Romania recently has finally transposed into its local law the 4th Directive concerning Money Laundering and at the same time requiring the implementation of a national Beneficial Ownership Register. This was done on 21st July 2019, by the passing of law 129/2019 on the prevention of Money Laundering and the sanctioning of money laundering, as well as the establishment of measures for preventing and combating the financing of terrorism. Law No. 129/2019 repealed Law no. 656/2002 which previously was applicable.
The law which has now entered in to force aligned Romania’s national legislation with EU anti-money laundering requirements and established the legal framework for national beneficial ownership registers.
With effect from the passing into force of the law all private legal entities and trusts registered in Romania are required to have adequate, accurate and up-to-date information on the identity of their ultimate beneficial owners including details of the method by which they exercise control and to have the specific data entered into the registers held by the Trade Registry for companies and persons registered with them; the Ministry of Justice for associations and foundations and the National Agency for Fiscal Administration in the case of trusts.
With effect from entering into force the law now requires that companies when being incorporated, yearly or each time when a change occurs that they submit an affidavit containing information on the ultimate beneficial owner and providing the following information namely, name and surname, date of birth, personal identification number, series and number of identity card, citizenship, domicile or residence, as well as details regarding the way that control is exercised over the company.
For companies already incorporated, the affidavit must be submitted to the Trade Registry each year within 15 days of the approval of the annual financial statements, or within 15 days of the occurrence of any change in the ultimate beneficial owner’s original or current information. The affidavit must be either authenticated, i.e. issued in front of a notary public, or executed in front of a trade register officer. This may cause problems for companies whose administrators are not based in or who visit Romania rarely if at all.
Breach of these provision is punishable with a fine of up to RON 10,000 (approx. EUR 2,000), and if the legal representative does not submit the affidavit within 30 days of the date from the date when the fine is applied, the Trade Registry can order the dissolution of the company.
The law gives companies 12 months from the date the law entered into force (21st July 2019) in which to comply with the law and we would advise any company currently operating in Romania to consider filing the affidavit as soon as possible so as to ensure that the provisions of this filing are not overlooked.
According to the law, the Beneficial Ownership Register held by the Trade Registry must become operational within the next four months. The authority has not yet issued any operating procedures or other guidelines on the functioning of such register, but further instructions are expected soon. It is unclear as to what will happen to those companies who may be in breach of the law the failure of Trade Registry to issue the rules or procedures.
The law provides by reference that the details of the Ultimate Beneficial Owner may be accessed by:
• competent authorities, including the Office for the Prevention of Money Laundering and Terrorism Financing;
• reporting entities when applying customer identification measures; and
• any person or organisation that can demonstrate a legitimate interest.
This is permitted provided that the data protection regulations are observed. Further no details are set forth in the law with respect to possibly restricting access to this information (e.g. in the event of a juvenile ultimate beneficial owner), or whether the exact ownership percentage of an ultimate beneficial owners is to be visible, or only a general statement (e.g. ownership above 25%) will suffice.
Since coming into effect of the law the affidavit has already been included in the list of mandatory documents for incorporating a company. The Trade Registry has recently published a standard form affidavit which can be used as a template to fulfil the reporting obligations.
The continued drive for disclosure on the ownership of companies is also covered in this Law. The Law now provides for the banning of bearer shares by imposing a series of restrictions and obligations. There is now a prohibition on the issuing of new bearer shares starting with the date of entry into force of the Law and the prohibition of carrying out transactions with existing bearer shares as of the date of entry into force of the Law.
The holders of bearer shares must submit them to the company at the company’s headquarters within 18 months from the entry date into force of the Law. The bearer shares submitted are converted into nominative shares and the company’s articles of association must be amended and submitted with the trade registry. If the board of directors does not perform the mandatory conversion, the company’s dissolution process is triggered. The bearer shares that are not submitted within the 18-month deadline are cancelled and the corresponding reduction of the share capital will be performed.
As will be seen a small but interesting change in the law which should cause there to be more transparency in relation to companies and their corporate governance. These changes also fit in well with the requirements of the banks concerning beneficial ownership.
As mentioned above we would advise all companies to consider filing the necessary returns and affidavits as soon as practical to prevent any issues in the future.