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Changes to company setup procedures in 2020 – redundant formalities eliminated

Did you know that during this year several changes to company setup procedures were amended in the Romanian law? Indeed, 2020 has brought a series of changes to the legal formalities that we must fulfill if we want to incorporate a Romanian company, especially in what regards a limited liability company (LLC).

From the cancelation of the obligation to have the consent of the neighbors when we want to open a company with registered office in an apartment address, to the waiver of the mandatory minimum share capital of 200 lei, this year there have been a number of significant changes to company setup procedures in the Romanian law. These changes managed to simplify the process in terms of some well-known formalities which had little relevance in practice.

We explain below, one by one, what were the most important changes to company setup procedures in 2020:

1. It is no longer necessary to have the consent of the neighbors when setting up an apartment company, only if there is no activity at the specific address

Probably the most important of the changes in the company incorporation procedure that took place this year is the (partial) removal of the obligation to obtain the consent of neighbors to open a company – this was implemented by Law no. 102/2020 for the amendment and completion of the Companies Law no. 31/1990 (and entered into force on 5 July 2020).

This is a partial removal because the exemption applies exclusively to those who do not carry out economic activity at the company’s headquarters, i.e. in the apartment. But even so, the change did have a strong impact. There are a significant number of people who only register a company at an apartment’s address, without carrying out the actual activity there.

Thus, from now on, setting up a company is even easier for such people. Until July 5, 2020, on the other hand, the consent of the neighbors was mandatory, even if no one was engaged in economic activity in the apartment.

At the same time, this formality has not completely disappeared. In situations where someone wants to set up a company in the apartment, without carrying out activity there, he still needs to prepare an affidavit/statement from the director (or directors, if there are several in the company) of the future company. The statement must confirm that no economic activity will be carried out at that address.

Otherwise, things have remained the same for those who open a business in the apartment and want to carry out economic activity there – they will need the consent of neighbors, which will be attached to a written agreement of the owners’ association (more precisely, the executive committee) for changing the destination of the dwelling.

2. There is no longer a limitation on the number of companies that can be registered at a single address ( depending on the number of rooms)

Until the entry into force of Law no. 102/2020 (mentioned above), no more than one company could have operated in one apartment than the number of available rooms there. Given that, as already mentioned, numerous people register a company in an apartment not for the purpose of carrying out the actual activity there, but exclusively as a formality, it would have been illogical to keep this limitation.

Unlike the removal of the consent from neighbors, in case of removal of the limitation on the number of companies, there is no difference between the assumption if there is, or is not an economic activity carried out at that address.

3. Through the same Law no. 102/2020, the prohibition for a person to be sole shareholder in more than one limited liability company was removed

Until July 5, 2020 (the date of entry into force of the amending law), no one could be a sole shareholder in more than one Romanian company (as applicable for any Romanian limited liability company). Otherwise, any interested person or the Ministry of Public Finance could have requested the dissolution of a company incorporated in violation of the above prohibition.

Subsequent to the entry into force of Law no. 102/2020, any person is free to be a sole shareholder in more than one Romanian LLC, as the above prohibition was repealed. In addition, the new changes to company setup procedures allow a Romanian LLC with a sole shareholder to be, in turn, a sole shareholder in another LLC. In other words, a sole shareholder in a limited liability company may indirectly control another LLC (owned exclusively by the first company).

4. The condition for minimum share capital of 200 lei for a limited liability company (Romanian SRL) was abolished – but the share capital cannot be established below 1 leu

In the context of current economy, the minimum share capital of 200 Lei for a company may seem a little and irrelevant amount. All the more so as that amount wouldn’t have remained blocked, so it did not even represent a general guarantee for creditors.

In this context, Law no. 223/2020 for the simplification and debureaucratization of the transfer of shares and the payment of the share capital (…) repealed, as of November 5, 2020, the obligation for Romanian LLCs to have a minimum share capital of 200 lei.

But this does not mean that the minimum share capital has completely disappeared. In fact, it cannot fall below the amount of 1 leu, according to the National Office of the Trade Register (ONRC). The reason behind is that the Romanian Companies Law (Law no. 31/1990) still imposes the obligation for the shareholders to ensure the equal division of the company’s share capital.

5. Registration of the company, possible without submitting to the tax authority (ANAF) a document reflecting the right of use over the headquarters

Until the entry into force of Law no. 223/2020, when setting up a Romanian company, it was mandatory to submit a document to ANAF stating the right to use the space for the headquarters of the company. Subsequently, that document was to be submitted to the Romanian Trade Register (RTR) as well.

Starting with the date of entry into force of the amending law (November 5, 2020), the respective document can be submitted only to RTR, which, in turn, will send it to the tax authority (ANAF).

These are, in short, the most important changes to company setup procedures which entered into force during 2020. Their main role was to simplify the process of registering a company in Romania, and remove formalities that, in practice, were not of fundamental importance. Instead, they actually could have blocked the process of setting up a Romanian company.


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