Category Archives: Romanian Real Estate

Saving Your Property Investment In Romania

Over the last few months as an English speaking Romanian based law firm with international connections we have received a number of enquiries from people outside of Romania who have woken up to the fact that they have in the past made investments in Romania and Eastern Europe and they do not know what has happened to them.

As I wrote previously time on this matter is running against them. A number of these enquiries emanate from clients who originally hired a Romanian law firm who quite happily acted in the purchase of property in Romania, but who now seem to ignore or do no longer wish to act for the Client. This means that the client has little or no legal support in Romania.

One area of concern is the number of clients who set up Romanian companies in which they owned 100% of the shares and which were used as a vehicle to purchase property. They were not advised as to how to keep the companies active and these companies are now being struck of by the Trade Registry for such reasons as inactivity; expiry of the lease of the registered address or failure to pay their taxes.

The procedure to strike off the company is instigated by the Trade Registry. If they consider that a company should be closed and liquidated they start the procedure through the courts. The Trade Registry notifies the Company, (but not the shareholders) of what is about to happen and giving them an opportunity to regularise the position of the Company.

This notification will be sent by mail to the last known address of the Company. This will often have been an accommodation address and the owner of the apartment may not know where to forward the letter, or indeed may not wish to as no rent has been paid for some time.

If no response is received by the Trade Registry as is often the case then the Trade Registry makes an announcement in Romania in a local paper. If still no response is received then the court accepts that the correct notice has been given and makes the necessary order to close the Company.

What remedies are open to a client who only finds out about the position at this stage? Firstly they can appeal the decision to liquidate the Company. They have to do this within 6 month of the original order. Failure to do so means that the liquidation process will proceed. The court usually appoints the liquidator on the recommendation of the Trade Registry. The fee of the liquidator is fixed by the curt and is dependent up the value of the assets. The liquidators fees are payable out of the realised value of the assets of the Company. If the assets of the Company have to be valued it is necessary to consider effect of the costs of the valuer in the liquidation.

This is important for the preservation of the property brought through the Company. In a number of cases the client is concerned to preserve the asset even though it has lost value. There is a real possibility that the value of the property in Romania will increase over a period of time and therefore not all is lost.

Once the liquidation has been finalised it is necessary for the assets if any of the company to be distributed to the shareholder. If they can be traced the assets will be passed to them either in kind or in specie. It should be remembered that there will be costs in connection with this. If the Company has no money then the fees will have to found from another source i.e. the shareholders or the assets. If no shareholders can be located then the property of the company will be sold and the monies handed to the Romanian State. If no shareholder or other person entitled to the assets appears within three years of the closing of the liquidation and dissolution the shareholders cannot claim the monies from the Romanian state as the prescription period has expired.

It should be remembered that if the shareholders are EU citizens then since 2014 any land can now be transferred to the EU citizen. However, if the shareholders are non EU Citizens then the whole process will have to be started again if the shareholders are to reclaim the land and hold it as an investment in Romania. If not then the land will be sold and they will receive the net cash amount.

Whilst all this has been discussed before, the Trade Registry is becoming more active and therefore anyone who brought a property in Romania should review the position of any company that they own and which they have neglected.