Corporate / M&A

Romania: Particularities of Cross-Border Restructuring – Practical Highlights

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.

Procedural aspects

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.

Practical highlights

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.

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.