Source: https://iclg.com/practice-areas/lending-and-secured-finance-laws-and-regulations/romania
Timestamp: 2019-04-23 08:29:14+00:00

Document:
In 2018, property investment volume in Romania is estimated at ca. €900 million, a value slightly below that registered in 2017 (€963 million). However, several transactions in different stages of negotiations were postponed and they will most likely be concluded during the first half of 2019.
The overall number of transactions decreased, although the average deal size increased, standing at approximately €31 million. Bucharest accounted for over 78% of the total investment volume. Market volumes were dominated by office transactions (50%), while retail accounted for 35% of the total.
2018 ended with a significant premiere on the local real estate market: Romanian investors ranked second in generated volumes by nationality. Almost €200 million was spent buying commercial properties (about a quarter of the total volume), a significant leap of more than five times the volume in 2017, according to Colliers International.
Total financing under the European Fund for Strategic Investments (EFSI) in Romania amounts to €652 million and is set to trigger €2.7 billion in additional investments. For infrastructure and innovation projects, there were 15 approved projects financed by the European Investment Bank (EIB) with EFSI backing and the approximately €536 million of total financing is set to trigger €1.399 million in investments. For small and medium companies, there were 13 approved agreements with intermediary banks or funds financed by the European Investment Fund (EIF) with EFSI backing and the €115 million of total financing is set to trigger approximately €1.3 billion in investments, with some 15,819 SMEs and mid-cap companies expected to benefit from improved access to finance.
Other sources for financing in Romania include syndicated loans. The Romanian syndicated loan market is estimated at €1 billion. For example, in March 2018, BERD and ING Bank provided to CTP a syndicated loan with a value of EUR 96 million.
A company may guarantee the borrowings of other members of its group if the guarantor has a certain commercial benefit deriving from the guarantee.
The most important restriction provided by Romanian law on this matter is that the guaranteeing operation should not represent a financial assistance transaction.
The assessment of the commercial benefit is not subject to any particular criteria. Thus, the guarantor’s directors shall carefully assess each case, considering the ratio between risks undertaken and the potential benefits that might be obtained by the guarantor, and also the general financial situation of the borrower, the general and specific terms of transaction and the group relationship.
According to Romanian law, financial assistance is prohibited. This interdiction is stipulated specifically only for the joint stock companies, but there are opinions arguing that it should also be applied to limited liability companies.
Secondly, as shown at question 2.1, a guarantor should have a certain interest in relation to any guarantee granted to support borrowings of another corporation. The apparent lack of counter-performance when a company guarantees the loan taken by an affiliate is not automatically equivalent to an act of no social interest.
Also, the Romanian Company Law provides that joint stock companies cannot guarantee the borrowings of its directors and the borrowings of companies where directors or their spouses or relatives are directors or shareholders with more than 20% of the share capital.
If one of these rules are breached, the guarantee will be declared null and void and can attract criminal liability of the directors in specific cases.
Another requirement set by the law for the guarantor is to possess and maintain sufficient assets in order to cover the secured liabilities, except where the creditor requires that the guarantor be a particular person.
In order to be able to grant loans, a company must have lending activities included in its scope of activity, and be appropriately authorised to perform such activities.
In the case of affiliated companies, in order not to fall within the scope of normative acts applicable in the field of financial-banking activities issued by the National Bank of Romania, the borrowing company will have to prove the necessity, the opportunity and the efficiency of such a lending operation (that is, when the loan is granted between the members of a company group).
Usually, there is no need for such consents. Still, in the case of joint stock companies, the board of directors or the directorate will be able to conclude legal acts in the name of and on behalf of the company to establish security interests over the company’s assets whose value exceeds half of the book value of all the company’s assets at the date of conclusion of the legal act, though only with the prior approval of the general meeting of shareholders.
In addition, when making any payments equal to or greater than EUR 50,000 or equivalent to non-residents, residents of credit institutions have the obligation to fill in a form provided by the credit institution used for the payment or by the payment authority. Also, credit institutions may use forms according to their own requirements in order to make any payments to non-residents with a value of less than EUR 50,000 or equivalent at the date of payment.
In general, no (except for the approvals for the guarantees referred to in question 2.4).
Usually, there are no obstacles to enforcement of a guarantee. Yet, in case of foreign lenders, the borrower can be restricted or limited from paying due amounts and the lender can be restricted from exercising its rights against a borrower. This safeguard measures may be imposed by the National Bank of Romania according to the regulation on the foreign exchange regime.
The Civil Code provides the following types of collaterals available in order to secure lending: pledge and immovable mortgage.
An agreement in relation to each type of asset is not required, only a distinction between movable and immovable property and shares.
Firstly, a general pledge agreement may be concluded that covers most types of asset, such as bank accounts, stocks, inventory, receivables, intellectual property, intangible assets and universalities, or it can be divided into many agreements for each type of asset.
Secondly, in order to take a collateral security over the real estate of the borrower, an immovable mortgage agreement is usually used, which may include the rent and insurance pertaining to the real estate.
Thirdly, the share mortgage agreement is used when the lending transaction is secured by the shareholders of the borrower company with their own shares.
Collateral security can be taken over land, plant, machinery and equipment.
In cases regarding land, an immovable mortgage agreement will be concluded. The agreement will be authenticated by a public notary and registered in the Land Book. If there are some movable assets as accessories to the real estate, the agreement will also be registered in the Electronic Archive.
Plant, machinery and equipment are usually brought as security by means of a pledge agreement. This does not require authentication by a public notary, only a deed that describes the assets with sufficient precision. A description is sufficiently precise, even if the asset is not individualised, insofar as it reasonably allows it to be identified.
According to Romanian law, collateral security can be taken over receivables by way of pledge. The mortgage may have as its object either one or more receivable or a universality of receivables.
The debtor of the pledged debt must be notified in writing, with the notification coming into effect as of the date on which the debtor received the communication. On the other hand, the effects of the notification are not conditional on the debtor’s effective receipt of the notification; according to the law, the pledge lender is only obliged to inform the debtor about establishing the mortgage.
A pledge on a receivable that is also guaranteed with a movable or immovable mortgage must be registered with the Electronic Archive or the Land Book.
A pledge of a receivable confers upon the creditor, when the conditions for the commencement of forced execution are met, the right to take over the title of the claim, to demand and obtain the payment or, at his choice, to sell the claim and to take the price, all within the guaranteed amount.
According to Romanian law, collateral security can be taken over cash deposits in bank accounts. In this case, the bank account must be individually identified in the mortgage agreement.
The publicity of the mortgage on the bank accounts opened at a credit institution is made by registering the mortgage in the archive or can be satisfied by checking the account.
In order to ensure priority, the lender should hold control over the mortgaged bank account.
A creditor acquires control over an account if (i) the mortgage lender is the actual credit institution where the account is opened, (ii) the creator, credit institution and creditor agree in writing that the credit institution, without requiring the consent of the mortgage constituent, will follow the instructions by which the creditor owns the amount in the account, or (iii) the mortgage creditor becomes the account holder.
Collateral security may be taken over shares in companies incorporated in Romania, usually by means of a pledge.
A pledge of the shares shall be made by means of a private signature, showing the amount of the debt, the value and the category of the guaranteed shares, and in the case of registered or bearer nominatives issued in the material form, also by mentioning the pledge by title, signed by the creditor and the shareholder or their trustees.
The pledge shall be registered in the register of shareholders held by the board of directors, respectively by the directorate, or, as the case may be, by the independent company keeping the shareholder register. The pledge creditor will receive the proof of registration.
The pledge becomes opposed to third parties and acquires its rank in the order of preferred creditors as of the date of registration in the Electronic Archive of the Real Securities Guarantees.
Even if the legal basis of the constitution, transfer, restraint or extinction of the collateral security was constituted by the application of another law, the mortgage will be subject to the law of the place where the asset is situated. The validity, the publicity and the effects of the mortgage or pledge will be subject to Romanian law, it therefore being necessary to conclude one of the mortgage agreements shown above.
Under Romanian law, a general pledge agreement may be concluded over inventory. This agreement is not subject to the authentication of the public notary, but the assets must be described with sufficient precision. As mentioned above, a description is sufficiently precise, even if the asset is not individualised, insofar as it reasonably allows it to be identified.
The description can be made by drawing up a list of mortgaged movable assets, by determining the category to which they belong, by indicating the quantity, by setting a determination formula and by any other means that reasonably allows the identification of the mortgaged movable asset.
There is no such prohibition according to Romanian law; therefore a company may grant a security interest in order to secure its obligations under a credit facility both as a borrower and as a guarantor of the obligations of other borrowers and/or guarantors of obligations.
As a general rule in the Romanian procedure related to granting security over different types of asset, there is no stamp duty or other similar fee.
The only fees payable are those associated with: the registration of mortgages in the Electronic Archive or other public register; the authentication of immovable mortgage agreements by a public notary and authorised translations of finance documents; and the registration of such an agreement in the Land Book.
Generally, the notification and the registration of securities does not involve a significant amount of time. In order to register a deed or a court decision in the Land Registry, it usually takes a few days and in the Electronic Archive, a few minutes. The authentication of an immovable mortgage agreement by a public notary usually takes a few hours. The fees payable in order to register the security is calculated proportionally with the value of the guaranteed asset, but is not a costly procedure.
In order to create a security, the articles of association of the company should mention the approval levels for a facility or it can issue a board decision on the matter.
As mentioned above, for joint stock companies, if the security exceeds half of the book value of the company’s assets at the date of conclusion of the legal act, the security may be granted only with the prior approval of the general meeting of shareholders.
In case of borrowings under a revolving credit facility, there is no special priority. The guarantee structure is flexible, including mortgage guarantees on equipment, machinery, and real estate.
(iv) payment of the shares thus acquired shall be made only from the distributable profit or from the company’s available reserves, entered in the last approved annual financial statement, except for the legal reserves.
If own shares are acquired for distribution to the employees of the company, the shares thus acquired must be distributed within 12 months from the acquisition date.
The law provides that the subscription, acquisition or holding of shares in a joint-stock company by another company where the joint-stock company directly or indirectly holds the majority of the voting rights or whose decisions may be significantly influenced by the joint-stock company is considered to be carried out by the joint-stock company itself.
The provisions mentioned above shall also apply when the company through which the underwriting, acquisition or holding of such shares is performed is governed by the law of another state.
Moreover, a company may not make advances or loans or provide collateral security for the subscription or acquisition of its own shares by a third party. This provision shall not apply to transactions in current operations of credit institutions and other financial institutions.
Conclusion: in this situation, it is considered that the acquisition is carried out by the joint-stock company itself, thus the provisions under situation (a) are applicable; namely a company may not provide any financial assistance in the form of a loan, guarantee or security interest for the acquisition of its own shares as these ways of acquisition are not compliant with the four cumulative conditions provided above.
Moreover, providing loans or collateral security to a third party is expressly forbidden.
According to the provisions governing the mandate contract, the trustee can make conservation and administration acts (general mandate) and also disposition acts (special mandate – expressly empowered). Also, the mandate extends to all acts necessary for its execution, even if not expressly stated.
Moreover, according to the law, the administrators of a company are allowed to do all the operations required to carry out the object of the company’s activity, except for the restrictions shown in the Articles of Incorporation.
The acts of disposition regarding the assets of a company may be concluded pursuant to the powers conferred to the legal representatives of the company, as the case may be, by law, by the Articles of Incorporation or by the decisions of the company’s statutory bodies adopted in accordance with the provisions of the law and of the company’s Articles of Incorporation. A special power of attorney in authentic form for this purpose is not necessary, even if the acts of disposition have to be concluded in authentic form.
The obligations and liability of administrators are governed by the provisions of the mandate contract and those specifically provided for by the law.
In this particular case, the receivables assignment involves the transfer of one or more receivables from the primary creditor (acting as assignor) to a new creditor (acting as assignee) by means of a bipartite agreement, generally concluded between the creditors, while the assigned debtor is not even notified about this agreement. The consent of the debtor is required only when, as occasion requires, the debt is essentially linked to the person of the creditor.
The receivables assignment transfers to the assignee all the rights of the assignor relating to the assigned receivables and also the securities and all related accessories of the debt. However, the assignor cannot transfer to the assignee, without the consent of the pledger, the possession of the pledged asset to the assignee.
There are no special requirements necessary to make the loan and guarantee enforceable by the lender that took over the loan from the primary lender. However, the forms of publicity regarding the guarantees of the loans must be complied with.
The tax for the revenue in the form of interest paid by the borrower to a foreign lender is 16% and will be withheld by the borrower from the moment when the interest is paid. The abovementioned tax may be different where double tax treaty or EU regulation is applicable.
Where a lender is enforcing a security against a debtor (borrower or guarantor), he is not liable for any tax on proceeds of such a claim, except where the lender is a natural person.
As an exception, there are no requirements to deduct or withhold tax from interest payable on loans if both the borrower and the foreign lender are affiliated companies and the foreign lender has its headquarters in an EU country.
There are no tax incentives preferentially provided to foreign lenders.
With an immovable mortgage, the fee to be paid for its registration with the Land Book is composed of a fixed tax of RON 100 and a tax of 0.1% of the value of the secured receivable, according to Annex no. 1, point 2.3.3. of Order no. 16/2019 on the approval of tariffs for the service provided by the National Agency of Cadastre and Real Estate Advertising and its subordinated units and an authorisation fee for those who carry out specialised works of cadastre, geodesy and cartography.
With a movable mortgage, the charges for signing the credit agreement and the related guarantee in the National Registry for Security Interests are borne by customers.
Fees for guarantee notices were initially established by art. 27 of Law no. 297/2018. The amount of taxes is updated by Government decision, depending on the official rate of inflation.
Thus, at present, the fee charged for submitting a notice is RON 30.
A foreign lender in receipt of Romanian-source interest income would be liable to Romanian income tax, according to arts 222 and 223 (1) (b) of the Romanian Fiscal Code, except where double tax treaty or other EU regulations are applicable.
In addition to the cost of registration of the collateral security mentioned in question 6.2 above to create a valid mortgage over real estate, the agreement must also be notarised, and notary fees can be quite significant, varying depending on the value of the secured amounts and the mechanism used for establishing the security. Where the loan agreement is not considered under its applicable law as being an executory title, the enforcement of the mortgages over real estate may raise problems.
Lenders are not be subject to such costs, as, according to the practice of the Romanian market, these costs are borne by the borrower; nevertheless it is advisable that parties reach an agreement regarding the allocation of such costs.
No. However, on 1 January 2018, the applicable rules for deductibility of expenses were completely changed.
The Romanian Courts recognise the foreign law of a contract, but the internal legislation may raise some debate in connection with this issue. In accordance with the Romanian Civil Procedural Code, in a case which has an extraneity element, the court will apply the Romanian procedural regulation (“forum regit processum”), as a principle in accordance with art. 1088 of the Civil Procedural Code. Nowadays, the majority of foreign civil international legislation is built in accordance with this principle, without admitting any waiver.
However, the qualification of an issue as being governed by the procedural rules or by substantial rules will be made in accordance with the internal legislation, excepting the legal entities that have no correspondence with Romanian bodies. Thus, the quality of the parties, the object and the scope of the claim will be set in accordance with the law that governs the merits of the dispute. The evidence and the evidence power of the document will be made in accordance with the law applicable to the contract, whenever the law of the parties allows this.
In consequence, the parties may choose any substantial law in the agreement, but if they choose to commence legal proceedings in front of Romanian Courts, the Romanian procedural laws will be applied. In the latest situation, the substantial law of the agreement shall be used, excepting the aforementioned features.
Regarding a contract that has a foreign governing law, in accordance with EU Regulation no. 593/2008, on the law applicable to contractual obligations (Rome I), courts in Romania generally enforce such contracts, provided they have jurisdiction for claims under such contracts.
In this case, a distinction between the English courts and the courts in the USA (namely, New York Courts) should be made. In accordance with EU Council Regulation no. 1215/2012, on jurisdiction and enforcement of judgments in civil and commercial matters (“Regulation Brussels I recast), a ruling rendered in an EU Member State shall be recognised without any special proceedings in any other EU Member States, unless the recognition is challenged.
However, in accordance with art. 45 of the aforementioned Regulation, on the application of any interested party, the recognition of a judgment may be refused, taking into consideration a few conditions stressed by this legal provision.
Regulation no. 1215 does not apply to judgments rendered by the NY Courts. In accordance with the Romanian Civil Procedural Code, foreign judgments are fully recognised in Romania (i) if they refer to the personal status of the citizens of the state where they were ruled, or (ii) if they were ruled in a third state first recognised in the state of citizenship of each party or, if recognition has been rendered on the basis of the law determined as applicable under the Romanian private international law, if they are not contrary to the public order of Romanian private international law and the right to defence has been fulfilled. Rulings other than those mentioned in the first paragraph may be recognised in Romania in order to benefit from “res judicata” (claim preclusion), if the following conditions are met cumulatively: (a) the judgment is final according to the law of the state where it was rendered; (b) the court which ruled it had, under the law of the state of residence, jurisdiction to hold the proceedings without, however, being based exclusively on the defendant’s presence or property not directly related to the dispute in the state in which that court is situated; or (c) there is reciprocity regarding the effects of foreign judgments between Romania and the state of the court that ruled the judgment.
Also, if the judgment has been given in the absence of the party who has lost the case, it must also declare that the party concerned has been served in good time both with the summons for the substantive debate and with the referral of the court and that it was given the opportunity to defend itself and to appeal the decision.
Unless some prior conditions are met, the court will not rule on the merits of the foreign ruling and will not proceed on amending it.
Firstly, we should make a distinction depending on the enforceable character of the agreement under discussion. If the contract is governed by Romanian law and the enforceable character is recognised, a claim submission will not be necessary and the contract shall be enforced in accordance with the Romanian Civil Procedural Code (as it will be stressed below). If the contract is governed by foreign law, an application in court shall be necessary, in order to obtain a ruling and then enforce it.
A foreign company may submit an application to the Romanian Courts in order to obtain a favourable ruling against a debtor which is in payment default. This application may take six months to one year, depending on the circumstances of the case, considering that the debtor has no legal defence.
After the ruling becomes definitive and all the appeals are ruled, a foreign lender will follow the enforcement procedure in front of a bailiff. This procedure may also take three months to one year depending on the assets that are executed. Seizure of the bank accounts may solve the debt recovery earlier than the execution of a real estate or mobile goods (that require a more complex procedure).
For example, in case of real estate enforcement, the bailiff will organise a public auction in order to sell the asset and recover the enforced amounts. The creditor may choose to adjudicate the real estate on behalf of its receivable, if its economic reasons are in this respect.
Regarding mobile goods, depending on their specifications, their enforcement requires the presence of the Police authorities in accordance with art. 659 of the Romanian Civil Procedural Code. Also, the enforcement of such assets will be considered as being performed, only after the bailiff identifies the goods, which is rather difficult. The possession document gives the creditor the right over those assets.
We should stress that if the foreign lender holds a letter of guarantee (even issued by a foreign bank) against the Romanian debtor, this instrument shall be enforced immediately by the bank at the first demand of the creditor, in accordance with Paris Publication no. 758, related to the execution of such autonomous instruments. The only requirement in this respect is to indicate to the bank the contractual provision that was breached by the Romanian company.
Regarding the enforcement of collateral securities, as mentioned above, this stage requires a procedure in front of a bailiff. After the registration of the enforcement submission, the bailiff shall request court approval for initiating the enforcement procedure. This approval is provided by art. 666 of the Romanian Civil Procedural Code. After the court grants this approval (the approval is based on form condition verifications), the executor will start the enforcement procedure: identify the debtor’s assets (that are located in the bailiff’s territorial division); transmit seizure letters to all the banks; and try to identify if the debtor has mobile assets or real estate assets in the Land Book and with City Hall. Also, the bailiff may request Trade Registry information about the debtor’s involvement in other companies, in order to seize these assets also.
As mentioned in question 7.3, the real estate execution requires the organisation of a public auction, in accordance with the provisions of art. 846 of the Romanian Civil Procedural Code. The real estate sale advertisement will be published at the bailiff’s office, at the City Hall where the asset is located and also at the executing court. This advertisement is usually published in national newspapers, in order to ensure full advertisement of the auction.
There are no specific restrictions applying to foreign lenders in case of submitting a court application against a company or foreclosure on collateral security.
It should, however, be noted that foreigners who submit claims in Romania should set a procedural headquarter in Romania for the communication of procedural documents (usually the lawyer’s office). If they do not comply with this legal requirement, the Romanian Courts will communicate the procedural documentation by post and the post receipt submission will be considered the evidence of a legal summoning procedure.
Also, all foreign documentation submitted before the Romanian courts will be translated into Romanian language by an authorised translator.
According to the Romanian legislation, from the date of the opening of the bankruptcy, reorganisation or similar proceedings, all judicial or extrajudicial claims against the insolvent/bankrupt debtor or any enforced execution proceedings are legally suspended. The main debt and all the penalties (contractual ones or legal interest) should be capitalised only by registering on the table of creditors. In this respect, the interested creditors may submit a registration petition to the judicial administrator/liquidator and in front of the insolvency court. This submission will show the amount of the receivable and its contractual and legal grounds. The judicial administrator/liquidator shall admit or dismiss the request of registration, depending on the grounds of the receivable. However, the creditor may challenge the liquidator/judicial administrator’s decision in the insolvency court.
The Romanian Insolvency Law also stresses that no interest, increase or penalty, collectively called ‘accessories’, will be added to the receivables borne before the commencement of the insolvency procedure, except for guaranteed creditors (that hold a mortgage), which will be registered on the definitive table of creditors with the market value of the guarantee. This value will be set by a valuation report and in case the value resulting from the report is higher than the initial amount registered on the table, the favourable difference will be distributed to the guaranteed creditor. This means that the Romanian legislation gives to the guaranteed creditors additional rights other than those applicable to the rest of the creditors participating in the insolvency procedure, in order to add securities to their guaranteed receivable.
Also, in case no reorganisation plan is confirmed, all the penalties, legal interest and additional expenses borne after the initiation of the bankruptcy procedure will be paid in accordance with the contractual documentation and the payment chart of the reorganisation plan. In case the reorganisation plan fails, all the accessories will be owed by the debtor until the initiation of the insolvency procedure.
According to art. 1125 of the Romanian Civil Procedure Code, a foreign arbitral award shall be enforced in Romania if the dispute is not contrary to the public policy of international private law. The procedure is provided by arts 1124–1134 of the Romanian Procedural Code.
At the same time, the Romanian Civil Procedure Code (art. 1065) stipulates the possibility of choosing the most favourable law (“mitior lex”): the New York Convention; or the Romanian Civil Procedure Code.
In other terms, the grounds for dismissing the recognition or the enforcement of the awards are identical in both normative acts because the Romanian Civil Procedure Code takes on the provisions of art. 5 of the New York Convention.
According to the Civil Procedure Code, in order to enforce foreign arbitral awards, an application for approval of the execution shall be submitted to the Tribunal, attached to the said award the arbitral convention translated in Romanian and over-certified by the Consulate. There is no requirement for a prior exequatur decision in order to address an application for declaration of enforceability. We should also stress that the aforementioned procedure is also called the exequatur procedure but this does not imply the involvement of a judicial executor (bailiff). This could have led to a confusion of terms.
Anyway, the Romanian Court shall only verify some prior procedural issues and will not argue the merits of the arbitral award.
According to the Insolvency Law, from the opening date of the insolvency proceedings, all judicial, extrajudicial actions or enforcement measures for recovering any receivables against the debtor’s assets are suspended.
The lenders can recover their claims, but only within the insolvency proceedings by submitting an application for receivables acceptance with the competent court and abiding by special rules provided under this procedure.
However, under the security held, the lender becomes a secured creditor and has certain preferential rights in the insolvency proceedings for the satisfaction of his claim.
Taxes, stamps and any other fees incurred with respect to the sale of the respective secured asset.
Receivables of utility services providers arising after the opening of the insolvency proceedings.
Remuneration of the judicial administrator.
Receivables of other secured creditors relating to the same secured asset if these arose during the insolvency proceedings.
Creditors granted with security over an asset have priority over that asset or the equivalent value of that asset, with the observance of the aforementioned limitations.
Fees, stamps or any other expenses related to the insolvency procedure.
Claims resulting from financing granted during the insolvency proceeding.
Claims arising from the debtor’s activity after the opening of the insolvency proceedings.
Receivables representing amounts owed by the debtor to third parties under alimony obligations.
Receivables representing amounts established by the syndic-judge for supporting the debtor and their family, if the debtor is a natural person.
Receivables representing banking loans, with accrued expenses and interest, resulting from product delivery, services or rents.
receivables resulting from gratuitous acts.
Where more creditors are granted the same security interest over the same asset, the priority is determined by reference to the moment the publicity formalities were performed (that is, registration with the Land Book or with the National Registry for Secured Transactions).
Therefore, on registration with the relevant public registry, the respective security interest ranks before the claims of any unsecured creditors and of the creditors holding subsequently registered security interests in respect of the same asset.
Where two or more creditors have the same priority rank, the sums are distributed proportionally by reference to the sum relating to the receivable of each such creditor.
According to the law, the insolvency procedure does not apply to public institutions, individuals, professionals who practise liberal professions (e.g. lawyers, doctors, architects, assistants, executors, experts, pharmacists) and to professionals who are subject to special provisions regarding their insolvency regime.
Also, the insolvency procedure is not applicable to the pre-university and university education units and institutions, as well as to the entities stipulated in art. 7 of the Government Ordinance no. 57/2002 on scientific research and technological development.
Persons performing liberal professions are liable civilly and disciplinarily for the damages caused in the exercise of their profession, according to special normative acts that regulate organisation and exercise of the respective profession.
Government Emergency Ordinance no. 46/2013 on the financial crisis and the insolvency of territorial-administrative units establishes the general framework and collective procedures for covering liabilities of the administrative-territorial units in the financial crisis or in insolvency.
Also, as of 1 January 2018, the Insolvency Law of Individuals (personal bankruptcy) entered into force.
In our legal system, the only creditors who can seize the assets of a company without court intervention are public institutions, the most common situation being the seizure performed by the Public Finance Administration for the recovery of tax liabilities owed by taxpayers to the state.
However, the Civil Code provides certain alternative enforcement measures for creditors, such as: (a) the possibility to temporarily take over mortgaged assets, for administration purposes, until the claims are satisfied; and (b) the possibility to appropriate the asset in order to extinguish the receivable, under certain conditions provided by the law.
Also, if the lender holds an enforcement title as defined by Romanian law (exchange bills, promissory notes, credit agreements under Romanian substantial law), it can easily be enforced, since the enforcement court intervention is purely a formal one, the court having the sole obligation to endorse forced execution in a non-contentious proceeding. After the writ of execution is given, the bailiff can take any and all the necessary measures for seizing the company’s assets.
In Romania, a contractual choice of forum is generally permissible and legally binding. Certain form requirements may apply. However, the choice of forum is not valid if it leads to the abusive deprivation of the protection provided by a Romanian court to one of the parties. Also, if other courts have exclusive jurisdiction, no choice of forum is permissible.
A waiver of sovereign immunity from jurisdiction is generally legally binding, on the condition that the waiver is authorised by law or by international conventions to which Romania is a party. Also, the legal entities governed by public law having economic activities in their scope of activity are able to conclude arbitration agreements, unless the law or their act of incorporation provides otherwise.
In Romania, a company could become a lender following the authorisation of its activity by the National Bank of Romania (NBR). An entity which carries out banking activities on a regular basis in Romania must either be duly licensed as a creditor institution or as a financing company, or non-banking financial institution.
Also, a company can grant loans to another company occasionally, but without doing it with professional title. In this case, the Romanian law provides that these companies are not subject to the legal provisions on credit institutions.
A creditor institution must have its own funds or a level of initial share capital that cannot be less than EUR 5 million. During the operation of the creditor company, the share capital must not fall below this level, otherwise the NBR may close its activity.
In order to obtain the approval, the applicants shall submit to the NBR a plan of activity, including the types of activity to be carried out and the organisational structure and showing the ability to achieve their objectives under a prudent and healthy banking practice.
Regarding the structure of the creditor, the company must have a rigorous management framework which includes processes to identify, manage, monitor and report the risks to which it is or might be exposed, adequate internal control mechanisms, including administrative and accounting procedures, rigorous policies and remuneration practices, which promote and agree with healthy and effective risk management.
The management of the creditor shall be provided by at least two people with good reputations and adequate banking experience.
(a) Credit institutions authorised and supervised by the competent authority of a Member State may be considered as creditors by the establishment of branches or by the provision of services directly, if those activities are covered by the authorisation granted by the competent authority of the country of origin.
(b) A credit institution from another Member State may carry out activities directly in Romania, pursuant to European Directive no. 2013/36/EU and European Regulation no. 575/2013, if authorised by the competent authority of the Member State.
(c) A credit institution authorised in a Member State may set up a branch in Romania or provide services directly on the basis of the notification sent to the National Bank of Romania by the competent authority of the country of origin.
(d) A credit institution in a third country can only operate in Romania by setting up a branch in Romania authorised by NBR. The initial capital of the branch may not be lower than the EUR 5 million.
(a) NFI may grant credits but cannot attract deposits. This last activity can only be done by credit institutions.
(b) NFIs are divided into two categories: NFIs registered in the Special Register of the National Bank; and those entered only in the General Register. In order to be part of the first category, non-bank financial institutions must meet certain capital criteria, the amount of credits granted, and total assets requirements.
(c) In order to receive an authorisation from the NBR, a bank must prove that it has an initial minimum capital of EUR 5 million.
(d) A non-bank financial institution shall have a share capital of only EUR 200,000, or EUR 3 million in the case of NFIs granting mortgages.
Non-compliance with such banking rules may lead to the criminal liability. According to the Romanian law, it constitutes an offence and it is punishable by imprisonment from one to five years.
Romanian legislation does not contain provisions on syndicated facilities. Although in practice there are situations in which syndicated loans are used by companies, the Romanian legislation does not contain provisions on this type of institution. Usually such contracts are drafted in English and governed by UK law, with the mention that where applicable, Romanian legislation prevails.
Yes, there are other material considerations which should be taken into account by lenders when they are participating in financings, which includes the establishment of personal insolvency for Romanian individuals.
The Personal Insolvency Law was inspired by the legislation applicable to the insolvency of natural persons in EU and aims to offer Romanian citizens similar rights (and obligations) as the majority of EU Member States recognise when their EU citizens declare insolvency.
the simplified insolvency procedure (applicable to individuals who lost over 50 per cent of their work capacity or qualify for standard retirement).
The relevant bodies that will apply the insolvency procedure to individuals are the insolvency commission (a new administrative body which will be established for the purposes of the personal insolvency of individuals), the insolvency administrator or liquidator and the courts.
While the banking industry is generally fine with the compromise solution enacted under the Personal Insolvency Law, it is yet to be seen to what extent individuals will try to abuse the newly introduced benefits.

References: art. 27
 art. 1088
 art. 45
 art. 659
 art. 666
 art. 846
 art. 1125
 art. 5
 art. 7