Types of Romanian Commercial Companies

TYPES OF

COMMERCIAL COMPANIES

Introduction

The term “commercial” comes from two Latin words: “cum” (with) and “merx” (merchandise).

According to the dispositions of the Romanian Civil Code, the company is a contract by which two or more persons agree to put something in common with the purpose to share the profit that may derive from it. The company has to have a lawful object that has to be made for the common benefit of the parties (art.1491 and art.1492). Any commercial company has its own judicial personality, it represents a contract, as well as a subject of autonomous law, and in the same time it has a lucrative purpose, because it wants to have material benefits, and benefits of another nature.

1. The General Legal Framework

There are four pieces of legislation which are of particular relevance for doing business in Romania. These are:

1. The Company Law (31/1990)

The Company Law defines the forms of Romanian business entities. It also provides for the rules applicable to each form of business entity relating to their respective formation procedures and documents, capital and shares, shareholders’ decisions, administration, mergers and liquidation.

2. The Insolvency Law (64/1995)

This Law deals with the insolvency of Romanian companies and other Romanian business entities. It also covers such matters as restructuring and liquidation.

3. The Commercial Registry Law (26/1990)

The Commercial Law governs the operation of the Commercial Registry, the obligations of business entities to register information with the Commercial Registry for publication and also the registration and public inspection procedures.

4. The Commercial Code

The Commercial Code sets out the main basic rules applicable to business transactions in Romania.

2. Nature and types of Commercial Companies

The Company Law (31/1990) provides for five types of Romanian business entities:

• General Partnerships (“societate in nume colectiv”, abbreviated “S.N.C.”), which must have a paid-in capital and in which the partners have unlimited and joint liability.

• Limited Partnerships (“societate in comandita simpla”, abbreviated “S.C.S.”), which must have a paid-in capital and in which general partners have unlimited and joint liability, limited partners however being liable only for the value of their paid-in capital.

• Joint Stock Companies (“societate pe acţiuni”, abbreviated “S.A.”), in which the liability of shareholders is limited to their holdings of capital in the company.

• Limited Partnerships by Shares (“societate in comandita pe acţiuni”, abbreviated “S.C.A.”), in which the contributed capital is divided into shares and where the financial obligations of the partnership are guaranteed by the capital and by the unlimited and joint liability of the general partners, limited partners being liable only for payment of their shares.

• Limited Liability Companies (“societate cu răspundere limitata”, abbreviated “S.R.L.” or “Srl”), in which the liability of shareholders is limited to their holdings of capital in the company.

Business entities existing under the Company Law (31/1990) may have their name prefixed by the words “societatea comerciala”, abbreviated to “S.C.”. In some cases this prefix may reflect the specific type of company concerned. The most commonly encountered entities in Romanian business area tend to be Limited Liability Companies and Joint Stock Companies.

a. General Partnership

Its obligations are patrimonial guaranteed by the social and the unlimited liability of all associates. The partnership relationship is based upon a contract and any person who is capable of entering a binding contract may enter a partnership. Following this agreement, the parties must register their partnership with the National Trade Register Office.

In a General Partnership, partners are jointly liable for the debts and obligations of the partnership and each partner can be personally liable for the overall debts and liabilities, which are not satisfied by assets of the partnership.