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The Romanian legal system is formalist, and recent legislative changes have turned it into an excessively formalist one.

In what sense?

In the sense that, although verbal agreements are recognized by law as contracts, a handshake is not enough. Some of the reasons are imposed by law and others by practice. For example, if a dispute arises between the contracting parties, an agreement that is not embodied in a written contract can hardly be proven and not always completely. Therefore, although the law recognizes these “gentlemen’s agreements” as valid, the parties do not benefit from sufficient legal protection.

Situations that arise in the absence of written contracts

There are situations in which people choose to make verbal agreements and then send each other e-mails. What happens with this correspondence, what value does it have if we want to prove what was established through the verbal agreement?

According to the law, correspondence is only a secondary means of evidence. In no case does it have the “force” of a written contract. Sometimes correspondence can be even harmful for the parties because people tend to say as much as possible in correspondence. Either this is completely wrong. Any correspondence of the “fluvial novel” type has the effect of distorting the initial understanding.

Even the accepted invoices are not a guarantee for obtaining a court decision to compel the debtor to pay. People need to understand that invoices are NOT a contract. They have the role of an accounting supporting document and, possibly, a notification. But it does not clarify the contractual aspects and, sometimes in litigation, they can even be successfully fought.

On the other hand, verbal agreements are difficult to prove, but also difficult to execute. For what reason? For the simple reason that we are all human.

The answer is as simple as it is complicated to take this into account.

In negotiations, people promise, make compromises, increase, etc. and, in the end, conclude an agreement. Everyone has their own image of the details. Everyone has their own image of the discussion, which most often does NOT coincide with that of the contractual partner. In a way it is normal, because two contractual partners are in reality two people with opposite goals that converge in a single point, namely that they chose each other to carry out an operation and in this way they have mutual claims.

As an exercise in imagination, let’s say that the parties agree to paint a house in exchange for a price. But he does not conclude a written contract, but a verbal agreement. They establish that the materials are included in the established price. However, during the execution of the work, the provider realizes that the material requirement is much higher than anticipated, because only with the uncovering can he notice that some additional repairs are also necessary.

What happens in this case?

The owner will probably refuse to add some costs, and the provider will refuse to continue the work because it becomes too expensive for him. However, none of them will know how to proceed if their understanding has not become a written contract. Like in the previous example, in any type of convention, elements of surprise may appear or, even if they are not a surprise, the parties may not remember the details they did not consider important at the time of the agreement.

Our advice as specialists is that any agreement, however simple it may seem, should be transposed into a written contract. And any written contract should contain the details that the parties consider important, the expectations they have from the contractual partner. However, the drafting of the contract must be left in the hands of a legal specialist. Just like health, just like in any field where expertise and an overall vision is needed, a legal specialist will know: how to draw up a contract according to the needs of his client, he will know how to guide him along a path as sure as possible, you will know how to anticipate the effects of certain commitments.

All these things are called “Preventive Attitude”.

If you are foreign investor in Romania (legal or natural person) you should be aware of the double taxation treaties that Romania has signed so that not to pay taxes in more than one country. Romania has been signing this kind of treaty since before 1989.

In 2001 Romania and the Federal Republic of Germany signed such a Double Taxation Avoidance Agreement concerning mainly taxes on income and on capital. This Agreement refers to the following types of taxes which are under Romanian tax law: tax on income, tax on profit, tax on property, tax on agricultural income, tax on dividends. In the case of Germany the types of taxes covered by the present agreement are: the tax on income, the tax on corporation, the tax on land, and the commercial tax.

The Convention shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this Convention in addition to, or in place of, the existing taxes. Income derived by a resident of one of the countries from immovable property (including income from agriculture or forestry) situated in the other country may be taxed in that other country.

In the case of dividends paid by a company of one of the countries to a resident of the other country these may be taxed by that other country. However the rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 5 percent of the gross amount of the dividend.

Business profits of a resident of one of the country shall be exempt from tax by the other country unless the resident has a permanent establishment in that other country. If the resident has a permanent establishment in that other country, tax may be imposed by that other county on the industrial or commercial profits of the resident but only on so much of them as are attributable to the permanent establishment.

This Convention for the Avoidance of Double-Taxation also contains stipulations on the taxation of capital gain, independent professions, pensions etc. It is important to be noted that the stipulations of these Conventions must also be corroborated with EU regulations (applicable in Romania through the Fiscal Code).

If you are foreign investor in Romania (legal or natural person) you should be aware of the double taxation treaties that Romania has signed so that not to pay taxes in more than one country.

Romania has been signing this kind of treaty since before 1989. This is also the case for the United States of America. These two Contracting Parties have signed such a convention in 1974.

This Treaty refers to the following types of taxes which are under Romanian tax law: profit tax for mixed companies (Romanian and foreign); income tax obtained from agricultural activities; rentals; nonresidents; wages, salaries, fees, copyrights, and income from any other source received by individuals; enterprises other than mixed companies or state enterprises.

In the case of the United States, the Federal income taxes imposed by the Internal Revenue Code (other than social insurance taxes). This enumeration is not imitative.

Income from immovable property, including royalties and other payments in respect of the exploitation of natural resources and gains derived from the sale, exchange, or other disposition of such property or of the right giving rise to such royalties or other payments, may be taxed by the State in which such immovable property or natural resources are situated.

In the case of dividends paid by a corporation of one of the Contracting States to a resident of the other Contracting State these may be taxed by both Contracting States.

However the rate of tax imposed by the first-mentioned Contracting State on such dividends shall not exceed 10% of the gross amount of the dividend.

Industrial or commercial profits of a resident of one of the Contracting States shall be exempt from tax by the other Contracting State unless the resident has a permanent establishment in that other Contracting State.

If the resident has a permanent establishment in that other Contracting State, tax may be imposed by that other Contracting State on the industrial or commercial profits of the resident but only on so much of them as are attributable to the permanent establishment.

This Convention for the Avoidance of Double-Taxation also contains stipulations on the taxation of capital gain, independent professions, pensions etc.

Economic activities are classified by their codification, by fields and subfields of activity, and within the subfields, by specific activities.

The main domains are coded with 2 numbers, the subdomains with 3 numbers, and the activities themselves, each with a 4-digit code.

The classification of activities in the national economy of Romania – CAEN was updated in 2007 in compliance with the provisions of the European Commission Regulation no. 1,893/2006 amending the Regulation of the Council of the European Economic Community no. 3.037/90 regarding the Nomenclature of Activities from the European Community – NACE Rev. 2.

When registering an economic structure (commercial company, authorized natural person) in the Trade Register, it is necessary to indicate the coded activities with 4 digits. It is useful to know that the activities coded with 4 digits are generic names that include de facto or by assimilation several specific activities.

That is why it is useful to consult the CAEN Guideline, taken from the website of the European Commission

Once we have decided to enter into legal relationships of any kind with another person it is certain that several stages shall have to be undergone so that the desired goal is achieved.

Always the foundation of legal relationships consists of the date of: the stage of verifications and the stage of materialization of the negotiations through a written agreement.

The attitude that is necessary for us to adopt is the preventive attitude. The way in which we act throughout these stages is of great importance; during this period, you may build a more or less solid foundation for your future relationship.

In order for your actions to be considered as preventive attitude, we should proceed in the following manner:

A. In the initial phase of the negotiations:

  1. ask for information and documents not only related to the future contractual partner, but also to the object of the negotiations;
  2. analyze the received documents;
  3. verify the veracity of the information provided on the future contractual partner.

For example, it is advisable to:

  • verify the existence and functionality of the company with which you chose to conclude an agreement,
  • verify if the person who presents himself/herself as the legal representative of another person actually have this quality,
  • obtain an extract from the Land Book for information so that to discover the eventual details on the real estate which is the object of the negotiation,
  • verify the existence and/or the reality of the documents or the information, which are mentioned in a real-estate sale-purchase agreement,
  • realize other verifications prior to establishing an agreement, this depending on the types of contracts that you whish to conclude.

B. In the stage of the drawing up of the contract:

  1. materialize the result of the negotiations, in short, in writing, in order to be able to recall what exactly you convened upon and to what extent;
  2. ask for the help of a lawyer in drawing up the agreement; it is advisable to have a written document in any situation, however it may be harmful to “borrow” models that you adjust yourself. The personal adaptation of a contract is comparable to the treatment of health issues without the help of a doctor. There are no identical situations thus there are only customized solutions.
  3. seeing that one of the parties assumes the role of the supplier of the draft of the agreement, do not sign it as provided. Verify the content of the draft and in general seek the support the legal specialists in undergoing these verifications.
  4. Sometimes the clauses are unclear and most of the time they are drawn up in favor of the party which is the supplier of the agreement. Seek the support of a specialist in order to reword those clauses or to make the necessary modifications to the content of the agreement.

It should be understood, as it is advisable to be aware on what land you step on when it is covered with water, it is also advisable to be aware of what you may rely on when taking the first step into a legal relationship.

We, as legal specialists, know that it is cheaper for our clients to prevent problems; once the problem occurs, in the situation in which the client did not take the necessary precautions at the beginning of the legal relationship, it is much more costly to remedy the problem.

This is why, our advice is for you to call upon the legal services of a specialist regardless of the conjuncture and from the very beginning, taking into consideration the fact that any legal relationship has its own dynamic which may gradually, for various reasons, get out of control, some of them being completely unexpected.

The process of selling a property in Romania, may be a complex one depending on the legal status of the property and the taxes that need to be paid by the seller before and at the moment of the sale.

In order for a person (legal or natural) to sell property in Romania the land, building or both should meet a series of conditions such as: the real estate should be free of encumbrances (mortgage, limitations or court cases expressly notified to the Land Registry) or if these exist this shall be notified to the Buyer (not an obligation, but it may make the process go more smoothly); the existence of court cases related to that particular estate, the real estate should not have an interdiction to be sold etc. Also, so that the property may be sold with any hinderance its legal status at the Land Registry should be in order.

Regarding the seller the one who wishes to sell property in Romania should have legal ownership over the real-estate, as nobody can sell something which does not pertain to him/her.

The seller shall then put the property on the market. The Seller has two main possibilities for this: either to conclude a contract for services with a real estate agent, or to designate a representative to deal with the selling of the real estate.

In a contract with a real estate agent, the Seller usually pays a commission of 1 up to 3 percent of the value of the transaction.

After this Buyers shall contact the Seller if they are interested in buying the property. The Seller may draw up a contract named unilateral promise to sell in which the Seller is obliged to sell the property and the Buyer has a limited period of time to decide if he desires to buy.

After the parties have agreed upon the property and its price then a sale-purchase contract may be drafter. Before the conclusion of the sale – purchase contract, the parties may sign a sale – purchase promise agreement stipulating that the sale – purchase agreement shall be drawn up in a determined period of time.

The sale-purchase contract must be authenticated by a public notary (the taxes for this may be paid by the Buyer or divided among the parties) in order fo it to be valid according to Romanian legislation. A series of documents must be presented to the notary by the seller: documents from the the fiscal authorities (stating that there are no outstanding debts), from the Land Registry ( stating that the seller is the owner) etc.

According to the Romanian Law, the Seller is held responsible for any hidden vices that Buyer may subsequently find by the real estate and also for any eviction against the Buyer.

The Legality Team are specialised in matters relating to the buying and selling of property in Romania and may assist you through the entire procedure.


The main management structure of the company in Romania is the general meeting of associates / shareholders. The constitutive act establishes the rules for convening and adopting decisions and whether the exercise of the vote can be delegated by special mandate by the associate / shareholder who cannot take part in the meeting. In the limited liability company, each shareholder entitles the holder to one vote in the respective meeting. The general meeting of associates has the following main obligations: ✓ to approve the annual financial statement and to establish the distribution of the net profit. ✓ to appoint the administrators and the censors, to revoke / dismiss them and to discharge them, as well as to decide to contract the financial audit, when it is not obligatory, according to the law; ✓ to decide the pursuit of the administrators and censors for the damages caused to the company, designating also the person in charge to exercise it; ✓ to modify the constitutive act.
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The limited liability company is the most common form of company in Romania, being the legal entity that best serves the interests of investors both from the point of view of the reliability of the activity, and from the perspective of its management. The limited liability company is abbreviated "SRL" in Romania and is the equivalent of the American limited liability company Limited Liability Company (abbreviated to LLC) or the German economic structure "Gesellschaft mit beschränkter Haftung" (abbreviated to GmbH), or the structure called "limited" , the structure used in most Latin American states.
The limited liability company is characterized by:
✓ the character intuitu personae, which means that this economic structure is based on the trust between the associates;
✓ the division of the share capital into fractions called shares, which cannot be negotiable securities;
✓ the liability of the associates is limited to their contribution to the share capital.
The limited liability company may also have a single partner, natural or legal person, of Romanian or foreign nationality, who will be the owner of all shares. Instead, the maximum number of associates is 50 people.
At present, the Romanian law no longer conditions the subscription and payment of a certain amount as share capital.
Through registration, the company acquires legal personality, becoming, under the law, a collective subject of law. The conclusion given by the judge is sent, ex officio, to the Official Gazette of Romania for publication at the expense of the company and to the Financial Administration in whose territorial area is the main headquarters of the company for fiscal registration, mentioning the registration number in the Trade Register .

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