The first question international clients usually ask us as lawyers in Romania is how long will it take to incorporate a company. As an experienced law firm that should be an easy question to answer, but like most things in the current business world, the answer is not as simple as the question would lead you to believe.
In the UK and other western countries there has developed a large business out of supplying readymade companies to those who want a company quickly. these formation agents offer readymade companies from low to high prices. All this comes as a surprise to Romanian lawyers and businessmen. There are very few such companies available in Romania for the reasons that will become clear later on in this article.
The reason for this surprise to Romanian lawyers is firstly the concept of a company and the philosophy which lies behind it. In a common law country, a company is viewed as a vehicle in which the shareholders invest their capital, (money in most cases) in a company and then appoint directors to run the business and make a return for the investors on the capital. In Romania companies are seen very much as the creation of the shareholders who then take an active and close interest in the company and its business. The shareholders retain the right to run the company as they think fit and take an active part in the management. The administrators of a Romanian company are there to implement the decisions of the shareholders and not to run the company in the best interest of the business and the shareholders. The administrators have to follow the shareholder’s decisions which are arrived at in general meetings.
This is the first issue that needs to be explained to a foreign investor.
Another concept that is different is the question of the registered office/headquarters/office. Romanian corporate law requires that each company has its own separate office theoretically equipped with desks chairs staff etc. The law does not take into account that you can have a business without staff and a fully equipped office. As a general rule therefore you do not have an office as you can in England such as an accounting firm who are the registered address of many of their client companies. There is some relaxation on this point in Romania which allows lawyers, who else, to offer their offices be used for a limited period of time as a registered address for a company. This is in part to allow the company formation procedure to be completed before a proper office is located. The lawyer can only provide a registered address for up to one year.
There are now virtual offices coming onto the market in Romania but even these still require an identifiable area.
Once the above two matters have been clarified there then comes the question of the documentation required. This consists of providing details of the shareholders, administrator, and the drafting of the statutes of the company. This has become easier with joining the European Union as the concept of companies had been more developed in continental Europe.
It is still necessary though to provide additional documentation particularly with regard to shareholders. Money laundering issues have now become a fact of life in Romania. This means that the identity of the ultimate shareholders of a company must be disclosed. This becomes important as on the formation of a Romanian company it is necessary to deposit the share capital in a Romanian bank and for the bank to issue a statement that they hold the capital. The banks therefore on behalf of the Romanian authorities identify the shareholders.
Another issue, which also comes into play, is if the shareholder of a Romanian company is to be a sole shareholder in the Romanian company, and the investor is itself a single shareholder company, or is the owner of multiple companies in Romania. This is prohibited by Romanian law. This often means that another shareholder has to be designated. This needs to be looked at when the incorporation procedure is discussed. Sometimes finding a third party to hold a single share to get around this provision can be difficult. We know of cases from our own experience where a foreign investor has allowed an individual to hold a single share for them and this has then become a bargaining position when the parties fall out. I have written about this in a previous blog but it does no harm to emphasis these points again.
The final issue for this blog is that if the proposed shareholder is a limited liability company then a bank reference letter is required. We have had examples of where we have tried to incorporate a Romanian company with a UK shareholder. This UK company has only authorized capital and no issued capital and therefore does not have/need a bank account. As Romanian companies require monies to be paid into a bank account before the company can be incorporated they do not understand the relationship of authorized and issued capital. The Trade Registry in our experience will not authorize the incorporation of a company if the foreign shareholder does not have a bank account and produce a bank reference letter.
As to the initial question, the answer is three days from when the complete set of incorporation documents are lodged at the Trade Registry.