How to close a company in Romania

How To Close A Company In Romania

Closing a Romanian company means its disappearance as a legal entity. Here's how to successfully do it...
Jul 19, 2022
Although many companies ask about how to be incorporated, there comes a time when they also enquire about how to close a company in Romania. There are subsequent steps that need to be taken to close a company in Romania and to ensure that there are no outstanding liabilities on the administrator and the shareholders.  

The concept of limited liability should in theory protect the administrator and the shareholders but there are cases where this does not apply.  The intention of this article is to provide a brief overview of some of the issues which can and do arise.  Some key considerations are highlighted below:

See article on how to acquire a company in Romania

Criteria to close a Romanian company

1.  A company can be closed voluntarily by the shareholders if they qualify for the following:

  • Do not have any liability against them
  • If the company no longer has any employees
  • If the company has paid all its debts including outstanding taxes
  • If the company has paid all its other debts in full and has repaid any shareholder's loans  

If all of these items have been actioned then the application for closure can be made by the shareholders/administrators to the Trade Registry to close and liquidate the company and for it to be deleted from the register. The procedure will take between 3 – 6 months.

If there are unpaid debts and the company has not entered into an agreement with the creditors on how to settle the amounts due, then a liquidator must be appointed in order to deal with the closure operations. This is the simplest procedure and the shareholders/administrators are in a position to control the process. The one important issue to remain aware of is to ensure that there are no outstanding liabilities to third parties before lodging the request with the Trade Registry.
2. According to Romanian legislation, the administrators of a company must ask for insolvency if a company has outstanding liabilities that exceed fifty thousand (50,000) RON and there is insufficient cash flow in order to pay these liabilities as they become due and payable.  In such a case the court will appoint a liquidator to manage the liquidation of the company.
The insolvency application lodged by the administrator on behalf of the company must include the list of documents as set out in the law. Below we set out the principal documents which include:
- The last annual financial statement, certified by the administrator

- The profit and loss account of the company for the year prior to the submission of the application

- The verified balance sheet for the month preceding the date of the registration of the insolvency request

- A complete list of the assets of the company, including all the bank accounts

- A list of creditors', mentioning their name, the amount due and when due as well as the addresses of the creditors

- The list containing the payments and transfers made by the debtor in the 6 months prior to the registration of the request


3. Any creditor who has an outstanding balance due to a company which exceeds fifty thousand (50,000) RON and unpaid for more than sixty (60) days may request the insolvency of a company.  In order to do that, the creditor must provide evidence of the debt, that it is due and, that it is unpaid.  

In such a case the court will appoint the liquidator designated by the creditor if no other creditor intervenes in the process and asks for a specific liquidator.  If this happens, the court will choose between the proposed liquidators.    
It is important to note that in all circumstances if the company enters the insolvency/bankruptcy procedure, the legislation allows for the Ministry of Finance (“ANAF”) to complete a thorough check of the accounting records.  In practice, there are times when ANAF does not do this.    
4. If the insolvency/bankruptcy procedure is opened an administrator may become solely liable together with the company for the company’s outstanding debts. So what happens next?

According to the provisions of the Law, the administrators and directors of a company as well as any other person who has contributed to the insolvency of the company can become liable for a part of the company’s debts. This is applicable irrespective of the type of debt that resulted in the insolvency (public or private).  

The liability must be established by a judgement given by the syndic judge responsible for overseeing the liquidation after a court action started by a person interested.  Such persons are one of the following:

- The judicial administrator / liquidator

- The president of the creditors’ committee

- Any creditor empowered by the creditors’ assembly

- Any creditor who holds more than thirty per cent (30%) of the debts of the company  
The liability can be established for part or for all of the debts but without exceeding the damage which is directly caused by such acts. The liability can be established only if one or more of the following acts have been committed:

a) The administrator or others have used the assets or credits of the company for their own or others' benefit

b) The administrator or others have conducted activities in their personal interest, under the cover of the legal person

c) The administrator or others have ordered, for their personal interest, the continuation of any activity of the company that would obviously lead to the cessation of payments by the company

d) The administrator or others have kept a fictitious account; made some accounting documents disappear or did not keep the accounting in accordance with the law

e) The administrator or others have embezzled or concealed part of the company’s assets or have fictitiously increased its liabilities

f) The administrator or others have used fictitious acts to procure funds for the company, in order to delay the cessation of payments by the company

g) The administrator or others in the month preceding the cessation of payments, have paid or ordered to be paid one creditor preferentially to the detriment of the other creditors

h) The administrator or others have committed any other act intentionally, which contributed to the company’s insolvency

See article on why you should consider opening a micro entity in Romania.

As mentioned before, the administrator's liability does not operate automatically but requires court action and confirmation by the judge responsible for overseeing the liquidation.
Court action in this respect must be lodged by one of the parties mentioned above.  The plaintiff must provide clear evidence that the above-mentioned deeds have been committed and that they affected the company and the creditor.  

The court action may be rejected by the judge if the defendant fills proper defences.  The court decision will depend on the syndic judge in the case, which can be appealed to a higher court by the plaintiff.  If the court action is approved then the final decision will be enforceable in Romania against the administrator. The final decision can be enforced in other countries based on the European or International conventions between Romania and that country.

Our experience in commercial business and insolvency matters means our clients seek our advice to sort out all issues and aspects in order to avoid any consequences resulting from their legal duties as administrators and also as shareholders in relation to their companies in Romania.  

From our experience and knowledge, there are cases when foreign investor abandons a company in Romania without being aware of the possible legal and financial consequences, even though they proceeded in good faith and without bad intentions.  What should and could have been a simple procedure at the beginning then becomes involved and costs the client more money.

Don't struggle with the entire process on your own; we are happy to help. Get in contact with us today!                                                                                                                                                                                                                                

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