Types of Romanian Commercial Companies

8/7/2019 Types of Romanian Commercial Companies

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Transilvania University of Brasov

Faculty of Economic Sciences

Business Administration

Project

Business Law

Consultant Teacher: Daj Alexis

Student:

Year I, 1st Group

- 2010 -



Introduction

The general legal framework

Nature and types of Commercial Companies

1. General Partnership

2. Limited Partnership

3. Joint Stock Companies

4. Limited Partnership by Shares

5. Limited Liability Companies

Similarities and distinctions between different types of commercial companies

Setting up Commercial Companies

Dissolution of Commercial Companies

Merger and Division of Commercial Companies

Liquidation of Commercial Companies

The bankruptcy procedure

Societas Europaea (European Company)

Introduction

Incorporation

Minimum capital

Registered office

Registration and liquidation

Statutes

Annual accounts

Winding-up

Taxation



Conclusions

TYPES OF

COMMERCIAL COMPANIES

Introduction

The term “commercial” comes from two Latin words: “cum” (with) and “merx” (merchandise).

According to the dispositions of the Romanian Civil Code, the company is a contract by which two

or more persons agree to put something in common with the purpose to share the profit that may derive

from it. The company has to have a lawful object that has to be made for the common benefit of the parties

(art.1491 and art.1492). Any commercial company has its own judicial personality, it represents a contract,

as well as a subject of autonomous law, and in the same time it has a lucrative purpose, because it wants to

have material benefits, and benefits of another nature.1

The General Legal Framework

There are four pieces of legislation which are of particular relevance for doing business in Romania.

These are:

1. The Company Law (31/1990)

The Company Law defines the forms of Romanian business entities. It also provides for the rules applicable

to each form of business entity relating to their respective formation procedures and documents, capital and

shares, shareholders’ decisions, administration, mergers and liquidation.

1. The Insolvency Law (64/1995)

This Law deals with the insolvency of Romanian companies and other Romanian business entities. It also

covers such matters as restructuring and liquidation.

2. The Commercial Registry Law (26/1990)

1 C. Hamangiu, “Tratat de drept civil roman”, Editura Nationala, Bucuresti,1996



The Commercial Law governs the operation of the Commercial Registry, the obligations of business entities

to register information with the Commercial Registry for publication and also the registration and public

inspection procedures.

3. The Commercial Code

The Commercial Code sets out the main basic rules applicable to business transactions in Romania.

2. Nature and types of Commercial Companies

The Company Law (31/1990) provides for five types of Romanian business entities:

• General Partnerships (“societate in nume colectiv”, abbreviated “S.N.C.”), which must have a

paid-in capital and in which the partners have unlimited and joint liability.

• Limited Partnerships (“societate in comandita simpla”, abbreviated “S.C.S.”), which must have a

paid-in capital and in which general partners have unlimited and joint liability, limited partners however

being liable only for the value of their paid-in capital.

• Joint Stock Companies (“societate pe acţiuni”, abbreviated “S.A.”), in which the liability of

shareholders is limited to their holdings of capital in the company.

• Limited Partnerships by Shares (“societate in comandita pe acţiuni”, abbreviated “S.C.A.”), in

which the contributed capital is divided into shares and where the financial obligations of the partnership are

guaranteed by the capital and by the unlimited and joint liability of the general partners, limited partners

being liable only for payment of their shares.

• Limited Liability Companies (“societate cu răspundere limitata”, abbreviated “S.R.L.” or “Srl”), in

which the liability of shareholders is limited to their holdings of capital in the company.

Business entities existing under the Company Law (31/1990) may have their name prefixed by the

words “societatea comerciala”, abbreviated to “S.C.”. In some cases this prefix may reflect the specific type

of company concerned. The most commonly encountered entities in Romanian business area tend to be

Limited Liability Companies and Joint Stock Companies.

a. General Partnership

Its obligations are patrimonial guaranteed by the social and the unlimited liability of all associates.

The partnership relationship is based upon a contract and any person who is capable of entering a binding

contract may enter a partnership. Following this agreement, the parties must register their partnership with

the National Trade Register Office.



In a General Partnership, partners are jointly liable for the debts and obligations of the partnership

and each partner can be personally liable for the overall debts and liabilities, which are not satisfied by

assets of the partnership.

A General Partnership must select a name for itself. Included in this name must be the name of one

individual partner, the nature of the partnership, and disclosure of the general partnership status of the

enterprise (Societate in nume colectiv – SNC). If a person who is not a partner permits his or her name to be

used in the name of the partnership, that person then becomes liable for the debts and obligations of the

partnership in the same way as general partners.

The Articles of Association (Articles of Incorporation) of this type of Romanian company shall

contain among other information: the ID data of shareholders, form, name, company office address; social

shares; duration of the future company in Romania and modality of liquidation.

b. Limited Partnerships

A Limited Partnership consists of one or more general partners who manage the business of a

partnership and one or more limited partners who contribute capital (money or other property) to a

partnership but do not participate in its management.

Its social obligations are patrimonial guaranteed by the social capital and by the unlimited liability of

the associates – the associates of this type of Romanian companies are only liable to the limit of their

contributions.

A Limited Partnership is a practical form of organization for an investment where the investors

would not normally participate in the control of the investment. Investors are limited partners while thegeneral partner provides the professional management of the investment. In this way, investors share the

profits but, as limited partners, their financial risk is limited to the capital they have contributed.

c. Joint Stock Companies

Joint Stock Companies are limited liability corporations which have not fewer than five shareholders

and have a minimum capital in RON of the equivalent of €25,000 calculated at the exchange rate fixed by

the National Bank of Romania on the date of subscription of the capital. The capital is divided into shares,

which can be negotiable instruments. The nominal value of a share cannot be less than RON 0.10.

When a Joint Stock Company is established, at least 30% of the share capital, must be immediately

contributed upon formation of the company and all registered share capital must be fully paid up within

twelve months of formation.

Shares could be nominative shares or bearer shares and can be freely traded or pledged. They have

equal value and in general confer equal rights to their holders. The General Meeting of Shareholders is



responsible for deciding all major corporate issues regarding the company as provided by the constitutive

documents and the Company Law. The General Meeting of Shareholders generally decides:

• changes of the corporate seat;

• changes in the objects of activity;

• the increase or decrease of the capital;

• the appointment and removal of administrators (directors) and censors (internal auditors);

• the approval of the annual accounts;

• the issue of bonds;

• the merger of the company;

• the commencement of the liquidation of the company.

Certain matters may be delegated to the Council of Administration (board of directors) or, as the

case may be, the sole administrator (director).

The Joint Stock companies must have one or more administrators (directors), who are responsible

for the management of the company. Administrators can be appointed and removed from office by the

General Meeting of Shareholders, which will also set the limits of their powers. Administrators may appoint

one or more executive managers to carry out the day-to-day activities of the company.

Joint Stock companies must have at least three censors and substitutes for each censor. Censors are

appointed by the General Meeting of Shareholders for a period of three years. The appointment of censors is

a normally statutory appointment and should be distinguished from the appointment of external auditors.

A joint stock corporation is usually recognized by the use of the words limited incorporated or

corporation in its name (Societate pe Actiuni, S.A.).

d. Limited Joint Stock Companies

A limited joint stock company is a rare form of limited partnership. It has characteristics of both a

joint stock company and a limited partnership. Similarly to a joint stock company, the registered capital of

the limited joint stock company is represented by shares. Similarly to a partnership, the general partners may

be liable for the debts and obligations of the company beyond amounts they have contributed. The limited

partners, not active in the management of the company, have their liability limited to their share amount. A

limited joint stock corporation is normally recognized by using the words SCA in its name (Societate in

Comandita pe Actiuni).

e. Limited Liability Companies

A limited liability company is a company formed by a limited number of partners (no more than 50).

It is based on the constitutive documents. The registered capital of a limited liability company cannot be less

than 200 RON (approximately equivalent to €50). The registered share capital of a limited liability company



is normally divided into social parts/shares with a registered value of not less than 10 RON. Shares cannot

be freely traded, making limited liability companies similar to what are known as private companies in other

legal systems. Shares of these companies cannot be pledged as collateral for loans.

The articles of incorporation of the limited liability company will include:

• the full name, place and date of birth, domicile and citizenship of individuals;

• the name, registered office and nationality of the shareholder, as legal person;

• the type, name, headquarters and, if any, the company logo;

• the object of the company, specifying the main domain of activity;

• the subscribed and paid in registered capital, the shareholders contribution in cash or in kind,

the value of the contribution in kind and its valuation method as well as the date of the full payment of the

subscribed share capital; the number and nominal value of shares as well as the number of shares subscribed

to each associate for his/her contribution;

• the shareholders in charge with the representation and administration of the company or the

non-shareholder administrators individuals or legal persons, and their powers which are to be exercised

jointly or separately;

• the share of profits and looses for each shareholder;

• the secondary offices (branches, agencies, representative offices or other such entities with

no legal personality) whether or not are established as the same time with the company, or the conditions of

their subsequent establishment if such establishment is taken into account;

• the duration of the company;

• the methods of dissolution and liquidation of the company.

Decisions are made by majority vote in the General Meeting of the Shareholders (1 share = 1 vote).

Decisions involving changes in the constitutive documents must be agreed by all shareholders if these

documents do not state otherwise. One or more Directors/Managers are appointed in the constitutive

documents or by the General Meeting and are put in charge for the management of the company.

Shareholders’ meetings of Limited Liability companies deal with the following matters:

(a) the approval of the balance sheet and distribution of dividends;

(b) the appointment, removal and discharge of directors, censors and auditors;

(c) decisions to sue the directors and censors for losses caused to the Company; and

(d) the amendment of the constitutive document.

Limited liability companies may also be formed by a sole associate. Currently, the majority of

companies registered in Romania, whether domestic or foreign-owned, are limited liability companies. A

limited liability company is known as a SRL (Societate cu raspundere limitata).



Similarities and distinctions between different

types of commercial companies

The main similarities between a Joint Stock Company and a Limited Liability Company are

that both of them offer shareholders the benefit of limited liability. In both cases, they must keep books and

records in accordance with Romanian legislation. Also, dividends / net profits can be distributed according

to the approved annual accounts

The distinctions between a Joint Stock Companies and a Limited Liability Company are the

fact that, usually, a Limited Liability company has a simpler organizational and management structure than

a Joint Stock Company.

Limited Liability companies may also have single shareholders, thus allowing them to be used as

wholly-owned subsidiaries. By contrast, Joint Stock companies must have at least five shareholders.

Against this, the main disadvantage of Limited Liability companies is that changes to the

constitutive document require the approval of a general meeting which must have 100% of the capital

represented at the meeting with resolutions passed by a vote of shareholders representing the absolute

majority of both the number of shareholders and also the capital of the Company, otherwise provided by the

constitutive document.

The main differences between a limited liability company and a general partnership are given

by the responsibility of the partners and by the registered capital. Thus, in a general partnership, the

associates shall have an unlimited and joint liability for the company's obligations; the creditors of the

company may sue the company in order to recover the credit given. In the case of limited liability

companies, the associates may be kept liable only up to the value of their subscribed registered capital. In

the case of limited liability companies the law prescribes a mandatory minimal amount of registered capital.In the case of general partnership, there is no minimal limit of registered capital.

3. Setting up Commercial Companies. The memorandum of association





The assets representing contribution in kind to the company become its property when the company

is incorporated at the Trade Register. Interest is not paid for the contribution of the associates.

The benefit quota, which will be paid to each associate, represents the dividend. Dividends will be

paid to the associates proportional with their participation to the paid social capital. Dividends will be

distributed only from real benefits, in the contrary they will be given back. The returning of the dividends is

prescribed in a period of 3 years from the date they were distributed.

Any document, letter or publication issued by the company must indicate the name, legal form, and

head office, recording number in the Trade Register and the fiscal code.

4. Dissolution of Commercial Companies

The following situations can cause the dissolution of companies and partnerships and give each

shareholder the right to ask for liquidation:

a) the expiration of the period set for the duration of the partnership or the company;

b) the impossibility to attain the business object of the partnership or the company;

c) the decision of the general meeting;

d) bankruptcy;

e) the joint-stock companies shall also dissolve if the number of the shareholders was reduced to less than

five, there are more than 6 months since that reduction and the number was not completed.

The dissolution of the business organizations must be recorded in the Register of Commerce and

published in the Official Gazette.The effect of the dissolution of the company is the beginning of the

liquidation procedure. The dissolution takes place without liquidation in the case of merger or total division

of the company or in other cases stipulated by the law. From the moment of the dissolution, administrators

cannot undertake new operations.

5. Merger and Division of Commercial CompaniesThe merger represents the absorption of a company by another company or by merging of two or

more companies to form a new company and it is decided by each partnership or company. The division

represents the division of the entire patrimony of a company, which ceased to exist, between two or more

existing companies or which are thus set up. Merger and division are decided by each company, under the

terms stipulated for the modification of the Articles of Incorporation.



Based on the decision of the General Meeting of the Shareholders of each company, which

participates to the merger or division, their administrators prepare a merger or division project. This project,

signed by the representatives of those respective companies, shall be submitted to the Trade Register where

each company is registered, accompanied by a statement of the company which ceases to exist as a result of

the merger or division regarding the modality in which its liabilities will be paid off.

Merger and division take place at the following moments in time:

• in the case of setting up of one or more new companies, the date of registration in the Trade Register

of the new company or of the last of them;

• in other cases, the date of registration in the Trade Register of the mention regarding the increase of

the social capital of the absorbing company.

6. Liquidation of Commercial Companies

The liquidation of a commercial company is the process by which a business or activity is freeze and

discontinued with a purpose to stop its operation and existence by paying of liabilities after disposing its

assets.

In law, liquidation is the process by which a company (or part of a company) is brought to an end,

and the assets and property of the company redistributed.

The liquidation of the company must be finished within maximum 3 months from the date of

dissolution. After completing the liquidation, the liquidators have to ask the deletion of the company from

the Trade Register. The Trade Register could make the deletion also automatically. The liquidation does not

operate a release for the associates and does not impede the commencement of the bankruptcy proceedings

of the company.

7. The bankruptcy procedure

Bankruptcy is the situation in which the liabilities of a person or business entity exceeds the assetsand properties owned by them and such entity has no means to settle the dues to their creditors fully. Courts

declare an entity as bankrupt based on the petition moved by such person or entity.

Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to

pay its creditors. Creditors may file a bankruptcy petition against a debtor ("involuntary bankruptcy") in an

effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however,



bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or

organization).

Bankruptcy fraud is a crime. While difficult to generalize across jurisdictions, common criminal acts

under bankruptcy statutes typically involve hiding of assets, hiding or destruction of documents, conflicts of

interest, fraudulent claims, false statements or declarations, and fee fixing or redistribution arrangements.

The bankruptcy modes

• The general procedure – represents the procedure mode scheduled by law, according to a

debtor which fulfils the condition of the law is submitted after an observation period to the judiciary

reorganization and bankruptcy procedure, successive or separately.

• The simplified procedure - represents the procedure mode scheduled by law, according to the

debtor is submitted directly to the bankruptcy procedure either at the beginning of the insolvency procedure

either after an observation period of maximum 60 days (this is the time interval to analyze all the specific

elements).

The parts at the bankruptcy procedure

Creditors – civil or legal person that has a privilege over the debtor property and solicits the

registration of this privilege the final debts table or in the final hard-set table and can be proved.

Debtors - civil or legal person whose patrimony is submitted to insolvency.

Legal courts

Bankruptcy judge

Administrator and liquidator

The insolvency procedure can be initiated with the petition introduced by the debtor and the

creditor, also by other legal persons or institutions legally vested.

Societas Europaea (European Company)

Introduction

The European Companies (known by the Latin term "Societas Europaea" or SE) are new companies

that can be established in various ways – for example, by the merger of two or more EU-based companies,

or by the creation of joint holding companies or subsidiaries. Individual companies may also choose to

transform themselves into SEs if they already have an established presence in more than one EU member



state. In this way it is possible to incorporate a European company with its own legislative framework. This

will allow companies incorporated in different Member States to merge or form a holding company or joint

subsidiary, while avoiding the legal and practical constraints arising from the existence of different legal

systems, to arrange for the involvement of employees in the European company and recognize their place

and role in the company.

Incorporation

There are four ways of forming a European limited company: merger, formation of a holding

company, formation of a joint subsidiary, or conversion of a public limited company previously formed

under national law. Formation by merger is available only to public limited companies from different

Member States. Formation of an SE holding company is available to public and private limited companies

with their registered offices in different Member States or having subsidiaries or branches in Member States

other than that of their registered office. Formation of a joint subsidiary is available under the same

circumstances to any legal entities governed by public or private law.

Minimum capital

The SE must have a minimum capital of €120 000. Where a Member State requires a larger capital

for companies exercising certain types of activity, the same requirement will also apply to an SE with its

registered office in that Member State.

Registered office

The registered office of the SE designated in the statutes must be the place where it has its central

administration, that is to say its true centre of operations. The SE can easily transfer its registered office

within the Community - as is the case at present - without dissolving the company in one Member State in

order to form a new one in another Member State.

Registration and liquidation

The registration and completion of the liquidation of an SE must be disclosed for information

purposes in the Official Journal of the European Communities. Every SE must be registered in the State

where it has its registered office, in a register designated by the law of that State.

Statutes

The Statutes of the SE must provide as governing bodies the general meeting of shareholders and

either a management board and a supervisory board (two-tier system) or an administrative board (single-tier

system).



Under the two-tier system the SE is managed by a management board. The member or members of

the management board have the power to represent the company in dealings with third parties and in legal

proceedings. They are appointed and removed by the supervisory board. No person may be a member of

both the management board and the supervisory board of the same company at the same time. But the

supervisory board may appoint one of its members to exercise the functions of a member of the

management board in the event of absence through holidays. During such a period the function of the person

concerned as a member of the supervisory board shall be suspended.

Under the single-tier system, the SE is managed by an administrative board. The member or members of the

administrative board have the power to represent the company in dealings with third parties and in legal

proceedings. Under the single-tier system the administrative board may delegate the power of management

to one or more of its members.

Annual accounts

The SE must draw up annual accounts comprising the balance sheet, the profit and loss account and

the notes to the accounts, and an annual report giving a fair view of the company's business and of its

position; consolidated accounts may also be required.

Taxation

In tax matters, the SE is treated the same as any other multinational. That means it is subject to the tax

regime of the national legislation applicable to the company and its subsidiaries. SEs are subject to taxes and

charges in all Member States where their administrative centers are situated. Thus their tax status is not

perfect as there is still no adequate harmonization at European level.

Winding-up

Winding-up, liquidation, insolvency and suspension of payments are in large measure to be governed by

national law. An SE which transfers its registered office outside the Community must be wound up on

application by any person concerned or any competent authority.



Conclusions:

In order to perform a commercial activity, natural and legal persons may associate and set up

business organizations according to some legal provisions as: the Company Law (no. 31/1990), the

Insolvency Law (no. 64/1995), the Commercial Code, the Commercial Registry Law (no. 26/1990) and so

on.

Because a Limited Liability Company has a simpler organizational and management structure that a

Joint Stock Company and may also have single shareholders, the Limited Liability Company (SRL) is the

most frequent type of legal entity in Romania and abroad.

References:

• George D. Cameron, “Business Law: Legal Environment, Transactions and Regulation”,

Homewood, Boston, 1989

• Henry R. Cheeseman, “Essentials of Contemporary Business Law: Student Study Guide”,

Prentice Hall, 2005

• Andres F. Lowenfeld, “International Economic Law”, Oxford, 2002

• Petri Mäntysaari, “Comparative Corporate Governance”, Springer, Finland, 2005

• Official Journal of the European Communities

(http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:294:0001:0021:EN:PDF)

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:294:0001:0021:EN:PDF

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:294:0001:0021:EN:PDF



• http://www.legal-explanations.com/index.htm

• http://www.aneir-cpce.ro/chapter5/fc1.htm

• http://www.aneir-cpce.ro/chapter5/laws/l31.htm

• www.mcgregorlegal.eu/ro/pdf/21274.pdf

http://www.legal-explanations.com/index.htm


http://www.aneir-cpce.ro/chapter5/fc1.htm


http://www.aneir-cpce.ro/chapter5/laws/l31.htm


http://www.mcgregorlegal.eu/ro/pdf/21274.pdf






Documents

Types of Romanian Commercial Companies