Romania: Streamlining procedure for declaring beneficial owners

This article first appeared on International Law Office.

Introduction

Pursuant to a draft bill issued by Parliament on 15 June 2020 – which is currently with the president for promulgation – the legal framework regarding companies' obligation to submit a statement about their beneficial owners could be simplified.

The main amendments to the act, which are expected to be well received, will remove companies' obligation to:

• submit an annual statement regarding their beneficial owners; and
• declare their beneficial owners (in case of companies held by individuals).

Since 21 July 2019,1 businesses have had to submit a statement regarding their beneficial owners, among other things, annually within 15 days of their annual financial statements being approved.

This obligation has caused difficulties and generated additional costs for the approximately 1 million legally active companies registered with the National Trade Register Office (ONRC) as of 30 April 2020.2 It has also proved challenging for the competent authorities as it has increased the burden on them (without legal grounds).

A simplified procedure for declaring beneficial owners is justified considering that, according to the data included in the explanatory notes to the draft law, 96.3% of limited liability companies were established by individuals, which means that their real beneficiaries should be easily determinable based on data already available in the Trade Register.

Draft law

The draft law proposes that:

• the obligation to file a statement regarding beneficial owners will apply only:
• on the incorporation of new entities; and
• within 15 days of the occurrence of any amendment to the beneficial owners already registered in the Trade Register; and
• only the real beneficial owners of a company will be automatically registered by the ONRC in the Trade Register (based on the documents submitted on the company's incorporation or which were already registered in the Trade Register).

When the individuals registered in the Trade Register are not the only real beneficial owners or when there are other means by which control is exercised over a respective company, the obligation to submit a statement of beneficial owners is expected to subsist.

It remains to be seen whether the deadline for submitting a statement regarding beneficial owners will be 15 days from the date on which the automatic entry in the Trade Register takes place or whether the legislature will set another deadline.

Provided that the law is promulgated in the form proposed by Parliament, it will join the other measures implemented from 14 May 2020 to simplify the procedure for declaring beneficial owners, including:

• the extension of the 15-day term (applicable in case of annual statements or the modification of existing beneficiaries) until 1 November 2020;
• the extension until 1 November 2020 of the 12-month term (which was to be met on 21 July 2020), during which companies registered until Law 129/2019 entered into force had to declare their real beneficiaries;
• allowing the statement to be submitted in the form of a document with a private signature or in electronic form (without requiring any notarised form); and
• allowing the statement to be submitted by electronic means (with an electronic signature) or by postal or courier service, without any other formality.

What's next?

It remains to be seen whether the draft law will be promulgated in the form adopted by Parliament. The government has taken a negative stance in this respect. Regardless of the final version in which these legislative changes are introduced, simplifying the procedures for setting up companies and doing business must remain a key objective for the legislature. In this way, Romania has a chance to increase investor confidence and contribute to the development of businesses affected by the COVID-19 pandemic.

A step towards this goal seems to be the recently announced plan of the Ministry of Justice and the ONRC to simplify the formalities for the establishment of companies and registration in the Trade Register and to increase the digitalisation levels in said procedures. To this end, a series of working meetings with businesses, professional associations and academic institutions were held in June 2020, where the Ministry of Justice and the ONRC presented no fewer than 30 proposals for the review of the relevant legislation.3

Endnotes

(1) Further information is available here.
(2) Further information is available here (in Romanian).
(3) Further information is available here (in Romanian).

authors: Mădălina Neagu and Cristina Enaga