Setting up companies in Romania
A new investor in Romania has a number of options available when considering the legal
form its investment may take. The allowed types of business presence range from limited
liability companies and joint stock companies to partnerships, as well as branches and
representative offices.
The establishment, functioning, dissolution, merge, division and liquidation of the
commercial companies are regulated mainly by Company Law No.31/1990, recently
republished, and Government Emergency Ordinance no. 76/2001 regarding the
simplification of certain administrative formalities for the registration and authorization of
business operations, republished, as further amended, whereby a unified procedure for
registration and authorizing of businesses was established.
Forms of Business Organization
The commercial companies may be established in one of the following forms:
1. Limited Liability Company (SRL) - are the most popular vehicles for carrying on
business activities in Romania by local and foreign investors, because:
2. Of the low administrative requirements;
3. The greater flexibility compared to other types of companies;
4. Low initial capital requirements.
DESCRIPTION: MINIMUM EQUITY CAPITAL: is currently ROL 2,000,000 (about USD 60).
The maximum number of shareholders in such a company is 50. An SRL is managed by
one / more administrators which may have full / limited powers and which may be
Romanian / Foreign Nationals. Please note that there is no distinction in Romania
between companies operating with / without foreign share capital.
Joint-stock company (SA) - the number of joint stock companies (SAs) and their
attractiveness to investors is increasing in Romania.
DESCRIPTION: MINIMUM EQUITY CAPITAL: is currently ROL 25,000,000 (about USD
700). There is no maximum number of associates. However, such a company should
have at least 5 shareholders.
When an SA is established, at least 30% of the subscribed share capital, or 100% in
respect of contributions in kind, must be immediately contributed upon formation of the
company and all subscribed share capital must be fully paid in within 12 months of
formation.
One or more "Board of Directors" members, who may or may not be shareholders of the
company, govern the daily operations of the SA.
a. Limited partnership - the partnerships' liabilities are guaranteed by the capital and by
the unlimited joint liability of all unlimited partners; limited partners are liable only up to
the value of their share contribution
b. General partnership - the partnerships' liabilities are guaranteed by the capital and by
the unlimited joint liability or all partners
For both partnership types, taxes are applied at entity level, not at the individual level.
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Registration Procedure
Company registration procedure was simplified and amended in August 2001 and
thereafter in October 2004.
The registration procedures for limited liability companies and joint stock companies
requite similar and consist of the following main steps:
1. The constitutive documents (by-laws) must be prepared, approved, and signed by the
shareholders;
2. The subscribed capital must be paid upon registration of the company. In the case of a
joint stock company (SA), each shareholder must pay at least 30% of its subscribed
capital. The registered capital may be subscribed and paid in by the shareholders by
contributions in cash, in kind and/or in receivables;
3. The company is registered with the Trade Register by issuance of a Registration
Certificate. This provides registration Code valid for both the Trade Register and the tax
authorities. The Registration Certificate also includes in a certificate of acknowledgement
stating that all conditions for carrying out commercial activities are fulfilled. The company
legally exists and has the right to start and run its activities from the date of its
registration with the Trade Register.
According to Law no. 359/2004 regarding the simplification of the registration procedure
with the Trade Registry of individuals, family associations and legal entities, as well as
the authorization of the functioning of legal entities, as further amended and
supplemented, the Trade Registry shall issue the registration certificate and the mention
registration certificate based on the statement on own liability given by the
associate/director regarding:
a. The legal entity does not perform operations at the head/secondary office;
b. The legal person fulfilling the operating conditions provided by the legislation
regarding the fire prevention and extinction, sanitary and sanitary-veterinary field,
environment and labor protection for the activities specified in the statement forms.
Pursuant to the Government Ordinance no.75/2001 on the Organization and Operation of
the Fiscal Record (“Fiscal Record Ordinance”), as amended and supplemented, for
incorporation and registration purposes, the company shareholders and its legal
representatives are required to produce a fiscal record certificate. Foreign legal entities
and individuals not fiscally registered in Romania have no obligation to produce the fiscal
record. In this case, a mere fiscal statement given before the notary public stating that
they have no fiscal debts towards the Romanian budgets replaces the requirement of
such certificate.
A subsidiary’s registration procedure is essentially similar to the one described above.
Branches
Branches are corporate entities with no legal status, set up by Romanian or foreign
companies subject to registration with the relevant trade registry. The legal status of the
branch applies to any other secondary office (agency, working points, etc.) established as
branch by the foreign parent company.
Branches must be registered using the same procedures for SRLs and SAs. The settingup
of a branch requires the following documentation:
- Record of the existence of the parent company (i.e. company memorandum and
articles of association, setting-up certificate of foundation, trustworthiness letter from
bank);
- Decision of the Board of Directors to establish a branch in Romania, listing the
activities of the branch and appointing a General Manager.
Branches must have a General Manager appointed by the Board of Directors of the
parent company, who will represent the branch in dealings with third parties in Romania.
The General Manager can be a foreign citizen. Branches can only operate in the same
field of activity as their parent companies.
Representative Offices
Representative Offices are established and operate in accordance with the provisions of
the Law-Decree no. 122/1990 on the Authorization and Functioning in Romania of
Foreign Companies’ Representative Offices and of Foreign Economic Entities, as further
amended and supplemented.
Foreign companies and economic entities may open Representative Offices in Romania,
subject to authorization by the Ministry of Economy and Commerce. Upon registration, an
operation authorization is issued, stipulating, inter alia, the activity object, the terms and
conditions for carrying out the activity, the duration and headquarters of the
Representative Office.
Representative Offices are often established as a first step. The Representative Office
may undertake on behalf of the parent company only transactions that are consistent
with its object of activity and set forth in the authorization. A Representative Office
cannot commit to any contractual engagements in its own name but can perform the
following activities without being considered a permanent establishment for profit tax
purposes:
- Using facilities only for the purpose of storage or display of goods or
merchandise belonging to a nonresident;
- Maintenance of a stock of goods or merchandise belonging to a non-resident only
for the purpose of storage or display;
- Maintenance of a stock of goods or merchandise belonging to a non-resident
only for the purpose of being processed by a third party;
- The sale of goods or merchandise belonging to a nonresident displayed at
exhibitions or trade fairs which are not permanent or are occasional, if the merchandise
or goods are sold not later than within a month after the closing of the trade fair or
exhibition;
- Maintenance of a fixed place of business solely for the purpose of acquisition of
products or goods or collecting information for a non-resident;
- Maintenance of a fixed place of business solely for the purpose of carrying out
activities of a preparatory or auxiliary nature by a non-resident;
- Maintenance of a fixed place of business solely for a combination of the activities
mentioned above, under the condition that the whole activity carried out through the
fixed place of business is of a preparatory or auxiliary nature.
Labor relations
The Romanian labor relations are mainly regulated by the Labor Code as framework
legislation, to be implemented by means of secondary normative acts. The current Labor
Code came into force on March 1, 2003, gathering under the same umbrella the
principles of employment relationship, employment contracts, labor and rest, labor
protection and health, as well as those related to trade unions, employers’ associations
and labor conflicts.
Labor Conditions
Starting January 2005, the minimum gross wage has been set-up at an amount of ROL
3,100,000 per month for a full-working program (about 171 hours/ month) and the gross
average salary is of ROL 9,211,000.
The standard working time, for full-time employees, is of 8 hours a day and 40 hours a
week. Overtime is allowed upon employer’s obligation to compensate with paid days off
to be ensured in the following 30 days or, if not possible, with supplementary payment to
be negotiated (not less than 75% of the basic salary). The duration of work cannot
exceed 48 hours per week (including overtime), or an average of 8 hours per day
including overtime. It is stipulated for each 12-hour day to be followed by 24 hours of
rest and irregular work duration is permitted upon the individual labor agreement
expressly mentioning as such.
There are seven statutory holidays, although additional holidays can be granted for
religious reasons and also others can be legislated on a year-to-year basis (e.g. the
Monday after Christmas, if the statutory holiday falls on a weekend).
Any full-time permanent employees must be granted a minimum of 20 days paid holiday
per year apart from the free days aforementioned. The right to annual leaves may not be
subject of any waiver, assignment or limitation, nor can be transformed in money. There
are other paid leaves for certain family events, for employees working in special
conditions, or for other particular situations.
Women are entitled to 126 days of maternity leave regardless of their tenure with the
company. During this time they are paid 85% of the average salaries earned in the 6
months before the maternity leave. Upon request, any of the two parents is allowed
further paid nursery leave to take care of the child under two years old, or 3 years old for
children physically or mentally challenged, with an allowance of 85% of the gross
average salary. For the rights established before December 31, 2003, the allowance is
calculated by applying 85% to the average salaries earned in the 10 months before the
birth of the child.
Individual Employment Agreement
Usually the individual employment agreement (“ILA”) is concluded for an unlimited
period of time. ILA has to be concluded in writing and in Romanian language.
Termination of ILA has to be preceded by a termination notice to be set up by ILA and/or
by the collective labor agreements. The termination notice period by the employee
cannot be longer than 15 days for executive positions and 30 days for the managing
positions. The termination notice period by the employer is of at least 15 days.
A trial period is allowed up to 30 days for executive positions and 90 days for managing
positions. During the trial period the ILA may be terminated by the employer on the
ground of the employee not being professionally fitted, no preliminary termination notice
being necessary.
Exceptionally the ILA can be concluded as (i) an ILA for a determined period of time, (ii)
a temporary labor agreement, (iii) a par–time ILA, (iv) an ILA for work at home.
ILA for Determined Period
The ILA for a determined period cannot be concluded for more than 18 months. The
period can be extended no more than two consecutive terms, whose cumulated period
cannot exceed 18 months.
This agreement may be concluded for a determined period of time in some specific cases
provided by the Labor Code:
1. when the employer’s activity is temporarily increased;
2. in case of seasonal activities;
3. when an employee is replaced, in case his employment agreement is suspended;
4. when it is concluded on the basis of legal provisions issued in order to temporarily
favor certain categories of unemployed persons.
A trial period is allowed for a period between 5 and 45 days depending on the ILA term.
Upon termination the employer must inform the employee on any vacancy existing in the
company.
Labor by an agent of temporary labor
The labor by an agent of temporary labor is supplied by a temporary employee. The
temporary employment agreement is to be concluded by the user with an outsourcing
agent, commercial companies authorized by the Ministry of Labor, Social Solidarity and
Family. It is an obligation for the user to resort solely to outsourcing agents for
temporary labor assignments.
The outsourcing agent is required to pay the employee’s salary evaluating and
withholding the whole taxes and contributions the temporary employee is compelled to
pay. The salary cannot be any lower than the usual one paid by the user to its own
employees for a similar job. In between assignments, the temporary employee is at the
outsourcing agent’s disposal and is entitled to a salary which value should be minimum
the gross salary set up at a national level. In cases when the outsourcing agent does not
comply with all conditions regarding salary payment or contributions and taxes, such
responsibilities incur to the user, within 15 days as of the due terms, upon the
employee’s request.
The temporary employment agreement should be concluded for a defined period to be
expressly provided thereby, not exceeding 12 months. Exceptionally, it may be extended
once up to maximum 18 months. At the termination of this special arrangement, the
employee can continue working for the same employer, under a normal ILA.
Part-time ILA
Part-time ILA is also allowed. The labor duration cannot be less than 10 hours per week,
respectively minimum 2 hours a day. In such terms, a part-time employee is forbidden to
work extra-hours, save for a force majeure situation. A part-time employee benefits from
the same rights as any other employees, proportionally with the time effectively worked.
The employer must inform in due time (by a notice posted at its premises) the vacation
of any part-time or full-time jobs, in order to ease the transfers from full-time jobs to
part-time jobs and vice versa
ILA for work at home
The ILA for work at home implies the performance by the employee of his/her specific
work tasks at home, having the right to establish his/her own working timeframe and the
employer having the right to check the employee’s activity, according to the terms
stipulated under the ILA.
Special clauses under ILA
The parties may negotiate certain specific clauses to be inserted in the individual labor
contracts, such as the professional training clause, non-competition clause, mobility
clause or confidentiality.
The non-competition clause implies the employee’s obligation not to carry out any
activity in his/her own interest or in interest of a third party, which may compete with
the activity performed for the benefit of his/her employer, nor to perform activities for
employer’s competitors. This clause is effective upon certain conditions (i) the ILA
expressly providing the activities that are forbidden to the employee, and (ii) an
additional indemnification, to be negotiated by the parties, amounting to at least 25 % of
the employee’s salary. The contract may also stipulate that such clause will survive the
termination of the ILA, for maximum 6-month duration – for executive positions – and
for a maximum 2-year period - for managing positions.
Professional training
Special provisions regard the beneficiary of professional training paid by the employer.
The employees who had taken courses or stages of professional training exceeding 60
days are not in the position of requesting to end the individual labor agreement for at
least 3 years since they graduated. If the terms of such clause are not observed, the
employee has the obligation to bear all costs for professional training. The same rules
applies in those cases when the employees are fired on disciplinary grounds or as a Court
Decision related to a professional crime or to the interdiction to perform their profession.
Employment of Foreign Citizens
Foreign citizens may work in Romania, provided that they obtain a work permit from the
Ministry of Labor, Social Solidarity and Family.
The work permit may be issued, upon request, to foreigners who meet the employment
requirements provided by law, and whose border crossing documents bear a long-term
visa either for employment or for other purposes. The maximum number of work permits
is annually determined by Government decision. For 2005 there has been established a
limit of 2,500 work permits, excluding those granted on the basis of certain international
treaties. Sometimes the limit is amended through Government’s decision.
The Ministry of Labor, Social Solidarity and Family, through its Office for Labor Force
Migration, will issue the work permits, for 12-month periods, with the possibility of
extension, upon request, for additional 12-month periods. Therefore, the ILA can be
concluded only on a determined period. Based on international treaties signed by
Romania, the work permit may be granted, or extended for periods longer than 12
months.
Work permits are not necessary for foreigners under certain circumstances, including
those that: (i) have legally established their residence on the Romanian territory; (ii) are
seconded by foreign companies headquartered on the territory of a World Trade
Organization member state to a representative office, subsidiary or branch of such
company located on the Romanian territory, or to a Romanian company whose
shareholder/associate is the foreign company; (iii) are seconded by an employer
headquartered abroad, to a legal entity in Romania, based on a services agreement. As
well, starting January 2007, work permits will not be required for the citizens of the
European Union member states, of the states parties to the Agreement on the European
Economic Area, and their family members.
Collective Labor Agreement
The employer that had hired at least 21 people is bound to initiate collective
negotiations. Collective negotiations are initiated upon the union request or of the
employee representatives. Employer’s failure to meet its negotiation obligation or refusal
to answer the negotiation invitation by the employees represents misdemeanor
sanctioned by administrative fine. The collective labor contract is concluded for a
determined period of time, which cannot be less than 12 months, or for a period
corresponding to a determined assignment.
There can be concluded collective labor agreements on national level and/or on industry
branch level and/or on unit level. According to the Labor Code, the provisions of ILAs
may not be contrary or grant rights in favor of the employee below the minimum levels
provided by the relevant legislation and by the collective labor contracts.