38% to 25%) and VAT (from 22% to the uniform level of 19%), reduced rates of excise duties and a broader excise duty base.
The Romanian law on stimulation of FDI (Law 241/1998) granted a number of customs and fiscal incentives to the foreign investors, including an exemption from customs duties and VAT on imported goods that represent a contribution in kind to the capital of the company and an exemption from profit tax payment for different periods of time. In March 1999, all tax and fiscal incentives for the foreign investors were suspended for one year. At the end of 1999 the Government adopted two emergency ordinances (Government Emergency Ordinance No. 215/1999 on the Value Added Tax and Government Emergency Ordinance No. 217/1999 on the profit tax), which cancelled the incentives granted by prior laws. Only investment projects with major economic impact were still given various incentives under the terms of a special Emergency Ordinance 67/1999. This Ordinance was then abrogated in April 2000. During the same month, the Romanian Parliament adopted the State Budget Law, which re-introduced some of the fiscal incentives for SMEs. The Government Emergency Ordinance No. 6/2000, adopted in February, clarified this confusing situation. This confirmed that only incentives referring to profit tax were cancelled. Incentives that were granted with regard to customs duties exemption and VAT on imported contributions in-kind or as raw materials, components, etc. remain in force until their expiry date.
3.2.7. New Law on the Promotion of Direct Investments with Significant Impact on the Romanian Economy
One of the main goals of Romania’s Strategy for Medium-term Economic Development and also of the Governing Program for 2001-2004 period, is to secure economic growth based on the increase in the investments rate by significantly increasing the participation of national and foreign capital, as well as by attracting direct investments in all fields of the economy.
To this end, the Government of Romania has elaborated Law no. 332 / June 29, 2001 regarding the promotion of direct investments with significant impact on the economy. This Law regards those investments whose value exceeds the equivalent of USD one million, and contributes to the development and upgrading of economic infrastructure, thus determining economic growth and creating new jobs.
This new Law creates a stable, well-balanced, undiscriminating, non-bureaucratic and efficient legal framework, which should subsequently secure:
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Stimulation of Romanian investors and attraction of foreign ones; |
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Guarantee of stability and coherence of the legal framework regulating direct investments; |
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Uniform application of economic laws strengthening the Romanian business environment and supporting investment’s guarantee and its inviolability; |
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Effective application of international conventions regarding foreign investments in which Romania is a part; |
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Acceleration of Romanian economic reform supporting the process of its accession to the European Union and Euro-Atlantic structures. |
This Law provides a few general provisions referring to the meaning of new direct investments with significant impact on the economy, as well as other definitions and fields of application of the law, legal means of dispute settlement and the qualified institutions, registration and procedures. Most importantly, the law provides further attractive facilities as follows:
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All technological equipment, installations, various equipment, measurement and control devices, automations and software products bought from import, needed for achieving the investment, shall be exempted from the payment of custom duties. |
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The new investments made in the conditions of Law 332 shall enjoy a 20%-deduction of their value. |
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The value-added tax applying to the goods bought from import or from within the country shall be postponed until the investment is commissioned. |
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The investment made in the conditions of the present Law shall enjoy the use of accelerated depreciation, defined according to Law 15/1994, upon notification but without the obligation of previous approval of territorial taxation bodies where the taxpayer shall be bound to send the taxation statement. |
3.3. Legislative framework of concessions
Applicable legislation includes: Law 219/1998 on the regime of concessions; Government Decision 216/1999 for the approval of the Methodological Norms for the implementation of the Law No. 219/1998; Law No. 213/1998 on public property and its legal regime; Petroleum Law 134/1995; Government Ordinance 30/1995 on the concession of construction and exploitation of terrestrial communication ways - highways and railways; Mining Law 61/1998; Government Decision 682/1994 for the approval of the Methodological Norms regarding the land and buildings concession in free zones.
Law 219/1998 regulates the concession regime for assets that are public or private property of the state, county, town or village, as well as public activities and services of national or local interest. The following bodies have the power of a conceding authority on behalf of the state, county, town or village:
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ministries or other specialized bodies of the central public administration, for assets that are public or private property or for public activities and services of national interest; |
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county councils, local councils or public institutions of local interest, for assets that are public or private property of the county, town or village or for public activities and services of local interest. |
Subject to concessions may be assets, activities and public services in the following fields: public transportation; highways, bridges and road tunnels with taxation; road, railway, port and civil airport infrastructures; the construction and exploitation of new hydro-electric plants, including the plants in conservation; postal services; spectrum of frequencies and the telecommunication transport and distribution networks; economic activities related to natural and artificial water ways, works of water administration, stations and measurement installations, hydrological, weather, water quality and fisheries; public lands, beaches, quays and free trade zones; pipelines for transport and distribution of oil and fuel gases; thermal and electrical energy transportation and distribution networks; transport and distribution networks for drinking water; exploitation of mineral resources and substances solid and fluid; exploitation of thermal resources; natural resources of the economic zone of maritime and continental plateau; sports grounds, entertainment places, specialized show establishments; medical units, sections and laboratories of those medical units, as well as auxiliary medical services; economic activities related to capitalizing historical monuments and sites; gathering, storage and valuation of waste; any other goods, activities or public services that are not prohibited by special laws.
Any Romanian or foreign, natural or legal person may have the quality of a concessionaire. Any interested investor as well as the conceding authority may initiate the concession procedure. The concession is made by public auction (open or open with pre-selection) or by direct negotiation. The concession agreement is to be concluded under Romanian law, for no more than 49 years, starting from the date of its signing. The concession agreement may be extended for a period, equal to no more than half of its initial duration, by the mere consent of the parties. The concession duration is to be set up according to the depreciation period of the investments, which are to be performed by the concessionaire.
Specific regulations govern concessions in the terrestrial communication field for the construction and exploitation of some highway and railway sections as well as for carrying out mining activities and petroleum operations in Romania. The regulations contain various exemptions from the payment of customs duties and taxes.
Oil Law No. 134/1995 states that beneficiaries of oil agreements shall enjoy the following facilities:
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delivery of outfits and equipment as well as services related to oil activities carried out by the holders of oil agreements that are foreign legal persons, will be VAT exempted and the suppliers of these products and services have the right to reduce the VAT (according to UGO No 17/2000 regarding VAT); |
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exemption from payment of customs duties for the imports of necessary goods for the carrying out of oil activities made by the holders of oil agreements or by their sub-contractors. According to the UGO No 17/2000, imported goods which are custom duties exempted by laws or Government ordinances, are also VAT exempted; |
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exemption from payment of customs duties on the imports of household and personal goods used by the holders of oil agreements, their foreign employees and sub-contractors; the goods, which are custom duties exempted, shall be nominated in the oil agreement's attachment. According to UGO No 17/2000, the imported goods which are customs duties exempted by laws or Government ordinances are also VAT exempted; |
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exemption from payment of the export customs duties for the oil quotas in accordance with the agreement as well as exemption from the payment of customs duties for imported goods made by the holders of the oil agreements or their foreign personnel. |
The Law on Industrial Parks regime (No.134/2000) regulates establishment and operating of industrial parks.
The purpose behind establishing industrial parks is to stimulate economic and social development, to perform the transfer of technology, to induce investment inflows and turn to best account the human resources in the area.
According to this law, industrial parks are well-defined areas whose territorial limits are strictly marked and where investment activities, industrial production and related services are developed under specific facilities regime. The industrial parks regime allows trade companies to develop their activity within the relevant areas; to have access to the infrastructure required for performing economic activities.
The initiative to set up an industrial park may come from local public authorities, chambers of commerce and industry, employers’ associations, professional organizations, as well as joint-stock companies with their registered office in Romania. The title of industrial park shall be granted to all joint-stock companies with registered office in Romania and whose sole object is the administration of industrial parks, proving that they fulfill the following minimum cumulative conditions:
a) It is the holder of a title deed or a lease for at least 25 years over the land pertaining to the industrial park;
b) It produces a feasibility study and a business plan for three years at least, focused on the operation of the industrial park;
c) At least five legal persons operate within the industrial park, in keeping with the legal documents of intent or agreements, and at least 300 new jobs are created within three years, as a result of the development of specific activities;
d) It produces an environment report including the obligations that must be fulfilled for developing activities within the industrial park in accordance with the legal stipulations in force regarding environment protection;
e) It has the authorization, valid for the time the industrial park operates, from the local council, the county council, the General Council of Bucharest Municipality, as the case may be, and their agreement on the economic and social development program used for obtaining the title of industrial park and for developing specific activities.
The holder of the title of industrial park can also be the contractor of the construction and erection works, commissioning, repair and maintenance of the relevant objectives can supply services and public utilities, as well as the services related to park operation.
For promotional reasons, the titleholder has the obligation, without going against the interests of the beneficiaries, to promote the park as an opportunity for potential investors.
Economic actors developing their activity within an industrial park are granted the following facilities:
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exemption from import duties and VAT for the imports of machines, plant, installations, equipment, transport means, farming machinery and tools, other depreciable assets necessary for the development of the relevant investment; |
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exemption from import duties and VAT for the imports of raw materials and staples, spare parts and components used in the construction, repair and maintenance of units within the park; |
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tax exemption for retained profits invested in re-engineering, development of industrial infrastructure, as well as in supporting investment objectives developed within the industrial park, for a period of five years since set-up; |
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redeemable or irredeemable co-funding from the funds destined to industrial park development, equal to 25 per cent of the value of the necessary investment for resuming infrastructure works and providing the utilities in the relevant industrial park at the most, excepting the foreign funding when the co-funding ceiling is set by the foreign donor; |
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facilities for the payment of local taxes, by decision of the local and county councils under whose territorial and administrative jurisdiction the relevant industrial park is, for a period of five years at the most. |
The provisions of this law are also applicable to the IT development parks.
Facilities granted to investors in the mining sector
The Mining Law No. 61/1998 states that titular of licenses shall enjoy the following fiscal facilities:
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exemption from customs duties corresponding to imports of goods needed by the titular of the agreement or their sub-contractors in order to carry out mining activities; |
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exemption of the affiliated companies and their foreign sub-contractors from customs duties corresponding to imports of household and personal goods needed by the foreign personnel hired by the titular of the license; |
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exemption from customs duties corresponding to imports of new equipment, installations and devices, which cannot be produced in Romania and which are meant to be used for environment protection actions needed as a result of negative impact of mining activities upon the environment. |
Facilities granted to Small and Medium-Sized Enterprises
The Law No. 133/1999 regulates the activities related to Romanian Small and Medium-Sized Enterprises. It contains specific provisions on the stimulation of private entrepreneurs in order to set up and develop small and medium-sized enterprises. Government Emergency Ordinance No. 297/2000 amended this law.
The law grants a series of fiscal facilities as follows:
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small and medium-sized enterprises shall be exempted from customs duties corresponding to imports of machines, installations, industrial equipment and know-how in order to enable the development of their own production activity and services financed from own resources or from loans contracted with Romanian or foreign banks. |
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small and medium-sized enterprises shall be exempted from customs duties corresponding to imports of raw materials needed for the manufacturing of their products, provided that these products are exempted from import customs duties. |
3.4. Dispute resolution mechanisms
The rights granted to foreign investors may be enforced through the Romanian courts or third-party arbitration if agreed by the parties to the dispute. International commercial arbitration may take place before the Romanian International Commerce Arbitration Court administrated by the Romanian Chamber of Commerce and Industry.
Romania is a signatory of the New York Convention on Recognition and Enforcement of Foreign Arbitration Awards. It is also a party to the European Convention on International Commercial Arbitration and a member of the International Center for the Settlement of Investment Disputes.