14 February 2025
newsletter
romania
Romania one step closer to secondary FDI legislation
In an eagerly awaited development, Romania has taken a step forward in fostering more clarity on essential concepts relevant for foreign direct investment (FDI) screening, by publishing draft guidelines (the "Guidelines"), anticipated to enter into force in March 2025. While the Guidelines may not bring major surprises for practitioners who have been working in the FDI trenches since the regime came into force in April 2022, the formal codification of the authority's practice is a welcome step toward greater transparency and predictability
Short recap: investments covered by the Romanian FDI regime
Before delving into the key takeaways of the Guidelines, we remind you that the Romanian FDI regime covers a broad range of investments:
- acquisitions of control (or decisive influence);
- acquisitions of minority interests, allowing effective participation in the target's management through the appointment of board members, other executives or even observers in certain circumstances, who may gain access to commercially sensitive information;
- expansions of capacities or production, entering new lines of business (for already established investors);
- internal restructurings (in some circumstances).
Key takeaways of the Guidelines
Investment value
One of the biggest challenges when assessing the FDI jurisdictional test has been making a best guess on how to calculate or reverse-engineer the local investment value.
The Guidelines now clarify that the investment value needs to factor in all funds made available by the investor in the context of a deal, which may include both cash and non-cash consideration (such as assets, shares, debt conversions or relief, services or other in-kind consideration), all assessed at fair market value.
Below is a breakdown of how the investment value should be calculated for various types of investments:
|
Type of investment |
Investment value |
|
Share deals |
Price paid for the shares and/or additional capital brought by the investor to the target company |
|
Share capital increases or share capital contributions or debt-to-capital conversions |
Value of the entire contribution (including any initial contribution, follow-on contributions already known and applicable premiums) |
|
In-kind (non-cash) investments |
Fair market value, evaluation made by the investor |
|
Loans / financing by the investor |
Principal and interest |
|
Multi-step transactions |
Cumulative value of all prior acquisitions or contributions until a filing is triggered |
|
Multi-jurisdictional deals |
If a specific local deal value (price) is not allocated for the Romanian undertaking or assets, the valuation provided by the parties will be factored in; otherwise, the global deal value will apply |
|
Publicly traded securities |
Investment value determined based on the stock exchange price the day prior to submitting the filing (or the latest publicly traded price) |
More clarity is likely to come with more accountability. Since the Guidelines now largely eliminate ambiguities and grey areas, it is reasonable to expect that the authority will adopt a harsher stance on attempts to evade the FDI regime by allocating artificial investment values.
Filing based on MoUs
The Guidelines also clarify that investors may notify based on any preliminary agreement, not just a signed SPA, documenting the firm intention to proceed with the investment. The underlying document used for filing purposes should at a minimum include details of the parties, the scope of the transaction, the price and the funding.
Filing in a still early stage, based on a signed MoU or LoI, can significantly streamline the transaction timeline.
Control
The Guidelines also clarify that the concept of "control" has the same meaning as under merger control rules. Gaining negative control is also a trigger.
The Guidelines do not provide further clarity on the alternative trigger (gaining an "effective participation to the management" of the target), which is specific to the FDI legislation.
What comes next
All relevant stakeholders are now invited to provide their input on the Guidelines by 11 March 2025.
Nonetheless, the Guidelines represent just the first step in providing clarity on the FDI regime in Romania. Further guidance is still eagerly awaited regarding the 13 sensitive sectors that dictate the scope of the regime, the concept of "effective participation", potential de-scoping of non-sensitive transactions, and a more streamlined approach for non-problematic deals involving either EU or non-EU investors.
Notably, a more streamlined approach appears to be prompted by the authority's workload in 2024, with a steep increase to 600 filings submitted, of which 471 were reviewed and 129 remained pending at year-end.
authors: Georgiana Bădescu, Cristiana Manea, Sabina Aionesei and Teodora Burduja
co-authors
