The stock market's flexibility is its greatest selling point for publicly traded companies, as it allows a fast flow of capital while still enabling majority shareholders to implement fundamental corporate changes should they wish to exit the market. However, even with all of this flexibility, shares may not always be free of other encumbrances, and the sale of such shares may be opposed by interested parties or even refused to be recognised as a genuine sale by the Trade Registry.
Law 223/2020 recently introduced a series of important changes to the Companies Law. It appears that the goal of these provisions is to further simplify the legal requirements for setting up and operating limited liability companies so that they become more attractive to investors seeking to carry out business in Romania.
At the beginning of 2020, legislative initiatives were launched to debureaucratise the functioning of companies established in Romania. In furtherance of these initiatives, in July 2020 20 members of Parliament submitted to the Senate a draft law proposing new amendments to the Companies Law. The draft law proposes numerous amendments – some which are welcome and some which raise questions as to their benefits. This article highlights the main proposed legislative changes and their anticipated effects.
Pursuant to a recently issued draft bill, the legal framework regarding companies' obligation to submit a statement about their beneficial owners could be simplified. The main amendments, which are expected to be well received, will remove companies' obligation to submit an annual statement regarding their beneficial owners and declare their beneficial owners (in the case of companies held by individuals).
A series of minor yet impactful amendments will shortly be introduced to the Companies Law, making it easier for investors and entrepreneurs to set up a new company. Parliament adopted the amendments in order to reduce the red tape surrounding company incorporation and encourage investment in the Romanian economy.
Under Romanian law, the scope and duration of a director's confidentiality obligations must be agreed in the mandate agreement to be concluded between the director and their company. In order to mitigate any risks in this regard, mandate agreements should set out the specific circumstances in which directors can disclose confidential information to their company's parent undertaking or subsidiaries.
In Romania, joint stock and limited liability companies continue to be the most common type of corporation. Limited liability companies are an important backbone of the local economy, with many becoming large enough to qualify as targets in M&A transactions. However, debate exists as to whether classical exit-related provisions (eg, put or call options or drag-along or tag-along clauses) may be implemented in M&A transactions involving shares in limited liability companies.