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Enhanced creditor protection

As a part of the continuing process of harmonisation of local law with EC Law, Romania has recently transposed, through Law 284/2008 amending Law 31/1990 (Law 284/2008), the Directive 2006/68/EC of the European Parliament and of the Council of September 6 2006 amending Council Directive 77/91/EEC regarding the formation of public limited liability companies and the maintenance and alteration of their capital (Directive).

Law 284/2008 introduces into the Company Law certain principles of the Directive concerning standardised creditor protection by ensuring that creditors that comply with certain criteria may resort to judicial or administrative proceedings whenever their claims may be affected by the intention of shareholders to reduce the capital of a company.

Under Law 31/1990 (Company Law), the reduction of subscribed capital must be resolved by an extraordinary general meeting of shareholders (EGM). The reduction may be carried out through the following methods: (i) by decreasing the number of the shares; (ii) by decreasing the nominal value of shares or of the social parts (the name given to the shares in the limited liability companies); or (iii) by acquiring own shares, followed by their cancellation.

Furthermore, when the reduction is not caused by losses, it may be accomplished by: (i) the total or partial discharge of the shareholders' obligation to make contributions to capital; (ii) the restitution to the shareholders of a quota of their contributions, proportionally with the decrease of the share capital and equally established for each share; or (iii) other methods provided by the law.

Irrespective of the method chosen for the reduction, the EGM resolution must: (i) observe the legal minimum capitalisation requirements (in the case of joint stock companies the minimum capitalisation is €25,000 ($33,000), and in the case of limited liability companies the minimum is roughly €50; (ii) explain the reasons for the reduction of capital; and (iii) describe the method used.

Because the reduction of capital may negatively affect the right of unsecured creditors to recover their debts, the Company Law takes over the provisions of the Directive and sets forth three main principles for the protection of such creditors, respectively, as follows.

  • The creditors whose claims against the company predate the publication of the EGM are entitled to obtain security for claims that have not fallen due by the date of the publication of the resolution.
  • These creditors are entitled to challenge in court the capital reduction resolution and to ask the court to oblige the company to grant the appropriate security, if it may be reasonably considered that the reduction of capital does have a negative affect on their ability to realise their claims.
  • The reduction of capital may not be implemented and no payments may be made to the shareholders until the date when: (i) the creditors realised their debts or obtained adequate security; (ii) the court either rejected the creditors' claim as inadmissible; or (iii) the court rejected such claim on the grounds that the company did grant adequate guarantees or on the grounds that such guarantees were not necessary when taking into account the value of the company's assets and such court decision became final and irrevocable.

This third principle, together with the possibility of obtaining a court award obliging the company to grant appropriate security, has been newly introduced by Law 284/2008 in order to further enhance the protection granted to the categories of creditors mentioned above.

The resolution of the EGM to reduce the subscribed capital may be implemented only after two months from the date when the EGM resolution has been published in the Official Journal.

The creditors may challenge the EGM resolution irrespective of the method chosen for the reduction. They must do so within 30 days of the publication of the EGM resolution in the Official Journal, the claim being lodged with the Trade Registry, which will transmit it to the competent court. The challenge will stay the implementation of the resolution until the court reaches a decision.

Without ensuring perfect creditor protection, the latest amendments brought to the Company Law do achieve in general the scope of the Directive by allowing creditors not only to challenge a potentially harmful resolution aiming to reduce the subscribed capital but also to apply to the appropriate authority (the court) in order to obtain the relevant adequate safeguards.

Delia Nitescu

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