In Romania, joint stock and limited liability companies continue to be the most common type of corporation. Limited liability companies are an important backbone of the local economy, with many becoming large enough to qualify as targets in M&A transactions. However, debate exists as to whether classical exit-related provisions (eg, put or call options or drag-along or tag-along clauses) may be implemented in M&A transactions involving shares in limited liability companies.
Regulatory approval plays an important role in the transfer of assets or lines of business. In general, where permits are issued in consideration of assets being sold, the transfer will entail a new authorisation procedure to be undertaken by investors. This is also the case for environmental authorisation; however, as local authorities do not consistently deal with the applicability of the various regulations in this regard, mitigating potential hurdles will generally require coordination with the respective authorities involved.
As momentum builds in the Romanian business environment, reorganisations by way of spin-off or merger have become increasingly attractive options for companies. This growing interest highlights several ambiguities in the relevant legislation. However, certain solutions are typically implemented in practice in order to alleviate risks associated with this lack of legislative clarity.
The most frequent strategies for handling deadlocks and exits are call and put options. Traditionally, the breach of such conditions triggered the payment of damages by the party in breach; specific performance was available only in limited circumstances. However, damages may be a less desirable solution and a beneficiary may be able to obtain a court order to enforce a call and put option agreement.
Romania's recent economic growth has triggered increased appetite for investment in domestic companies. Most investors seek to leverage their acquisitions and expect to be able to use the target company's assets for this purpose; the scope of the applicable restrictions is open to interpretation.
Romanian law has drawn on reasoning and concepts familiar in common law jurisdictions in increasingly sophisticated mergers and privatizations. However, representations, indemnifications, certain special warranties and liability and its limitation may be interpreted in ways unfamiliar to those outside the Romanian market.
In order to ensure an appropriate, consistent and workable legislative framework for corporate restructuring of companies which are subject to international accounting standards (IAS), the minister of public finances recently issued an IAS-based set of principles to govern the merger and split-off of such companies from an accountancy perspective.
A recent law allows golden shares to be converted into ordinary shares by way of amendment of the original share sale-purchase agreement. However, the buyer of the former golden shares may be obliged to preserve documentation regarding information technology and design, and research projects financed from the state budget, as well as to maintain defence production capacities.
The Romanian Parliament has ruled that majority shareholders which control more than 90% of the voting rights in an enterprise must make a mandatory public offer for its entire floating stock. The obligation will particularly affect major investors which have formed strategic alliances with the government during privatization.
New procedural rules elaborate on some of the privatization regime's more innovative provisions and establish a framework within which ownership of the state utility companies can be transferred to the private sector. Meanwhile, supervision of newly privatized companies will be stepped up under a new ordinance.
A new law, which remodels aspects of the existing privatization procedure to reflect experience gained over the past 12 years, is expected to make the privatization process swifter and smoother. The law contains provisions relating to stock sales, utilities, joint ventures and indemnification, among other things.
The Constitutional Court has ruled that the arrangements in place for transferring the operation of Romania's public utilities over to private investors are unconstitutional, excluding their future application in relation to local public property assets, or services and activities of local interest.
The Romanian government has approved procedures for the acceleration of privatization within the tourism sector, setting out guidelines on the implementation and finalization of the privatization process.
The Romanian government has finalized the procedural rules for the privatization of commercial companies. These include a requirement that potential buyers notify the Competition Council of proposed acquisitions of shares of companies undergoing privatization.
A new ordinance concerns the acceleration and finalization of the privatization process of companies operating in the tourism sector. Among other things, it allows the Ministry of Tourism to accept payment in instalments for shares sold, and simplifies the open-bid auction procedure.
A nationwide, online database has been created to ensure that the creation and priority ranking of security interests in certain collateral, other than immovables, are registered and accessible to the public.
A new law provides for the restitution of certain immovable assets that were abusively appropriated by the Romanian state between March 6 1994 and December 22 1989. Former owners can obtain in-kind restitution of land and buildings, as well as any equipment and installations lost with these assets.
The turnover threshold that subjects an economic concentration to the control of the Romanian Competition Council, and that triggers a corresponding obligation to notify the council of the operation prior to its implementation, has been increased to Lei65 billion.
New enactments have amended the legal framework for privatization. The procedure for certifying a company's debts to the state budget has been modified, and a new body has been created to implement government strategies regarding the privatization process and the economic development of the private sector.
The privatization process for state owned companies in Romania has been improved. Competitive and clear privatization methods are now used to ensure the swift transfer of state owned property into private ownership and the effective privatization of major companies.