Introduction |
Emergency Government Ordinance no. 52 published in the Official
Gazette on April 30, 2008 (the “Emergency Government Ordinance”) amended
Romania’s Company Law 31/1990, as well as Law no. 26/1990 regarding the Trade
Registry, as republished, to introduce two new concepts mandated by the EU
Aquis -- the concept of the European Company, and rules relative to
cross-border mergers. In addition, a long awaited clarification with respect to
the authentication of certain types of agreements was added. These amendments
are meant to further integrate Romania into the internal market of the EU and
bring its national legislation in line with the EU Aquis. (Additional
articles concerning other amendments to the Company Law are found in the
Romanian Digest™ archive at:
/digest_archive.htm .)
|
Court Orders Government to Pay Fair Value on Restituted
Properties It Leases
A year ago, the
Romanian government issued Government Decision No.343/2007,
which unilaterally reduced the rent that it was paying on all
restituted properties leased by the government by a substantial
amount. The owners of the Bran Castle sued the government for
what they regarded to be an incomprehensibly abusive act. On May
27, 2008, the Bucharest Court of Appeals rendered a decision in
favor of the owners that partially cancelled Government Decision
No.343/2007, and ordered the Government of Romania to pay the
owners of Bran Castle the original rental amount. The Court of
Appeals also rejected the intervention of the General Secretary
of the Romanian Government and the National Authority for
Property Restitution, both of which had sought to uphold the
Government’s action. If the High Court of Cassation and Justice
of Romania upholds the Court of Appeals decision, then
approximately 2,500 owners of other restituted properties whose
rents were also unilaterally reduced by GD No. 343/2007 will be
entitled to receive rent from the government in an amount much
closer to actual market value.
(The
case was successfully argued by Florentin Timoianu of Rubin
Meyer Doru & Trandafir) |
|
[ Up
to Contents ] |
Cross-border Mergers |
The need for a framework within the EU to facilitate cross-border
mergers has increased as a result of the European Union’s enlargement.
The first proposal in the EU for a Cross-Border Merger Directive was
made in 1984, but it was not adopted because European legislators
encountered a social problem regarding the issue of worker participation
in decision-making bodies that they needed to solve before cross-border
mergers could be implemented with safeguards for the rights of workers
in such mergers. The issue was clarified by the rendering of the
Directive 2001/86/CE supplementing the Statute for a European Company
with regard to the involvement of employees, thus clearing the way for
the introduction of the concept of cross-border merger.
The EU framework for cross-border mergers was created in 2005 by
Directive 2005/56/CE. Shortly thereafter, the European Court of Justice
confirmed the cross-border merger regime in a case involving a German
state agency handling the registration of companies that had refused to
register a merger between two companies because one of them was a legal
entity of a different EU Member State, i.e., Luxembourg. The reason
given by the agency was that Germany’s legal framework allowed for only
mergers between companies that were registered in the same Member State.
The European Court of Justice ruled that cross-border mergers are a
means of expressing the freedom of establishment. (The freedom of
establishment is set forth in Article 43 of the Treaty and enables “an
economic operator” (whether a person or a company) to carry on an
economic activity in a stable and continuous way in one or more Member
States.) The failure of the agency to register a cross-border merger
between two companies from different countries was, according to the
European Court of Justice, a form of discriminatory treatment that
jeopardized the freedom of establishment. Such treatment could only be
justified if made to protect the interests of creditors, employees or
minority shareholders; but here, the refusal to register a cross-border
merger was not done to protect the public and, consequently, German law
was found to be in breach of the EU’s freedom of establishment
provisions.
A newly introduced Chapter III of the Romanian Company Law regarding
cross-border mergers allows for joint-stock companies, limited
partnerships by shares companies, limited liability companies (forms of
Romanian legal persons) and European companies (see below) to merge with
companies that have their headquarters, central administration or main
office in another Member State of the EU or the European Economic Area.
The companies from other Member States that are subject to the merger
need to be organized in one of the forms provided by Article 1 of
Council Directive no. 68/151/EEC/09.03.1968, which corresponds to the
aforementioned types of legal persons from Romania. Legal entities
operating on a securities market are exempted from the provisions
regarding cross-border mergers, and therefore cannot participate in
cross-border mergers.
The Trade Registry in the locality where the Romanian company is
headquartered has the power to assess the legality of an envisaged
cross-border merger. Cross-border mergers are defined in the Emergency
Government Ordinance as:
- one or more companies, of which at least two are headquartered
in different EU Member States, are dissolved without being
liquidated and transfer all their patrimony to another company,
known as the absorbing company - the shareholders of the absorbed
companies receive equity participation in the absorbing company,
with the possibility of also receiving cash of up to 10% of the
nominal value of such participation;
- one or more companies, out of which at least two are
headquartered in different EU Member States, are dissolved without
being liquidated and transfer all their patrimony to a newly created
company - the shareholders of the absorbed companies receive equity
participation in the new entity with the possibility of receiving
cash of up to 10% of the nominal value of such participation; or
- a company is dissolved without being liquidated and transfers
its entire patrimony to a company that holds all of its shares,
i.e., the sole shareholder.
The
merger proposal is drafted by the directors or the members of the
directorate of the companies, in accordance with the management system
applicable to the respective companies. The detailed procedure for the
registration of a cross-merger is set forth in the Emergency Government
Ordinance.
Creditors of the companies planning to merge are entitled to notice and
have a right to oppose the cross-border merger project. Their opposition
may suspend the merger unless the debtor company proves in court that
the debt no longer exists, provides proper warranties to the creditor,
or concludes an agreement for future payments. Another difficulty may be
occasioned by the withdrawal of shareholders that are opposed to the
merger. They have the right to ask the company to buy their shares at
their nominal value. Withdrawal is possible only if the legislation of
all the Member States of the merging companies allow for it as a
protection for shareholders, or if the companies expressly agree to such
withdrawal.
When considering a merger, the companies must take into account the
manner in which the merger may affect their employees, and seek means to
have them represented on the decision making bodies of the company.
Consequently, in order for the employees to be protected, the new
company or the absorbing company must develop methods to include
employees in the decision-making process, providing a mechanism for
their participation in the decision making process in the former
companies, pursuant to the provisions of EU Directive 2001/86/CE
regarding the involvement of employees and any national legislation in
the field. Such mechanisms of participation of employees in the decision
making process may take the form of consultation and the proper
distribution of pertinent information.
A merger has the following consequences:
- the transfer of all of the assets and liabilities to the new
/absorbing company;
- the shareholders of the former companies become shareholders in
the absorbing/new company as per the merger plan; and
- the absorbed/former companies cease to exist.
A merger becomes effective on the date of its registration with the
Trade Registry except for absorption mergers where the parties can
provide for a different, later date, for the merger to become effective.
When the merger becomes effective, the rights and obligations of the
absorbed companies regarding the employees are duly transferred to the
new or absorbing companies. |
[ Up
to Contents ] |
The European Company |
The EU has determined that for the proper organization and function of
the internal EU market and to improve the economic and social
environment throughout the European Union, trade barriers needed to be
diminished, if not eliminated completely. Production facilities should
be adapted to a community dimension in order for commerce within the
internal market to be able to develop and thrive. Consequently, the EU
deems it essential that companies which develop a business that is not
limited to satisfying purely local needs should be able to easily expand
their activity beyond national borders. A new means was needed for such
companies to be able to plan and carry out the reorganization of their
business at the level of the European Union. In 2001, Council Regulation
2157/2001 was enacted regarding the creation of a European Company. The
provisions of the Regulation were meant to allow for the creation and
management of companies with a European dimension, free of any obstacles
arising out of the territorial enforcement of national company laws.
This European Company is known in Romania as Societas Europea or
an SE. They are companies that can be incorporated within the territory
of the European Union in the form of European public limited-liability
companies under the conditions and in the manner described in the
Regulation. The main advantage of an SE is the fact that the registered
office of an SE may be transferred from the Member State in which it has
been incorporated to another Member State. Such a transfer does not
result in the winding up of the SE or in the creation of a new legal
person as it does for national companies.
The
new Emergency Government Ordinance amends the Romanian Company Law so
that it now contains provisions with regard to an SE and its enforcement
in Romania. Because of its importance, this subject is treated
separately, having its own title – Title VII, in the Romanian Company
Law.
While SE’s with headquarters in Romania are subject to the Council’s
Regulation 2157/2001, the Emergency Government Ordinance provides for
the means by which SE’s are to operate within the Romanian legal
environment. SE’s registered in Romania can transfer their headquarters
to any other of the Member State by way of a transfer proposal which
needs to be submitted and approved by the Trade Registry. The transfer
proposal is also published in the Official Gazette so that all
interested persons can have access to it. Consequently, the creditors of
such an SE may submit their opposition to the transfer of the
headquarters and, in such case, the transfer will be suspended until an
irrevocable Court decision is rendered with regard to the opposition.
The transfer is not suspended if the debtor company proves in court that
the debt no longer exists, provides proper warranties to the creditors,
or concludes an agreement for future payments with the creditors. The
right to withdraw from the company is granted to shareholders that did
not vote in favor of the transfer within 30 days from the date the
general assembly of the shareholders was held. They also have the right
to ask the company to buy their shares at the nominal value. |
[ Up
to Contents ] |
General Amendments to the Company Law |
Another important amendment to the Romanian Company Law effectuated by
the Emergency Government Ordinance is a long awaited clarification of
the corporate approvals necessary for a company to enter into an
agreement that needs to be notarized. Until now, there have been two
opinions and two trends with regard to what is necessary in terms of
corporate approvals for a company seeking to conclude notarized
agreements. In accordance with the first trend, the provisions of the
Company Law as to the mandate of the directors corroborated with the
relevant provisions on notarized deeds, were interpreted so that there
was no need for a resolution of the general assembly of the
shareholders’ of a company for the approval of the execution of an
agreement needing to be notarized to also be notarized. Such resolution
needed to be notarized only if the Articles of Incorporation of the
respective company provided for it. But many public institutions,
notaries, and lawyers, interpreted the abovementioned provisions
concluding that agreements that required notarized deeds, required
corporate approvals that also needed to be notarized. This was, quite
frankly, a narrow-minded and red tape oriented conclusion that merely
led to the consumption of unnecessary time and money. The new Emergency
Government Ordinance puts an end to this confusion by providing that the
corporate approvals appointing the directors of a company to sign
notarized deeds do not also need to be notarized as long as they abide
by the law and the Articles of Incorporation of the respective company.
This will spare all the time that was until now lost by procuring
unnecessary notarizations and apostilles.
The Emergency Government Ordinance also provides for several other
amendments of a general nature such as those concerning the distribution
of profits in case of a loss, mandates of the board of directors when it
comes to accounting policies, the dissolution of a company, the plans
for future mergers or de-mergers of a company or the nullity of mergers
and de-mergers. |
[ Up
to Contents ] |
Conclusion |
Romania
has fulfilled yet another of its obligations to maintain its national
legislation in line with the EU Aquis. By adopting some important
aspects of EU law into Romanian law, the Government has allowed for the
creation of a framework for registering and utilizing in Romania the
concepts of cross-border mergers and a European Company. Romanian
companies are no longer restricted by territorial limitations and have a
chance to compete with multinational companies that long ago expanded
beyond their borders. Romania, therefore, takes another significant step
towards its membership in the internal EU market, and becoming fully
European. |
[ Up
to Contents ] |
Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2008 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
|
RUBIN MEYER DORU & TRANDAFIR
societate civila de avocati
Str. Putul cu Plopi, Nr.7, Sector 1
Bucharest, Romania
Tel: (40) (21) 311 14 60
Fax: (40) (21) 311 14 65
E-Mail:
office@hr.ro
VISIT OUR WEB SITE:
http://www.hr.ro
The Romanian Digest Archive
|
AFFILIATED WITH:
Herzfeld & Rubin, P.C.
125 Broad Street
New York, NY, 10004
Tel: (212) 471-8500
Fax: (212) 344-3333
http://www.herzfeld-rubin.com
Long Island Office
Herzfeld & Rubin, P.C.
1225 Franklin Avenue, Suite 315
Garden City, New York 11530
Tel: (212) 471-3231
Herzfeld & Rubin LLP
1925 Century Park East
Los Angeles, California 90067
Tel: (310) 553-0451
Fax: (310) 553-0648
Chase Kurshan Herzfeld & Rubin
354 Eisenhower Parkway, Suite1100
Livingston, New Jersey 07039-1022
Tel: (973) 535-8840
Fax: (973) 535-8841
Israeli Affiliated Law Firm
Balter Guth Aloni & Co.
96 Yigal Alon Street,
Tel Aviv, 67891, Israel
Tel: +972-3-511-1111
Fax: +972-3-624-6000 |
|
New York — California — New Jersey — Romania |
If you no longer wish to receive emails
from us, please send an e-mail with UNSUBSCRIBE
in the subject line to
Romanian.Digest@hr.ro. |
|