The law applicable to cross-border public offers has been a cause of uncertainty among Romanian capital markets practitioners. Under Romanian international private law principles, the issuer's national law governs the acquisition of shares. On the other hand, practitioners considered that since such shares were to be distributed in Romanian territory, Romanian capital markets rules should also apply to a certain extent.
Following individual requests for clarification, the Romanian National Securities Commission (NSC) has issued several individual acts dealing with the law applicable to some special cases of cross-border public offers. In what follows, we present the content of two such individual acts.
In Individual Act 45/2006, NSC dealt with the law on the subscription of the employees of a Romanian subsidiary/branch of a foreign issuer of shares issued by the foreign issuer and traded on foreign regulated markets. NSC has decided that the law applicable to the subscription of such shares is the national law of the foreign issuer. However, Individual Act 45/2006 clearly states that the trading of such shares in a Romanian-regulated market will take place under the conditions established by Romanian law.
Since Individual Act 45/2006 refers generically to foreign issuers, it applies to both EU and non-EU issuers.
In 2007, NSC was called asked to decide on the law applicable to a public offer of securities of a non-EU issuer, performed in Romania and addressed either to (i) fewer than 100 investors, or to (ii) current or former employees. It issued Individual Act 59/2007.
In Individual Act 59, NSC decided that in the case of a public offer of securities of a non-EU issuer performed in Romania and addressed to fewer than 100 investors, the issuer's national law governs the conditions and effects of the transfer of such securities. If the securities are not to be admitted to trading in Romania (and the national law of the issuer is not Romanian law), then there is an obligation to notify NSC in advance of the terms of the offer.
A similar decision has been adopted with respect to the law applying to the public offer of securities of a non-EU issuer. These are securities already admitted to trading on a regulated market recognised by the EU, where the public offer is performed in Romania and addressed to current or former employees (the offer is excepted in the obligation to publish a prospectus). In this case, NSC decided that such an offer is governed by the applicable legislation of the home member state. Since the issuer is a non-EU entity, it appears that the applicable law is that of the member state of the regulated market where such securities are traded.
Also in this case, if the issuer does not contemplate the admission to trading of such securities on a Romanian regulated market and if the national law of the issuer is not Romanian law, the issuer needs to notify NSC in advance of the terms of the offer.
Analysis of the two acts indicates that that NSC's opinion is that when an offer is (i) performed in Romania by a non-EU issuer (ii) addressed to fewer than 100 investors or to the current or former employees of a Romanian subsidiary or branch of that issuer and (iii) not contemplated to be admitted to trading on Romanian regulated markets, its terms and conditions are those of the national law of the issuer, except when non-EU securities are already traded on a regulated market recognised in the EU – in that case the terms and conditions of the offer will be governed by the law of the home member state.
It appears that, even if the respective securities are not to be admitted to trading on the Romanian regulated markets, the respective non-EU issuer must notify NSC in advance of the terms and conditions of the respective public offer.
In accordance with the regulations governing NSC activity, the individual act (aviz in Romanian) is an act through which NSC formulates official answers to issuers regarding the application of law, or gives opinions regarding regulated markets and financial instruments. These acts are binding on third parties if published in an NSC official bulletin.
Because these acts represent answers to individual situations, interested parties should ask NSC about the application of the acts to their particular circumstances, until a more general regulation is published.
Adelina Iftime and Mihaela Maxim