Romania: Particularities of Cross-Border Restructuring – Practical Highlights
→ Alexandra Munteanu
Directive 2005/56/EC of the European Parliament and of the Council on cross border mergers of limited liability companies has been transposed into the Romanian corporate law via Emergency Ordinance No. 52/2008.
In Romania, cross-border mergers may be implemented between Romanian joint-stock companies, partnerships limited by shares, limited liabilities companies and European companies with their headquarters in Romania, and either:
- joint-stock companies, partnerships limited by shares, limited liabilities companies incorporated under the laws of, or having their registered office, central administration or principal place of business in other EU member states (as listed in article 1 of Directive 68/151/EEC); or
- companies formed in accordance with the laws of other EU member states with share capital and having legal personality, possessing separate assets able to cover its debts, although not organised in one of the forms in article 1 of Directive 68/151/EEC.
A cross-border merger may be pursued if: (i) the national laws of the member states of the merging companies allow mergers between such types of companies; and (ii) each company taking part in a cross-border merger remains subject to the provisions and formalities of the corresponding national law that would be applicable in the case of a national merger.
A cross-border merger generally involves the following steps:
- preparation of the merger prospectus by the merging entities’ management;
- submission of the merger prospectus to the relevant Trade Registry for publication with the Official Gazette of Romania, or alternatively publication on the merging company’s official web-site;
- creditors’ opposition rights;
- preparation of the management reports;
- preparation of the independent expert’s report;
- shareholders’ approval; and
- dissenters’ right of appraisal.
In terms of implementing the cross-border merger, if the absorbed company is a Romanian legal entity, the delegated judge operates the registration of the amending act of the absorbed company’s articles of incorporation and verifies the existence of the documents issued by other EU member states’ competent authorities. Alternatively, if the absorbed company is incorporated in another EU member state, the delegated judge verifies the legality of the merger resolution and issues a decision on the compliance of the merger documentation with the conditions set forth in the Romanian regulations.
Following the implementation into the Romanian Companies Act of Directive 2005/56/EC on cross-border mergers, several premier international financial institutions have tackled (in line with corporate restructurings trends in Eastern Europe) the possibility of converting their Romanian banking subsidiaries into branches of the parent institutions by taking advantage of the EU cross-border merger regime. This had various rationales.
No need to seek authorisation to operate
The implementation of the “single European passport” principle into the banking industry-related Romanian legislation made it possible for credit institutions authorised by competent authorities from another EU member state to engage through their Romanian branches in any activity it is licenced to perform under its authorisation granted by the home member state. Hence, the establishment of a Romanian branch is possible based on a notification sent to National Bank of Romania (NBR) by the competent authority of the home member state. The “single European passport” principle reflects the mutual recognition between member states of the authorisations issued to credit institutions.
No capital and prudential requirements
Branches of credit institutions with their head office in another EU member state need not comply with endowment capital requirements, nor will the NBR exercise any prudential supervision with respect to such entities. In other words, a branch of a foreign credit institution need not comply with all requirements provided for by Government Emergency Ordinance 99/2006 (the Credit Institutions Act) with respect to separate own funds, initial capital level, risk exposure limits, large exposure mechanisms, liquidity levels and others.
All requirements will be applied against the credit institution and its branches established in other EU members, as a whole. Therefore, the above capital requirements, own funds and liquidity levels must be met by the credit institution, without any capital compliance requirements imposed on their branches.
Supervision by the home member state; limited supervision by the NBR
The competent authority that retains all responsibility with the prudential supervision of a EU credit institution establishing a Romanian branch is the competent authority of the home member state. In such cases, however, the NBR retains limited supervisory power with respect to, among others, liquidity requirements and monetary policy.
Compliance with professional secrecy regulations in the banking industry
Romanian branches of credit institutions authorised in another EU member state must comply with the professional secrecy rules in the banking industry. That is, the branches must maintain the confidentiality of all facts, data and information about its activities, and about any facts, data and information in its possession, and those regarding the person, activities, business, property, personal or business relations of its clients or the clients’ accounts, the services rendered and the agreements concluded with its clients.
Minimum reserve requirements
Romanian branches of foreign credit institutions must maintain minimum reserves, in national and foreign currencies, in the bank accounts opened with the RNB. The calculation basis for minimum reserves is made from financial amounts in local and foreign currency representing obligations of a bank resulting from the acceptance of deposits and other funds.