Significant new rules have become effective as of December 1, 2006 affecting all Romanian companies and requiring amendments to their by-laws and other corporate documents. The Romanian Company Law (Law no. 31/1990 regarding companies, as republished, and Law no.

26/1990 regarding the Trade Registry, as republished) was amended by Law no 441/2006, which changes the way companies are registered, structured and function in Romania. It has a particular impact upon joint stock companies. This article presents an overview of these amendments, but it should not be regarded as a presentation of the provisions of the law in itself.

Moreover, since the new law has many crucial amendments that affect joint stock companies, the article will focus on joint stock companies, while at the same time pointing out which amendments apply to other forms of companies.

Incorporation and Shareholding Requirements

The founders of a company - the persons signing the Articles of Incorporation and those having a crucial role in its registration - must be persons who have not previously been convicted of certain crimes to which the crimes from the Insolvency Law have now been added.

As to the creation of joint stock companies there has been an amendment with regard to the share capital that has to be paid upon incorporation. In the old version of the law, only 30% of the share capital had to be paid at the time of incorporation and the rest could be paid in 12 months time from the date of incorporation.

Now, the capital that has been subscribed but not yet paid is divided into cash and assets, and treated differently. With regard to the cash, the law is unchanged, but for assets, a two year period from registration is now provided for payment. For all other types of companies, the entire share capital must be subscribed and paid at the moment of the incorporation.

The currency used in determining the minimum share capital for joint stock companies has been changed from euros to lei. Instead of € 25,000 the share capital is now stated as RON 90,000. (RON is the new Romanian Leu.) The share capital is now measured in Euros only in a subsidiary.

Because of recent changes in the exchange rate, the minimum share capital has increased, although in December 2006 when the amendment became effective, the amounts were equivalent. The share capital may never decrease under this initial minimum value. If it does the company may be dissolved.

The amount of the share capital for limited liability companies has not been amended, but the sums are now expressed in RON.

Another important change is the decrease in the minimum number of shareholders for joint stock companies from five to two. Also, if the company has only one shareholder for more that nine months it could be dissolved. The share capital that is subscribed in assets now can now only include assets that have a pecuniary value.

The contribution of debts to share capital has the same legal regime applied to it as with all other participations to the share capital. They are only permitted in joint stock companies that have no public subscriptions. The law now expressly includes services in the category of participations that are not allowed.

The conditions under which more than one company may function at the same headquarters are: that the space allows the functioning of more than one company, at least one person is a shareholder in all the companies and that at least one of the shareholders is the owner of the premises.

The amendment provides that only one of the conditions needs now to be fulfilled and not all of them as in the past.

The founders, the first administrators, or, as the case may be the first members of the Board of Directors, are jointly liable for not registering the company within a 15 day period from the date of the execution of the Articles of Incorporation.

The company may acquire within two years from the registration date or from the date when it receives the authorization for developing its activity, assets from a founder or a shareholder, for an equivalent of at least 1/10th of the value of the subscribed share capital, upon the prior approval of a general shareholders meeting.

Such action must be noticed to the Trade Registry and it must be published in the Romanian Official Gazette or in another important newspaper. The acquisitions that are part of the daily operations of the company, those done by order of a public authority, as a result of a court ruling, or arising from stock market operations, are not included in this requirement.


If dividends are to be forthcoming, they must be paid at intervals established by the General Shareholders Assembly, or as the case may be, by special legislation, but no later than within six months time from the approval of the financial statements for the previous year.

If the company does not pay dividends in time, it is liable for damages for the period of delay at the legal interest rate, if a larger interest rate has not been established.

The daily operations of the company

The managers, administrators, directors, financial auditors or censors of a company that is a debtor, or that has been found guilty of crimes under the Company Law or the Insolvency Law, cannot hold or acquire such a position for a period of five years after the court decision has become final.

The amendment to the Company Law provides that the directors, censors, auditors and all the other persons with duties in the daily business of the company are liable for their actions with regard to the company.

To this end, minority shareholders who represent individually or jointly at least 5% of the share capital of the company may bring claims on behalf of the company, against any of the above mentioned individuals. They have this prerogative only if the company itself does not take any action.

The amendment therefore adds to the persons who are liable, the censors, auditors and other persons involved in running the company and adds a minimum threshold of participation to the share capital.

Joint stock companies

The amendment introduces the possibility for the holders of preferential shares to acquire the right to vote if there are delays in the payment of dividends. The company cannot subscribe to its own shares.

A company may acquire its own shares directly, or through a person acting in its stead, by complying with some conditions: the Extraordinary General Assembly must authorize the acquisition and its terms, the total value of the shares acquired by the company must not exceed 10% of the subscribed share capital, the shares have to be fully paid, and the payment for these shares must be made from the

profit that could be distributed and from the available reserves of the company, with the exception of the legal reserves. The shares thus held by the company do not bear the right to dividends. Also the right to vote inherent to these shares is suspended during the time they are held by the company.

If the shares are bought to be distributed to employees of the company, the transaction must be finalized within a 12 month period from the date of the acquisition. If the shares are acquired by a company in which the present company holds the majority interest, it is considered to be the acquisition of those shares by the present company.

Shareholder Assemblies

New quorum and voting requirements have been instituted for the Ordinary General Assembly, i.e., instead of requiring the presence of shareholders representing at least half of the share capital, the amendment provides for the presence of the shareholders representing at least one quarter of the voting rights. Decisions are taken with a simple majority, meaning the majority of the votes cast.

The amendment contains changes with regard to the Extraordinary General Assembly as well. The quorum for the first convocation is no longer three quarters of the share capital but is now one quarter of the voting rights. For the second convocation, the quorum is no longer half of the share capital but one fifth of the voting rights.

Additionally, the majority for the assembly of the shareholders is no longer measured against the share capital, but against the voting rights, which could be less than the share capital. The voting rights are less than the share capital if the company has issued shares with priority without the right to vote.

Thus, what becomes important is not the actual presence of the shareholders, but the presence of the ones who can actually cast a vote. In some special situations, the decisions can only be taken with a necessary majority of two thirds of the voting rights.

These situations are: the modification of the main object of activity of the company, the decrease or the increase of the share capital, changing the legal form, mergers and acquisitions, and divisions and dissolutions. Any decisions of this sort that do not observe the mandatory requirements could be challenged by interested parties as being null and void.

The provisions regarding the agenda or order of business of shareholders assemblies have also been amended. Any changes to the order of business can be proposed by shareholders who, individually or jointly, represent at least 5% of the share capital. Once this participation limit is fulfilled, the board of directors is obligated to include the new desired issues in the order of business.

In this way, the law puts a stop to the practice in which a director who convoked the assembly could act over the will of the shareholders by refusing to amend the order of business despite their demand. Moreover, the director has the obligation to publish the modified agenda with at least 5 days notice prior to the date on which the assembly is to be held.

The assembly can be convened by the directors whenever they deem it necessary, or when a certain number of shareholders expressly request it. As amended, the Company Law requires that this number of shareholders must hold at least 5% of the share capital of the company, and not 10% as before.

This amendment increases the power of minority shareholders in companies that have many shareholders and a widely spread share capital, since they now can more easily convene a general assembly.

Voting Agreements

A very important amendment is the introduction of the ability to conclude voting agreements. Agreements that provide for voting according to the instructions and proposals of the company or its representatives are now the only ones not permitted. All other voting agreements may now lawfully be concluded and enforced. If concluded, they are considered to be valid and binding upon the parties.

This provision applies to all types of companies and not only to joint stock companies. For the protection of minority shareholders, if the company owns a website, it is obligated to publish on it in an electronic form all the decisions of the general assembly of the shareholders.

Corporate governance

The newly revised law significantly alters the governance organization of companies. It introduces two possibilities out of which companies need to chose one and apply it. The governance system refers to the introduction of two administrative systems: the monistic system (the only one Romania had until now) and the dualistic system.

In the monistic system, the company is governed by one or more directors or a board of directors presided over by a chairman. The dualistic system is of German origin and provides for the governing of the company by a directorate (the members of which have the right to represent the company) and a supervisory council (with duties of control and supervision).

The amendment also changes the monistic (unitary) system that has been applied until now. The directors are no longer comprised of a single category. Now there are executive and non-executive directors comprising the board of directors. There are even independent directors. The law provides for special competences for each category and the relations and interactions that exist between them.

The board of directors works by delegating. Thus it may delegate some or all of its duties related to the management of the company to one or more executive directors or to a directing committee. These provisions bring flexibility to the governance of the company since it may now choose how to conduct its daily business and how to organize itself.

If indeed it decides to delegate, the directors of the company will only have the prerogative of supervising the executive directors, and have only a non-executive function. The executive directors are also the persons who can lawfully represent the company, excluding such representation from the duties of the board of directors.

The directors and the executive directors of the company may no longer conclude labor agreements since they can not be the employees of the company. They can only conclude management agreements with the company. If the directors that are appointed had been employees of the company, their individual labor agreement is suspended during their mandate as a director.

According to the new provisions of the Company Law, directors must obtain professional liability insurance.

Company Shares

Previously, the law provided for a preemption right with regard to new shares issued to raise the share capital of a company requiring that subscriptions must first be offered to existing shareholders of the company. The amendment has extended this preemptive right.

The old version was not applicable to an increase in share capital by contributions in-kind while now a preemption right applies to these as well. Moreover, the amendment created a simpler procedure with regard to the subscription for shares issued for this purpose to third parties.

The amendment also introduces a new concept with regard to increases in the share capital of a company. This is the authorized capital. It must be provided for in the constitutive documents of the company.

The board of directors or directorate, depending on the governance system, is authorized to raise the subscribed share capital during a period of five years from the date of the registration of the company or of the amendment to its constitutive documents to permit the raising of the capital, up to a certain threshold (“authorized capital”).


At the present time, the Romanian Company Law is about to be amended yet again by a Government Ordinance, and the draft has already been submitted for the approval of the Government.

The new law provides that joint stock companies have nine months commencing December 1, 2006 to amend their constitutive documents in order to comply with the new legal provisions. Consequently, all companies that do not yet conform to these regulations must commence the formalities of amending their articles of incorporation to comply with the new structure and organization.

The article was published based upon approval of:

Rubin Meyer Doru & Trandafir