Cross-Border Mergers in Romania

What are cross-border mergers and what types of legal entities can take a part in these mergers under the laws of Romania?

Cross-border mergers can be carried out by Romanian joint stock companies (SA), partnerships limited by shares and limited liability companies (SRL), as well as by European companies (SE) with their registered office in Romania, with companies that have their registered office, central administration or principal place of business in another Member State of the European Union or of the European Economic Area and that have one of the legal forms listed in Directive (EU) 2017/1132 relating to certain aspects of company law.

Since 2023, Romanian law also regulates cross-border conversions (the transfer of a company's registered office to another Member State without liquidation) and cross-border divisions, under the rules transposing Directive (EU) 2019/2121.

Not every Romanian company may take part in a cross-border merger. Law no. 31/1990 excludes, among others, collective investment undertakings and investment funds governed by capital market legislation, companies subject to resolution or crisis-prevention measures, companies in insolvency or preventive restructuring proceedings, and companies in liquidation that have already started distributing their assets to shareholders.

Regarding what cross-border mergers imply more precisely, this concept covers four situations, namely:

1.     one or more companies, of which at least two are governed by the laws of two different Member States, are dissolved without going into liquidation proceedings and transfer their assets, in its entirety, to another company in exchange for the issue of shares in the acquiring company to the shareholders / associates of the company or companies being acquired and, optionally, a cash payment not exceeding 10% of the nominal value of shares so distributed;
2.     more companies, of which at least two are governed by the laws of two different Member States, are dissolved without going into liquidation and transfer all their assets to a company they establish , in exchange for the issue of shares in the new founded company to their shareholders / associates and, if applicable, a cash payment not exceeding 10% of the nominal value of shares so distributed;
3.     a company is dissolved without going into liquidation and transfers all its assets to another company which holds all its shares or other securities conferring voting rights in the General Assembly; one or more companies are dissolved without going into liquidation and transfer all their assets and liabilities to another existing company, without the acquiring company issuing new shares, provided that one person holds, directly or indirectly, all the shares of the merging companies or that the shareholders hold their shares in the same proportion in all the merging companies.

How is the cross-border merger procedure accomplished according to the Romanian law on the matter?

The first step in a cross-border merger must be made by the administrators or members of the directorate of the companies that will participate in the merger, having to prepare a common draft merger project which is to be attached alongside the draft articles of association of the company to be founded or the draft of the modifying articles of association of the company.

The common draft terms are signed by the representatives of the participating companies and filed with the Trade Register office where the Romanian participating companies are registered, at least one month before the date of the general meeting that will decide on the merger. The draft is published in the electronic bulletin of the Trade Register or on the company's website.

The management of each participating company must also prepare a report explaining the merger to the shareholders and to the employees. Shareholders who vote against the merger may exit the company in exchange for cash compensation, and creditors benefit from specific protection measures.

The Trade Register registrar checks the legality of the merger and issues the pre-merger certificate for the Romanian participating companies. If there are indications that the operation is carried out for abusive or fraudulent purposes, the registrar may refer the matter to the court.

What is the date from which a cross-border merger takes effect?

Depending on the type of the merger, it takes effect as follows:

•     In the case of formation of a new company, from its registration date in the Trade Register;
•     In case of merger by absorption, usually from the date of registration with the Trade Register of the modifying act of the constitutive act or from the date stipulated by the parties;
•     If the merger forms a European company, from its registration date.

The cross-border procedure involves numerous stages and thorough documentation. The team of attorneys within the Darie, Manea & associates law firm will be available with information regarding the documents necessary for registration of cross-border merger in the Trade Register, details on the effects of such a merger in accordance with Romanian legislation and specialized legal assistance adapted to the needs of its clients. Do not hesitate to contact us!

by Cristian Darie