GENERAL PRESENTATION

Romania is situated in the Southeastern part of Central Europe, in the Northern part of Balkan Peninsula, on either side of the Carpathians Mountains, on the Danube lower course, bordering the Black Sea. Romania borders on Ukraine and the Republic of Moldova to the north and northeast, on Bulgaria to the south, on Serbia to the southwest, and on Hungary to the northwest. The Black Sea coast is its easternmost limit.

Area: 238,391 square kilometers (91,780 square miles). Romania is the second largest country in Central and Eastern Europe.

Strategic location: The eastern border of the inland European Union, at the turning point where EU meets the Balkans and the CIS countries.

Climate: temperate-continental, four seasons

Natural resources: crude oil, with old exploitation traditions; natural gas; coal; especially coking pit coal, brown coal and lignite; ferrous and nonferrous ores, gold, silver and bauxite ore deposits.  A special category of subsoil riches is constituted by over 2000 mineral water springs, many with applications in medical treatments.

Wages: Average gross monthly wage in Romania was Lei 1860 as of September 2009. Average net monthly salary was Lei 1359.

Currency: RON (leu, plural lei).

Population: 22,303,552 (July 2006) - 95.2 inhabitants per sq km.

Ethnic Groups: Romanians 89.5%, Hungarians 6.6%, Roma 2.4%, Ukrainians 0.3%, Germans 0.3%, others 0.9%.

Language: The official language is Romanian, part of the Latin language family. In some parts of Transylvania Hungarian is spoken alongside Romanian, while in other parts of Transylvania and in the West of the country German can be heard.
Religion: Romanian-Orthodox 86.8%, Roman Catholic 4.7%, Protestant 3.2%, Pentecostal 1.5%, Greek Catholic 0.9%, others 0.9%.


Organization

Official name: ROMANIA

Capital: BUCHAREST (228 sq. km; 1,929,615 inhabitants in April 2005).

Form of government: Republic with parliamentary democracy, according to the Constitution adopted in 1991 and amended in 2003. The President is elected by popular vote for a five-year term and can be reelected only once.

Legislative power: Bicameral Parliament consists of the Senate (137 seats) and the Chamber of Deputies (332 seats); members are elected by direct and popular vote on a proportional representation basis to serve a four-year term. It is the people's supreme representative body and sole law-making authority.

Executive power: The Government ensures the implementation of the country's domestic and foreign policies and provides general management of public administration. Public administration in the territorial administrative units is based on the principles of local autonomy and decentralization of public services.

Juridical power: Supreme Court of Justice - judges appointed by the President on the recommendation of the Superior Council of Magistrates

National Day: 1st of December

Administration: The country is divided into 41 counties (districts) and Bucharest municipality, 276 cites of which 103 are municipalities, 2,727 communes (with 13,042 villages).

Main cities: Iasi, Constanta, Cluj-Napoca, Timisoara, Galati, Brasov, Ploiesti, Craiova.
Romania is a member of the European Union, World Trade Organization, International Monetary Fund, World Bank, North Atlantic Treaty Organization.

Infrastructure and Transportation: Located in the center of Europe, Romania lies at the crossroads of the economic exchanges between West and East, North and South of the continent, between Europe and Middle East.

Railway network: The fourth largest railway in Europe in terms of total line length (11,385 km) and traffic volume, covering the entire Romanian territory. 45% of the rail network is electrified, and there are two important trans-European corridors passing through.

International Airports: in Bucharest (Henry Coanda-Otopeni), Constanta (Mihail Kogalniceanu), Timisoara (Traian Vuia), Arad, Bacau, Baia Mare, Cluj–Napoca, Craiova, Iasi, Sibiu, Oradea, Targu Mures, Tulcea.

Domestic Airports: Bucharest-Baneasa, Caransebes, Deva.

Public roads network: total over 198,755 km, of which 100,173 km paved roads and 262 km of highways.

Ports:
- on the Black Sea: three main ports: Constanta (the first in the Black Sea in terms of throughput), Mangalia and Midia.
- on the Danube: 13 ports which offer good and reliable links between Romania and Western and Central European countries, of which 3 (Braila, Galati and Tulcea) can accommodate sea-going ships. River ports at Moldova Noua, Orsova, Calafat, Corabia, Giurgiu, Oltenita, Cernavoda, Sulina.
- the Danube-Black Sea Channel, dug on the lower reaches of Danube, has shortened the maritime way to Bosporus and the Middle East by 400 km.

Sources: National Statistics Institute, Romanian Trade Promotion Center.

ESTABLISHING A BUSINESS IN ROMANIA

Generally, no specific legal permission is required to establish a business in Romania. However, for certain specific industries, a prior authorization from the competent authorities may be required. The general set-up procedure requires the fulfillment of certain legal formalities: obtaining a delegated judge's decision, registration with the Trade Register and with the tax authorities.

The establishment, functioning, dissolution, merge, division and liquidation of the commercial companies are regulated mainly by Law no.31/1990, amended and supplemented by Law No. 441 of November 27, 2006, Law no. 302/2005 and Law No. 164/2006.

According to the international legislation and practice, the Romanian law recognizes the nationality of a legal person by the location of its registered office. There is no distinction between companies operating with Romanian or foreign capital.

A new investor in Romania has a number of options available when considering the legal form its investment may take. The allowed types of business presence range from limited liability companies and joint stock companies to partnerships, as well as branches and representative offices.

The annual financial statements shall only be submitted to the Office of the Trade Register in electronic format and/or on paper, and they shall be sent ex officio to the Ministry of Public Finances.

Limited Liability Company (SRL)

It is the most popular form for carrying on business activities in Romania by local and foreign investors, because of the low administrative requirements, the greater flexibility compared to other types of companies and the low initial capital requirements.

Minimum equity capital is currently Lei 200 (about EUR 50). The shares have registered value of no less than Lei 10. Shares cannot be freely traded; neither can be pledged as collateral for a loan.

The minimum number of shareholders in such a company is 2 and the maximum number is 50. Under certain conditions a sole shareholder may set up a Limited Liability Company.

A SRL is managed by one or more administrators which may have full or limited powers and which may be Romanian or foreign nationals.
Company Management decisions are made by a majority vote in the General Meeting of Shareholders (one share equals to one vote). All shareholders must agree to decisions involving changes in the agreement of incorporation unless the agreement of incorporation provides otherwise. One or more directors/managers are appointed in the general meeting and are put in charge of the management of the company.

Joint-stock company (SA)

The number of joint stock companies and their attractiveness to investors is increasing in Romania.

Minimum equity capital is currently Lei 90,000 (or the equivalent of EUR 22,500). The value of one share may not be below Lei 0.1. Paid-up capital must be at least 30 percent of subscribed capital (100 percent for contributions in kind). The subscribed capital must be fully paid within 12 months of setting up. The capital is divided into freely transferable shares and the company may issue debentures up to 75 percent of share capital.

Such a company should have at least 2 shareholders. There is no limit to the maximum number of shareholders. If the company has less than two shareholders for more than nine (9) months, any interested person may request the Court to dissolve the company. The company shall not be dissolved if, before the Court decision of dissolution becomes irrevocable, the minimum number of shareholders provided by law is reconstituted.

Company management decisions are made by a majority vote in the General Meeting of Shareholders, held at least once a year, within no more than 5 months after the end of the financial year. A Board of Directors assumes the management of the joint stock company, although it is possible to have only one administrator. At least half of the directors must be Romanian citizens unless the articles of incorporation provide otherwise. The directors are elected by the General Meeting of Shareholders for a maximum of 2 years, unless otherwise stipulated in the articles of incorporation. They may be re-elected. The initial directors may be appointed in the articles of incorporation, for a maximum of 4 years and may be re-elected. Before starting their activity, the directors must deposit a guarantee, representing at least the value of ten shares or double of the amount of their monthly remuneration. At least three auditors must be appointed by the General Meeting of Shareholders. At least one of them must be a Romanian chartered or certified accountant.

The administration system of the joint stock company is modified through the introduction of two administration systems:
- the unitary system: the Board of administration shall be composed of the executive administrators, who shall have the right to represent the company, and the non-executive administrators, who shall be members of certain internal committees, without representation rights, and
- the dual system: the management of the company shall be composed of the Board of Directors (which represents the company) and the Supervisory Board (which has a supervision and control role).
The administrators shall conclude mandate agreements with the company, and such administrators may no longer be employees of the company. If the administrators are employees of the company, their labor agreement shall be suspended throughout the exercise of the term of office as administrator.

The administrators shall have the obligation to conclude professional liability insurance.

Joint stock companies shall have at their disposal a term of nine (9) months starting December 1, 2006 to fulfill the provisions of the Law with regard to the amendment of the constitutive acts.

Partnerships

Partnerships are forms of legal presence that are seldom used in Romania. There are three forms of partnerships provided by the law:
- general partnership (SNC);
- limited partnership (SCS);
- limited partnership by shares (SCA).
The partners in a general partnership and the active partners in limited partnerships have unlimited liability with respect to the obligations of the partnership toward third parties. Minimum capital is stipulated only in respect of the partnership limited by shares (Lei 2,500). Partners may contribute in cash, in kind as well as in rights or services.
For both partnership types, taxes are applied at entity level, not at the individual level.
The minimum number of partners is 2. There is no limit to the maximum number of partners.
All partners bear unlimited liability for the obligations of the general partnership but shall be claimed only after a creditor's unsuccessful claim against the general partnership itself.
In a limited partnership there must be at least one general partner who is fully liable (private assets included) and at least one limited partner whose liability is limited to the amount of the contribution agreed.
In a limited partnership by shares, besides the corporation itself, one or several general partners assume full liability.

Branches

Branches are corporate entities with no legal status, set up by Romanian or foreign companies subject to registration with the relevant trade registry. The legal status of the branch applies to any other secondary office (agency, working points, etc.) established as branch by the foreign parent company.

Branches must be registered using the same procedures for SRL and SA. The setting-up of a branch requires the following documentation:
- record of the existence of the parent company (i.e. company memorandum and articles of association, setting-up certificate of foundation, trustworthiness letter from bank);
- decision of the Board of Directors to establish a branch in Romania, listing the activities of the branch and appointing a General Manager.
Branches must have a General Manager appointed by the Board of Directors of the parent company, who will represent the branch in dealings with third parties in Romania. The General Manager can be a foreign citizen.

Branches can only operate in the same field of activity as their parent companies.

Representative Offices

Representative Offices are established and operate in accordance with the provisions of the Law-Decree no. 122/1990 on the Authorization and Functioning in Romania of Foreign Companies' Representative Offices and of Foreign Economic Entities, as further amended and supplemented.

Foreign companies and economic entities may open Representative Offices in Romania, subject to authorization by the Ministry for Small and Medium Size Companies, Trade, Tourism and Liberal Professions. Upon registration, an operation authorization is issued, stipulating the activity object, the terms and conditions for carrying out the activity, the duration and headquarters of the Representative Office.

Representative Offices are often established as a first step. The Representative Office may undertake on behalf of the parent company only transactions that are consistent with its object of activity and set forth in the authorization.

A Representative Office cannot commit to any contractual engagements in its own name but can perform the following activities without being considered a permanent establishment for profit tax purposes:
- Use of facilities only for the purpose of storage or display of goods or merchandise belonging to a non-resident;
- Maintenance of a stock of goods or merchandise belonging to a non-resident only for the purpose of storage or display;
- Maintenance of a stock of goods or merchandise belonging to a non-resident only for the purpose of being processed by a third party;
- The sale of goods or merchandise belonging to a non-resident displayed at exhibitions or trade fairs which are not permanent or are occasional, if the merchandise or goods are sold not later than within a month after the closing of the trade fair or exhibition;
- Maintenance of a fixed place of business solely for the purpose of acquisition of products or goods or collecting information for a non-resident;
- Maintenance of a fixed place of business solely for the purpose of carrying out activities of a preparatory or auxiliary nature by a non-resident;
- Maintenance of a fixed place of business solely for a combination of the activities mentioned above, under the condition that the whole activity carried out through the fixed place of business is of a preparatory or auxiliary nature.

Source: Romanian Trade Promotion Center

Extra info

Retail Sector in Romania Nov 2009 Newsletter
The Romanian Market of Private Medical Services 2009
Automotive Sector  in Romania Newsletter - October 2009