Although it is the legal act that regulates the establishment and operation of companies, Law 31/1990 does not give us a clear definition of closed or open joint stock companies. The definition of the types of closed or open companies is the result of an overall study of the legislation governing the two types of company.
Closed companies are those joint stock companies in which the shareholders are limited in the possibility of transferring their shares to other shareholders or, if they wish to transfer them to a previously determined third party, this transfer must be approved by the other shareholders.
Open companies are those joint stock companies established by public subscription or which, after their establishment as closed joint stock companies, become open companies by increasing their share capital by public subscription.
Therefore, even if a joint stock company is set up as a closed company, it may subsequently be converted into an open company and fall under the securities market regulations. This transition can be achieved by public subscription of shares. Public subscription of shares is the acceptance of a public offer to the general public to invest in the share capital of a capital company. This acceptance consists of the assumption of a firm obligation to invest in securities offered for subscription.
The purpose of making an offer is to achieve a specific objective, for example to form or increase the share capital of a open joint-stock company by attracting financial resources.
Initial public offering is the first public offering of shares of a public company, after which the company becomes an open company.
The initial public offering is made by an issuer offering for subscription a new issue of securities issued expressly for this purpose, with a view to placing them on the market.
A secondary public offering is made by an owner of securities offering for sale securities previously issued.
In other words, the general legal regime for shares issued by joint stock companies is subject to Law 31/1990, whereas the issue of shares from a public company or which intends to attract financial resources by organising a public offer for sale is subject to a special legal regime, and the special provisions of the updated Law 297/2004 on the capital market become applicable.