Romania, located in Southeastern Europe, has been gradually emerging as a significant player in the European economic landscape. With its strategic location, developing infrastructure, and skilled labor force, more businesses are looking toward Romania as a potential hub for their operations. Understanding the nuances of corporate law in Romania is crucial for anyone considering establishing a business in the country.
Legal Framework and Corporate Entities
The primary legal framework governing corporate law in Romania includes the Commercial Code (Codul Comercial), the Law on Companies (Legea Societăților Nr. 31/1990), and the Civil Code. The Law on Companies is the cornerstone, detailing the various types of corporate entities, formation procedures, governance, and operational guidelines.
In Romania, businesses can take several forms, each with its specifications:
1. **Limited Liability Company (Societate cu Răspundere Limitată – SRL)**: This is the most common type of corporate entity due to its simple formation process and limited liability. The SRL can be established by one or more shareholders, and their liability is limited to the capital invested.
2. **Joint Stock Company (Societate pe Acțiuni – SA)**: This entity is more suitable for larger businesses and involves more rigorous regulatory requirements. It can raise capital through the issuance of shares and can be listed on the stock exchange. An SA requires a minimum share capital and multiple shareholders.
3. **Branch and Representative Offices**: Foreign companies can set up branches and representative offices in Romania. While branches conduct business activities, representative offices can only perform activities such as market research and promotion.
Formation and Registration
To establish a company in Romania, several steps are involved:
1. **Choose the Type of Entity**: Based on the business needs, select the appropriate corporate form.
2. **Name Reservation**: Reserve a unique company name through the National Office of the Trade Register (Oficiul Național al Registrului Comerțului – ONRC).
3. **Draft Constitutive Documents**: Prepare the articles of incorporation and other necessary documents, which must be notarized.
4. **Register with ONRC**: Submit the necessary documents, including proof of share capital deposit, to the ONRC. The registration process is relatively swift and can often be completed within a week.
5. **Obtain Tax and Social Security Identification**: Register for tax purposes with the Romanian Ministry of Finance and obtain a unique identification code. Additionally, register for social security if employing staff.
Corporate Governance and Compliance
Romanian corporate law emphasizes transparency and accountability. Companies are required to maintain accurate records and books, prepare financial statements in accordance with national accounting standards or International Financial Reporting Standards (IFRS), and submit annual reports to relevant authorities.
1. **Board of Directors and Management**: An SRL may have one or more directors who manage the company’s operations, while an SA is required to have a board of directors or a dual system with a supervisory board and a directorate. Directors and managers have fiduciary duties toward the company and can be held liable for breaches.
2. **Shareholders’ Meetings**: Both SRLs and SAs must hold annual general meetings where shareholders vote on key issues such as approving financial statements, dividends, and significant corporate changes.
3. **Auditing**: Depending on size and turnover, companies may be required to have their financial statements audited by a certified auditor.
Taxation and Incentives
Romania offers a competitive tax regime to attract foreign investment. The corporate income tax rate is 16%, among the lowest in the European Union. There are also various incentives available, such as:
1. **Research and Development (R&D) Incentives**: Significant deductions and incentives are available for companies engaged in R&D activities.
2. **Remote Zones**: Businesses operating in economically disadvantaged areas can benefit from state aid and tax reductions.
3. **Special Economic Zones**: Romania has several industrial parks and free zones offering tax exemptions and benefits to attract investments.
Labor Law and Employment
Employment in Romania is regulated by the Labor Code (Codul Muncii), which outlines the rights and obligations of both employers and employees:
1. **Employment Contracts**: All employees must have written contracts specifying the terms of employment, including salary, job description, and working hours.
2. **Working Conditions**: The standard working week is 40 hours, with provisions for overtime compensation. Romania places strong emphasis on occupational health and safety.
3. **Social Security Contributions**: Both employers and employees must make contributions to social security, health insurance, and unemployment funds.
4. **Termination of Employment**: The Labor Code provides specific guidelines for the termination of employment, requiring justification and, in some cases, severance pay.
Conclusion
Overall, Romania presents a promising landscape for businesses with its strategic location, favorable tax regime, and evolving infrastructure. Prospective investors and entrepreneurs must navigate the complexities of Romanian corporate law to ensure compliant and successful business operations. Understanding the legal landscape will provide a solid foundation for leveraging the opportunities Romania has to offer.
Corporate Law in Romania: A Comprehensive Overview
For further reading and detailed information on corporate law in Romania, you may find the following links useful: