Law on the amendment of Company Law no. 31/1990 regarding the sole shareholder of a limited liability company (in Romanian “societate cu răspundere limitată” or “S.R.L.”) and the registered office

On July 2, 2020, the President of Romania signed the Decree on the promulgation of the Law for the amendment of Company law no. 31/1990 to repeal Article 14, amendment of para. (1), (3), repeal of para. (4) and introduction of a new para. (6) under Article 17 of the Company Law no. 31/1990.

The law regarding the amendment of Company Law no. 31/1990 (the “Company law”) (the “Amendment Law”) concerns the repeal, in full, of Art. 14, which provides the interdictions of an individual or a legal entity to have the capacity of sole shareholder in more than one limited liability company (“S.R.L.”), as well as the interdiction of a S.R.L. with a sole shareholder to be the sole shareholder of another S.R.L.

As a result of the repeal of article 14, is it allowed both for an individual or legal entity to be sole shareholder in more than one S.R.L. as well as for a limited liability company with sole shareholder to have the capacity of sole shareholder in another S.R.L.  

The Amendment Law also provides the following amendments regarding Article 17 of the Company law:

1.       The amendment of para. (1) of Article 17 by the elimination of the provisions regarding the on the submission of the statement on own responsibility regarding the holding of the quality of sole shareholder in a single limited liability company at the moment of the authentication of the constitutive act or at the legal date registration thereof.

2.       The amendment of para. (3) of Article 17 by the elimination of letters b) and c). Thus, upon registration of the company and upon change of a company's registered office, only the document attesting the right of use over the space where the registered office shall be located would be required. The document attesting the right of use over the space where the registered office shall be located should be registered with the competent fiscal body of the National Agency for Fiscal Administration, as per the applicable legislation. 

In the legislator’s view, it is no longer necessary to prove that within that space, no other offices are registered, and no affidavit, in authentic form, regarding compliance with the conditions on the registered office, as provided in the current form of the law, under para. (4), will be required.

3.       The repeal of para. (4) under Article 17.

As a result of the elimination of this paragraph, several companies will be able to operate in the same space and it will no longer be necessary to divide the space.

4.       The introduction of a new para. (6) under Article 17, which provides that the approval (in Romanian “aviz”) on change of destination of collective buildings with housing regime, specified by Law no. 230/2007 on the establishment, organization and functioning of associations of owners, is not necessary when the director or, as the case may be, the directors, execute an affidavit stating that no activity is carried out at the respective registered office.

The elimination of the above restrictions, especially the one on the sole shareholder, has long been awaited by the business community, especially by foreign investors coming from countries where this restriction did not (longer) exist. The elimination of the two restrictions is likely to encourage investments in Romania. However, the promulgation of the Amendment Law had a sinuous path, being:

• initially rejected by the Senate in 2017;
• adopted by the Chamber of Deputies on December 18, 2019;
• sent for re-examination to the Parliament by the President of Romania on January 17, 2020; and
• on May 4, 2020, the Government of Romania filed a complaint of unconstitutionality regarding the form sent by the Parliament for promulgation after re-examination.

Regarding this latter obstacle of the Amendment Law, the Constitutional Court of Romania declined by decision 372 of June 17, 2020, published in the Official Gazette no. 542 of June 24, 2020, the complaint of unconstitutionality, as inadmissible (respectively ungrounded, regarding the amendment of Article 17 (1) of the Companies Law) on grounds of procedural flaws.