New Legislative Changes in Romania: What Companies, Especially S.R.L (LLC), Need to Know

New Legislative Changes in Romania: What Companies, Especially LLCs, Need to Know

A legislative package proposed by the Ministry of Finance in Romania announces significant changes for the business environment, with a particular focus on limited liability companies (LLCs). These reforms aim to strengthen fiscal discipline, improve transparency, and protect creditors, imposing new obligations and restrictions.

The business environment in Romania is on the verge of important transformations, following the publication of a draft legislative package by the Ministry of Finance. The draft, currently under public debate, proposes substantial changes to the corporate framework, with direct implications for the operation and administration of companies, especially LLCs. The stated goal is to eliminate so-called "ghost companies," increase financial responsibility, and ensure better tax collection.

Key Changes Expected for Companies

Here is a detailed analysis of the proposed amendments and their impact on commercial companies' activities:

1. New Triggers for Fiscal Inactivity and Reactivation Deadlines

• Companies without a bank account in Romania or those filing financial statements more than five months late will be automatically declared fiscally inactive.
• Companies inactive for more than one year (or more than three years for voluntary suspension) risk insolvency, liquidation, or dissolution procedures initiated by the National Agency for Fiscal Administration (ANAF).
• Transitional measures exist: companies already inactive for over three years have 30 days to reactivate, while those inactive for less than three years have 90 days from the date the new law enters into force.

These provisions aim to clean up the commercial registry and improve the accuracy of the business environment, supporting better fiscal compliance.

2. Mandatory Bank Account Requirement in Romania

All companies will be required to open and maintain at least one bank account in Romania or with the State Treasury throughout their existence. Newly established companies must open a bank account within 30 days of incorporation. Failure to comply with this obligation constitutes a contravention and is subject to fines ranging from RON 3,000 to RON 10,000.

The measure is designed to ensure financial transparency and traceability of operations, facilitating fiscal oversight.

3. New Conditions for Opposability of Share Transfers to ANAF

The draft bill introduces additional conditions for share transfers to be enforceable against the tax authority:

• Control-changing share transfers must be notified to ANAF within 15 days.
• For companies with outstanding state debts, especially LLCs, guarantees must be provided before the National Trade Register Office (ONRC) records the transfer.
• ONRC will require approval from ANAF, and guarantees will be enforced if debts remain unpaid after 60 days.

These rules aim to prevent situations where companies avoid paying their debts to the state by transferring shares, ensuring the recovery of claims even when ownership changes.

4. Increase in Minimum Share Capital

The new minimum share capital for limited liability companies will be RON 8,000 (approximately EUR 1,600). Existing companies will have to increase their capital at the first amendment of their articles of association, but no later than two years from the law's entry into force. Non-compliance with this provision may lead to the company's dissolution by court order.

The increase in minimum capital aims to enhance the financial responsibility of founders and protect creditors, addressing the issue of companies being easily set up with minimal resources.

5. Restrictions on Dividend Distribution and Loan Granting

The project introduces strict rules to prevent decapitalization and ensure that dividends are distributed only when financially justified:

• Companies paying quarterly dividends will not be allowed to grant loans or advances to shareholders or affiliates until all interim dividends are regularized at year-end.
• Dividends from current profits can only be distributed after covering accumulated accounting losses and setting up legal or statutory reserves.
• If a company's net assets fall below the legal minimum, dividends (including interim dividends) may only be distributed after the net asset value is restored.
• If net assets fall below half of the share capital, the company cannot distribute dividends nor grant or receive loans to/from shareholders or affiliates. Persistent shortfalls require mandatory conversion of shareholder loans into capital.
• Violations of these provisions entail joint liability for directors and shareholders, as well as fines ranging from RON 10,000 to 200,000.

Next Steps and Recommendations for Companies

The draft bill is currently under public debate and may be subject to changes following feedback. After the consultation period, the draft will enter the parliamentary process.

It is essential for all companies, especially LLCs, to audit their capitalization, net assets, intra-group loans, and share-transfer pipelines in advance to anticipate and prepare for the new requirements. A proactive approach can help avoid sanctions and ensure compliance with future regulations.

Sources: mfinante.gov.ro.

Keywords: Romania legislative changes companies, LLC law, minimum share capital, fiscal inactivity, dividend restrictions