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Company Law

Law 31/1990 on trade companies (the Company Law) has seen a chain of amendments recently, the last being made after only six months after the previous one. Government Emergency Ordinance 82/2007 (the Amending Ordinance), published in the Official Gazette on June 29 2007, was adopted to fill in some gaps and eliminate ambiguities in the Company Law.

Directors/Administrators

The Amending Ordinance states that the Company Law provisions related to the administration of joint stock companies do not apply to limited liability companies (LLCs), regardless of whether or not the LLCs are under an auditing obligation.

This clarification sheds some light on the controversy whether the prohibition for administrators/ directors to conclude both a mandate and an employment contract applies solely to joint stock companies or to both joint stock and LLCs. Following this provision, the conclusion would be that the administrator/director of an LLC could combine the mandate and the employment contract. Concerning joint stock companies, the prohibition for administrators/directors to also conclude employment contracts with the company they manage is maintained. However, the Amending Ordinance clarifies that the directors' remuneration received on the basis of their management contract is considered a salary income from a fiscal point of view and taxed accordingly.

Through this amendment, it also clarified that the administrators of an LLC may represent the respective entity shareholders in a general meeting of shareholders resolution, which is prohibited in case of joint stock companies.

For both companies, the list of those prevented from holding the positions of administrator, founder, director, or member of the administration council has been expanded to include persons condemned with criminal offences related to money laundering and financing acts of terrorism.

Increase of LLC share capital

The Amending Ordinance stipulates that an LLC may increase its share capital using the same methods and sources provided for joint stock companies. This provision ends a long scholarly debate regarding the possibility of increasing the share capital of an LLC by compensation of the liquid and due receivables against the relevant LLC with its shares. This is clearly allowed under the new provisions.

Internal auditors

The change of the internal auditor in joint stock companies does not have to be registered with the Trade Register. However, the obligation is maintained for censors and financial auditors.

Offences

The act of not submitting the decisions of the general meeting of shareholders in joint stock companies with the Trade Register within 15 days is considered a civil offence and is liable for fines ranging from L5,000 to L10,000 ($2,200 to $4,400).

Under the Amending Ordinance it is no longer a criminal offence for a shareholder (the legal entity that has founded the relevant entity) to take a loan from the entity it controls, or which has control over it.

Transitory provisions

The Amending Ordinance gives joint stock companies six months to conform to the previous amendments dated December 2006 and the present amendments.

The amendment has rendered directors/administrators' employment contracts invalid. Derogating from the provisions of the Labour Code (which does not provide for this termination situation), employment contracts concluded before the date the Amending Ordinance entered into force cease to be valid from that date. The situation is similar for those who accept the mandate of director/administrator after the date the Amending Ordinance entered into force. In this case the employment contracts will cease on the date the mandate is accepted.

Clarification

Although not as substantial as the previous amendments of December 2006, the Amending Ordinance does clarify the distinction in the legal regime between LLCs and joint stock companies, and underlines more precisely that the regime for LLCs is more permissive than that for joint stock companies.

Maria Luiza Colonescu and Mihaela Maxim

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