BUSINESS LAW

Chapter I
Brief introductive considerations. Definition. Object. Brief history
1.1. In order to position ourselves in the field of a specialized subject addressed to
persons with aspirations in becoming trade professionals holders of companies
performing activities directed towards making a profit, therefore a field of present and
then, at same time, of future expectations, we think we ought to position the subject in
the curriculum of the law subjects, generally speaking and, then, define it, in order to
allow ourselves understand it beyond the profane, easy accessible significance of the
collocation.
Generally, the notion of law may receive a multitude of senses. Taking only those with
juridical significance, we may distinguish amongst:
a) The law, as an ensemble of regulations, rules, juridical norms applicable to the
population of a certain state. From this point of view, we may differentiate the
Romanian law from the law of other states, French, German, etc. From another
perspective, this ensemble of regulations constitutes the objective, positive law,
so the law seen as the entirety of juridical norms applicable within the territorial
limits of a state;
b) Then, law may be understood as an aptitude (meaning possibility) which the
objective law (i.e. the ensemble of juridical norms applicable on the territory of a
state) recognizes to a person to adopt a certain conduct or, to put it in another
way, the possibility to adopt a certain attitude, to commit a certain act, to claim
from another person the acknowledgement of a right, the performance of a
certain obligation on the basis of a law, of a certain regulation. For example, the
right of every citizen to work, of every individual to have a name, the right to
ownership, etc, are, each of them, subjective rights, reported to the individual as
a subject of law.
c) Finally, when we say law we may have in view the science of law as a branch of
education or scientific research having as its object exactly the study of the

ensemble of regulations, therefore both of the objective and subjective rights.

From this point of view we can make the distinction between the general science
of law and other branches of the human knowledge, or, in a more limited variant,
between the various branches of law (civil, penal, constitutional, etc)
1.2. Seen as an ensemble of juridical norms which regulate the social relationships,
traditionally, law is divided into two branches; public and private law. This is not the only
classification but it is the one considered fundamental, basic. The distinction between
the two branches is given by the nature of the social relationships between the subjects
participating in those relationships. Thus;
a) Subordination relationships are specific to the Public law1, between the
participants, relationships between the governors and the governed or, to put
it differently, between the state and the private, within which it is the state that
imposes the rules, governs and the private is the one obliged to observe them;
branches like constitutional law, financial law, international public law, penal
law, etc, belong to this great division.
b) The Private Law2 is characterized by the position of equality between the
participants; it studies the social relationships created between private
individuals or entities, aiming therefore at the private juridical order. Civil law is
representative for this category as it includes the most important share of the
private law regulations. The assertion is supplementary and substantially
argued by the adoption of the present Civil Code which came into force on the
1st of October 2011 and which becomes the fundamental law, the common law
in the matter of the relations of private law, applicable both to private persons
as individuals and to professionals exploiting companies in various fields of
interest and, therefore, belonging also to other branches of the private law.
The new regulation revolutionizes by its monist vision in the matter of private
law relations, consisting in the claim that it offers a unique and regulatory
basis to all the categories of relations between the private persons, civilian
1

Mircea Muresan, Civil Law, The General Part, Cordial SRL Publishing, Cluj-Napoca, 1992, pag.7; Ioan Schiau,
Course of commercial law, Rosetti Publishing, 2004, pag.5;
2
Idem

and professionals altogether. Obviously, though it is the fundamental law for

this branch of the law, it is not the only one. It is completed by special
regulations, applicable to certain fields and/or professionals and who, in their
turn, define sub branches of the private law, like, business law, labor law,
family law.
Hence, branch of the private law, business law has its own identity, its own autonomy.
In relationship with it, civil law remains the common law whose rules complete the
special regulations of the business law.
As compared to it, though, business law has its own special dynamics, superior to any
other sub-branch of the private law and justified by the nature, complexity and specificity
of the professionals activity and of the field they exploit, i.e. the profit oriented economic
one.
1.3. Business law definition;
In order to define the subject it becomes a priority to define the business notion; in its
most comprising sense, it includes any economic activity, therefore, subordinated to a
profitable aim and, subsequently, subjected to risk, assumed by each of the participants
as a chance to win or possibility to loose3.
The evolution and complexity acquired by the economic activity in an epoch acutely
marked by the globalization tendency assign to the notion of business, and that happens
in a natural manner, new, supplementary valences as compared to the traditional variant
of what we used to identify, under the rigors of the old Commercial Code (valid between
1887 2011) as commercial activity.
The issues which are specific to the business field are complex and diverse, with
incidence in the field of taxation, labor, competition, consumers protection, transport,
banking, industrial copyright, etc. it is the argument for which, amongst the sciences of
law, business law is qualified as a multidisciplinary subject composed of all the juridical
norms which regulate the status and the legal regimen applicable to professionals
specialized in the exploitation of a company, to the sense of activities organized with a

See Gheorghe Piperea, Introduction to professional contracts law, C.H.Beck Publishers, Bucharest, 2011, pag.8 and
the following

view to the production, administration or alienation of goods or provision of services in

the pursuit of lucrative, profitable aims.
1.4. Business law object of study
The definition of the discipline offers the landmarks to determine the object of business
law as: legal norms applicable to professionals (traders) which exploit organized
companies in order to develop economic activities (production, trade, services provision)
understood under their complex, modern sense, that of business. The course duration
though, limited to a semester, will not allow us an exhaustive approach but, quite on the
contrary, imposes on us a rigorous selection and synthesis of the analyzed entities. A
landmark in such an approach becomes the utility of the information reported to the
professional profile of the future graduates
1.5. Brief history
Before becoming a discipline of study or a distinct branch of law, the analyzed teaching
line may be identified as segment of the life of the pragmatic individual well oriented
towards activities bringing benefits, profits. Analyzed from the historic perspective, until
they became profitable, those activities responded to the individuals existence needs.
Thus:
1.5.1 During ancient times; In order to make ends meet, people started to exchange
between them the products they had, achieved either through their work or obtained
from the environment.
Therefore, the exchange, in its primitive variant called barter, was the result of the
awareness of the idea of property, of the right to dispose freely of certain goods. Later,
as people needs increased and the relationship between them developed, became more
intense, markets appeared as meeting places organized periodically with a view to host
the exchange of products. It is the period in the history of mankind when we cannot
speak yet about the need for certain regulations of a commercial matter, first of all due to
the importance of the agricultural and pastoral component of life.

The need for certain regulations of the matter appeared by and by, as commerce
developed. Significant contributions to that sense (the development of commerce)
brought the Phoenicians, the Egyptians and the Greeks, the last being the ones who
established the first rules applicable to the commercial activity, especially to the maritime
one. During the period of glory of the Roman Empire, to which belong important
regulations of civilian nature, commerce did not enjoy much success, the main source of
earnings being agriculture and the wars led for territorial expansion. Moreover, the
Romans considered the commercial activity as degrading, adequate only for slaves and
for the people they subjected. Therefore, they considered that their regulations of civil
matters were sufficient for the field of commerce
1.5.2. During the Middle Age; The fall of the Roman Empire resulted in the
disintegration of the political power as well as in dismemberment of the unitary law
system. The Italian citadel states appeared (Milan, Bologna, Genoa, Florence, Pisa) and
along with them, the traders interests to organize themselves in corporations in order to
represent their own interests. The corporation, including traders and craftsmen
belonging to a certain branch, started to configure their own rules which practically
became the first norms applicable to commerce. In time, they were coagulated in the socalled by-laws, each one of them representing the ensemble of a corporation own
regulations.
1.5.3. The Modern Epoch. Trade development imposed the replacement of those
customary norms with others which started composing the written law. The first marking
this passage was France, who, after written commercial rules of a lesser scope, in 1807
marked a historical reference moment by the adoption of the first Commercial Code
during Napoleons period of full glory. At the same time, the moment has the merit to
separate the regulations of the civil matter from the commercial ones. After the French
Revolution, its influence in Europe had as effect the spreading of the French
Commercial Code to various European states which adopted it as their own law of the
commercial matter. Amongst such states, the French Commercial Code was taken over
in Italy, offering a modern conception on commerce. In 1887, it was the basis of the

adoption of the Romanian Commercial Code which is still valid. In Germany, the
Commercial Code was adopted in 1897, together with the Civil Code. Both came into
force in 1900.
1.5.4. In Romania, at its beginnings and for a long period of time, commerce was
governed by customary rules. The first written rules were not especially related to
commerce, being, by consequent, applicable both to traders and non-traders. It is the
case of the Code of Andronache Donici of 1814, of the Caragea Code of 1817, in
Muntenia, of the Calimah Code of 1828, in Moldova. All precede the Commercial Code
adopted in 1887, the first important work concerning the commercial matter and the first
which is fully dedicated the regulation of the commercial field of activity to whose
development it contributed4. As it was not matching the principles of the socialist planned
economy, it ceased to be applied to domestic economic relationships being considered
obsolete for the full duration of the nationalized economy. Still, it was not formally
abrogated, preserving a limited area of applicability to the foreign trade juridical
relationships. It was only after 1989, at the same time with the passage to the market
economy, that the Code came back offering the first regulation of a general character to
the commercial activity characteristic to the market economy. Obviously, part of its
dispositions did not match the historical moment, the evolution of the modern
commercial life justifying new legislative approaches which will shape, in time, the legal
framework necessary to the field of economics and, correlatively, the matter of study of
the business law as a curricula subject 5. It imposed the basic principles in the field of
business but only until 2011 when it was abrogated by the New Civil Code which came
into force on the 1st of October 2011.
CHAPTER II
Categories of professionals in the field of business
4

The Code was structured in four parts called Books: Book I, On trade generally, Book II, On maritime Trade, Book
III, On Bankruptcy, (presently abrogated), Book IV, On the exercise of commercial actions and on their duration.
5
The regulations on commercial matters adopted after 1990 allow for the systematization by disciplines such as:
legislation on trading companies (ex. Law no.31/1990 on trading companies), legislation on the Trade Register (ex.
Law no.26/1990); legislation concerning insolvency (ex.Law no.85/2006), legislation on the capital market (ex. Law
no.297/2004), banking legislation, insurance legislation (ex. Law no.136/1995),etc. They make what the juridical
doctrine calls the springs of the business law

2.1. The traditional denomination of trader, established by the Commercial Code of 1887
(abrogated at present, as specified above) was assigned, under its incidence, to:
a) natural persons who qualified as such by the activity they developed (trade acts,
commercial operations

done on their own responsibility and with the continuity of

common occupation) and who are entered in the Trade Register;

b) legal persons who, by being entered in the Trade Register acquired the quality of
trader; trading companies, autonomous organizations, cooperative organizations,
groups of economic interest.
The common feature of all these traders, natural and legal persons equally, was
represented by the commercial nature, economic hence speculative, profit oriented of
their activity. Under the old regulation, this was the objective criterion which imposed the
distinction between the commercial and non commercial field, between the traders and
non traders and, as an effect, circumscribed the legal norms which were applicable to
them from those incident to other domains or professional categories.
2.2. By the new Civil Code, as the duality commercial civil was given up, under the
pretext of the union of the basic rules applicable to the matter of the private law,
generally, therefore implicitly to economic, business law, the traditional term of trader is
integrated to the more comprising category of professionals. According to art.3, line 2 of
the Code, professionals are all those who exploit a company, i.e. systematically
exercise an organized activity which consists of the production, administration or
alienation of goods, or of the provision of services irrespective if such activity has a
lucrative scope or not (art.3, line 3 of the Code). The definition includes the
professionals in general and, hence, those who perform in the field of business,
traditionally called traders. Under such terms, it becomes necessary the establishment
of the distinction elements, of delimitation between the various categories of
professionals and, obviously, of those who activate in the field of business. The Code
does not offer such landmarks in terminis. They are rather inferential than explicitly
formulated. In the determination of the private law regulations applicable to a domain or
other, the accent is laid on the subject, respectively on the quality of professional of the
holder of such activity. But, what makes the difference between the various categories of

professionals ? In other words, what distinguishes the business professionals from other
categories of professionals ? The unique criterion will still have to stay the developed
activity, respectively, in the case of the professionals traders, the lucrative scope of that
activity, in the sense of economic activities (production, trade or service rendering done
in order to make a profit).
2.3. The delimitation of the professionals in the field of business from other professional
categories brings in an uncontested practical importance. Their distinct status is defined
by:
a) An ensemble of specific professional obligations, such as: a.1) the obligation of being
entered in the Trade Register as of the start of the commercial activity as well as of the
subsequent filing of the acts and facts they perform and for which the law imposes such
a registration and, obviously, the registration of the activity cessation 6: a.2) the obligation
to keep certain commercial registers in which they will show the developed activity or,
a.3) to observe the rules of an honest, loyal competition.
b) the submission of their commercial activity to certain legal dispositions of their own,
dispositions which are specific and distinct, ones from those applicable to nonprofessionals, others, related to those applicable to other categories of professionals;
c) the insolvency procedure is usually and overwhelmingly applicable to traders;
2.4. Categories of professionals in the field of business (traders)
Traditionally, professionals in the field of business are classified in two categories:
a) natural persons;
b) legal persons
The present legislation, shaped as of 1989, preserves the distinction but harmonizes
and connects it to the evolution of society and, within such a context, to the economic
activities.
6

The Trade Register is the collocation which defines the records register of all the categories of professionals who
develop economic activities, of their documents for which the law imposes the performance of publicity and it is kept
by a public entity called the National Office of teh Trade Register, organized under Law no.26/1990 related to the
Trade Register

Thus, art.1 of Law no.26/1990 concerning the Trade Register, enumerates the following
categories of professionals who, being active in the field of economy, are bound to be
entered in the Trade Register:
a) licensed natural persons
b) individual companies
c) family companies
d) trading companies
e) national companies and national enterprises
f) autonomous organizations
g) groups of economic interest
h) cooperative companies
i) cooperative organizations
j) European companies
k) European cooperative companies
l) European groups of economic interest with their main headquarters in Romania
m) Other natural and legal persons provisioned by law
The enumeration offers a formal criterion for the distinction of professionals in the field of
economy.
The traders counted under lines d l are part of the category of professionals (traders)
legal persons. The most important part, in the said category is represented by the
trading companies.
For a correct determination of their own juridical regime, in what follows we will analyze
the main categories, but, in such a discourse, we will allocate them the adequate space,
directly proportional with the representativity and importance they own within the
economic reality.
2.5. The natural person
Unlike the trading company which is born a trader, to the sense that it is set up with
the aim of performing the economic operations determined by its deed of estalishment, a
natural person acquires this quality if it meets, cumulatively, the following terms:

a) perfoms economic activities in a professional manner, with a character of

continuity, on its own behalf and risk
b) applies for and obtains the registration in the Trade Register and the license to
run the activity.
At present, the registration and licensing procedure is regulated by the Government
Emergency Ordinance no.44 of 20087. According to the said bill, natural persons may
apply for the authorization necessary to develop their economic activity as follows:
a)

individually and independently, as licensed natural persons, (identified with the

abbreviation PFA (LNP))

b)

as entrepreneurs holders of an individual company

c)

as members of a family enterprise

Prior to the start of the activity, the natural person will apply for :
a) the registration in the Trade Register
b) the award of the authorization of functioning.
In all the three cases mentioned above, the competence to solve his application comes
to the office of the Trade Register by the court of law of the county where the natural
person to be licensed declares his headquarters.
Economic activities may be run under one of the three shown forms the natural
persons who:
a)

reached the age of 18, 16 years of age, respectively, in the case of the
family company members;

b)

have not committed facts sanctioned by financial, customs laws, as well

as laws related to financial-taxation discipline, of the nature of those
entered in the fiscal record;

c)

have a professional headquarters declared in a building on which they

have a title of use acquired under the terms of the law;

d)

declare on their own responsibility that they meet the terms of

functioning provisioned by the legislation specific to health, veterinary,
environment and labor protection domains.

The Government Emergency Ordinance no.44 concerning the development of economic activities by licensed
natural persons, individual companies and family companies was published by the Official Monitor, Part I, no.328 of
2008 April 25.

As effect of the solving the application for registration and authorization of functioning,
the certificate of registration is released including the natural persons unique registration
code. This is the document which proves the its registration in the Trade Register, the
authorization of functioning as well as the registration by the competent tax authority. To
put it differently, it is the document which confers lawfulness to the commerce done by a
natural person.
2.5.1. Legal regime of licensed natural persons (PFA=LNP);
a) Such a person has the right to cooperate with other natural persons licensed as
PFA, with entrepreneurs holding an individual enterprise, with representatives of
a family company, with other natural or legal persons in order to fulfill the scope of
the activity for which the licenmse was issued;
b) may hire third persons on the basis of labor contract for the development of the
activity for which it was authorized ;
c) It may cumulate the quality of licensed natural person with that of employee of a
third person irrespective of the fact that the activity is run in the same field or in a
distinct one, but it cannot cumulate this quality with that of an entrepreneur
natural person holder of an individual enterprise;
d) It is insured in the public system of pensions and has the right to be insured by
the health care social security system and by the unemployment insurance
system;
e) It may be subject to the simplified procedure of insolvency, under the terms of
Law no.85/2006;
f) Is liable for its obligations with the affected patrimony, if such a patrimony was set
up, and, to the extent in which the said patrimony is not enough, with the personal
estate.
2.5.2. Legal regime of the entrepreneur natural person holder of an individual
enterprise

a) Such a person may hire third persons on the basis of an individual labor contract,
may cooperate with other PFA (licensed natural persons), with other
entrepreneurs natural persons holding an individual enterprise or with
representatives of a family company, as well as with other legal persons;
b) It may cumulate the quality of entrepreneur holding a an individual enterprise with
that of employee of a third person irrespective of the fact that the activity is run in
the same field or in a distinct one;
c) It is insured in the public system of pensions and has the right to be insured by
the health care social security system and by the unemployment insurance
system;
d) It may be subject to the simplified procedure of insolvency, under the terms of
Law no.85/2006;
e) Is liable for its obligations with the affected patrimony, if such a patrimony was set
up, and, to the extent in which the said patrimony is not enough, with the personal
estate.
2.5.3. Legal regime of the family company
a) It is set up of 2 or more members of a family who may simultaneously be LNPs
(PFA) or holders of an individual enterprise or may cumulate the position of
employee of a third person with activity in the same domain or in one which is
different from that of the family company; family members sign an establishment
agreement whose written form constitutes a term of validity. In its contents, such
agreement will indicate the members names, the name of the enterprise
representative, the date, each members participation in the enterprise, the
percentage quota according to which they will distribute the income between
them, the relationship between them and the terms of withdrawal. The
compulsory elements of the agreement are comparable with those of the
company deed of establishment, obviously in a simplified form, matching the
family enterprise less complex structure which lacks legal personality.

b) The members of the family enterprise are insured in the public systems of
pensions and have the right to be insured by the health care social security
system and by the unemployment insurance system;
c) The family company may not hire third persons on the basis of a labor contract;
d) It may cooperate with all types of traders (legal natural persons, entrepreneurs
holding an individual enterprise, family companies, trading companies, etc)
e)

It does not have legal personality and, subsequently, it does not have
its own patrimony; but, by the establishment agreement, its members may agree
to set up a business related patrimony regulating each members quota in the set
up of the said patrimony;

f) The members are jointly and indivisibly liable with the business related patrimony,
for the debts incurred by the company representative; when there is no such
patrimony or as its supplement, they are liable with their full estate, according to
the participation quotas agreed by the establishment agreement.
2.5.4. Business related patrimony;
Government Emergency Ordinance no.44/2008 first establishes this concept with
reference to the subjects of the business law. It represents the entirety of the goods,
rights and obligations allocated by the natural person licensed under any of the three
forms allowed by law for the development of its economic activity. It follows that, in order
to recover their debts, the personal creditors of the trader LNP, of the entrepreneur
holder of an individual enterprise or of the members of a family enterprise may not claim
the goods included in the business related patrimony but the respective persons
personal ones. Likewise, commercial creditors will claim first the goods composing the
business related patrimony and only in a complementary manner the personal ones of
their trader natural person debtor. Thus, distinction is made between two categories of
creditors of the trader natural person, creditors of the commercial activity and personal
creditors, respectively8
We need to specify that, subsequent to this first legal establishment of the concept of
business related patrimony in the matter of the business law, by the dispositions of
8

See Gheorghe Piperea, Commercial Law,Vol.I, C.H.Beck Publishers, Bucharest, 2008, pag.45

art.31 of the Civil Code, its application is generalized for all the catergories of
professionals as it is affected to the exercise of their profession.

Chapter III
LEGAL PERSONS - SUBJECTS OF BUSINESS LAW
Trading companies
1. Introductory aspects
If the dimensions of the natural persons economic activity, under any of the three
organization forms of activity regulated by the Government Emergency Ordinance
no.44/2008 are directly reported to its person, acquiring, subsequently, the scale allowed
by the energies of a single individual and therefore the said dimensions correspond to a
low scale business, the trading company becomes, for a change, the adequate form of
running economic operations when their ampleness imposes a concentration of human
and material resources and, inherently, a corresponding organization. Hence, its
appearance represented the natural consequence of the economic and social evolution
of human society. The association of human and material resources became necessary
from the point in which the satisfaction of needs overcame the possibilities of a single
individual, the pursued convergent scope being the performance of profitable activities.
From limited association formulas, reuniting just a few persons who got together their
goods and skills to give efficiency to their economic activity, in time, higher scale
associations appeared, of hundreds, even thousands of persons, which, inherently,
imposed adequate solutions of business organization and coordination. Of course, their
complexity is the direct expression of the business dimensions and of the number of
persons involved in its realization. There is an indissoluble connection between the
evolution of the economic activity and that of the legal structures set up for its
performance. Seen therefore from the historic perspective, it becomes easy to
understand why, at present, the company became a legal entity precisely configured by
legal dispositions, capable of concentrating human, material, financial energies aiming
to satisfy the needs of the entrepreneurs and, indirectly, those of the human society. The
company itself structured its organization forms in direct correlation with the interests of

the economic activity in expansion. It is explicable, then, why nowadays it represents the
most important share of subjects legal persons performing in the field of business.
2. Brief history
The beginnings of the trading company date from ancient times. At the beginning, it did
not have legal personality, being inspired by the regulation of the civil society of the
Roman law.

Evolving, it defined its main characteristic attributes during the Middle

Ages, when the limited partnership appears. During the colonial capitalism (the 17 th
century) we witness the appearance of the joint stock company. The French commercial
code of 1807 calls it anonymous society and regulates its two forms, the joint stock
company and the limited partnership by shares. At the end of the 19 th century, out of the
combination of the features of the general partnership and those of the joint stock
company, the result was the limited liability company
3. Definition.
The trading company may be defined as being the entity with legal personality,
established according to law, by the association of several persons under the terms
stipulated by the deed of establishment having as its scope the performance of
economic activities in order to obtain profit. 9
3.4. The legal personality of the trading company.
According to law, the trading company becomes a legal person as of the moment
of its entry in the Trade Register. Therefore, it gains its own identity, distinct from that of
the partners which set it up, configured by the following elements which personalize it :
g) It has an organization of its own, agreed by the partners through the deed of
establishment, with the observance of the terms imposed by law according to the
legal form ;
h) It has its own patrimony, as an ensemble of rights and obligations with economic
content,10 distinct and independent from the patrimony of any other person,
9

A group of people set up on the basis of a company contract and having legal personality, in which the partners
decide to put together certain goods in order to exercise commercial facts with the aim of making and sharing the
resulted profit. Stanciu D. Carpenaru, Drept comercial roman 6th edition, revised and completed, Universul
juridic Publishing, Bucharest, 2007, pag.156;
10
The notion of social patrimony is a composite one: it is composed of a) the assets, in which are included the real
or personal goods and rights of an economic value, belonging to the company and b) the liabilities, expressing its

including the partners and assigned to the achievement of its own commercial
activity; the specific elements of the trading company patrimony are the share
capital;
i) It has its own elements of identification arising out of its quality of distinct law
subject (denomination, headquarters) ;
j) It has its own will (social will) manifested through its organs, distinct from that of
the partners ;
k) It has its own nationality, distinct from that of the partners and that is the
nationality of the country on whose territory it established its headquarters;
l) It has its own legal capacity, (legal responsability), distinct from that of the
partners and that allows it the participation on its own behalf in the legal
relationships matching the performance of its objectives and scopes, (capacity of
specialized use) ;
The trading company is a trader, hence professional, as of the moment it gains legal
personality. Unlike the natural persons who become traders (entrepreneurs, economic
operators) the company is born a trader and keeps that quality for the full duration of
its existence, irrespective of the fact that it develops such an activity or not.
Subsequently, its legal acts are commercial and subject to the commercial law, even if
they are performed with non-traders (art.56 Commercial Code).
1. Regulation
The bill which is the common law in the matter of trading companies, offering the
set up, organization, functioning, reorganization, dissolution and liquidation rules
is the Law no.31/1990.11 , hereinafter called LSC. By the last amendments
brought to it, the law was harmonized with the European regulations of the matter.
debts to third parties and partners. Ioan Schiau, Titus Prescure, Companies Law no..31/1990, Analyses and
comments by articles, Ed. Hamangiu, 2007, pag.33
11
Law no.31/1990, republished in 2004 Official Gazzette no.1066 of the 17th of November 2004, amended and
completed by: Law no.302/2005, published in the O.G. no.953 of 27.10.2005; Law no. 85/2006 related to the
insolvency procedure, published in the O.G. no.359 of the 21st of April 2005; Law no.164/2006, publicata in the
O.G. no.430 of the 18th of May 2006; Law no.441/2006, published in the O.G. no.955 of the 28th of November
2006; Law no.516/2006, published in the O.G. no.14 of the 9th of January 2007, Emergency Ordinance no.82/2007,
published in the O.G. no.446 of the 29th of June 2007;

For certain economic domains, usually those of a greater impact on population and,
therefore, to the aim of protecting its interests, specific bills for the respective domains
were adopted and such bills, having a special character, become incidental as a priority
for the regulated domain. In their case, Law no.31/1990, becomes complementary
applicable.

12

The collocation corporate law takes its substance as a priority from the LSC and,
complementary, as we have already specified, from the special regulations applicable toi
certain categories of trading companies. Seen as a whole, all these configure the legal
status of this category of professionals, distinct from that regulated by the norms of
common law represented by the Civil Code. The idea is expressed by the text of art.192
of the code and according to which the legal persons legally set up are subject to the
dispositions applicable to the categories to which they belong as well as to those
included in the present Code, if the law does not stipulate otherwise.
2. Trading companies organization forms
The trading companies law regulates five legal forms under which a company may be
set up and those forms are :
1. general partnership
2. limited partnership,
3. joint-stock company;
4. limited partnership by shares
5. limited liability company
The enumeration preserves the order of their historic appearance. Those are, in
principle, the legal forms regulated by the legislation of other states also, they are not
laboratory products but the result of the long verified experience and practice in the
states with market economy.
The five forms are restrictedly provisioned by the law; the future partners have the
freedom to opt for any of them but, as of the moment of their choice, they are bound to
12

Examples of such bills: the Banking Law no. 58 of the 5th of March 1998, Law no. 32/2000 related to
insurance companies and insurance surveillance, etc.

observe the legal dispositions specific to the chosen legal form; they may not imagine
new legal forms, sui generis, not even taking over and combining in a selective manner
features belonging to the five regulated types.

On the other hand, the option right is

limited by the situations in which the field of activity of the future company imposes the
organization under a certain legal form, determined by special bills. It is the case of
banking companies or of those of financial investments for which incidental special laws
imposes their set up under the legal for of joint-stock companies. Obviously, the
partners choice for one or another of the company forms will have the chance of being
correct, corresponding to their state of fact, only to the extent in which they know the
features which define every type of company so that the choice be made in full
awareness.
3. Trading companies classification
The five legal forms of trading companies may be classified according to several criteria.
In what follows, we will take a look at just two of them as we consider them essential in
the understanding of their legal regime, in the exact configuration of the features which
customize them. Thus ;
1. According to the nature of the association, to the argument of this
association, there are :
a) Companies of persons ; the ones in which the association is a consequence of
the relationship between the partners, of the reciprocal trust they grant each
other; therefore, the company is set up in the consideration of the partners
person, ( intuitu personae ). The relevance of the relationship between the
partners gives the companies of this category a series of specific elements such
as those related to the assignment of the denomination, the relatively small
number of partners, their unlimited and joint liability, the rigid terms of interest
shares transfer, so, of gaining and terminating the position of partner, the causes
of the company dissolution, etc. This category includes the general partnership
(the most representative one) and the limited partnership.

b) Companies of assets; in which the relevance of the relationship between the

partners fades away in favor of the importance of the size of the contribution to
the share capital; the partners capital investment is determinant. Subsequently,
there are companies which bring together a great number of partners who, most
of the times, do not get acquainted with each other. In the case of the companies
of this category, the gain of the position of shareholder is not conditioned
anymore by the agreement of the other shareholders and, subsequently, it does
not represent an element of their deeds of establishment amendment. The
prototype is represented by the joint-stock company. Part of this category is also
the limited partnership by shares.
c) The limited liability company is not fully integrated in any of the mentioned
categories. It represents an intermediate form, a hybrid created from a
combination of features specific both to the companies of persons and to those of
assets. For example, just as in the case of the companies of persons, its set up is
based on the relationship between the partners, a fact which justifies, as a matter
of fact, the limitation of their maximum number to 50. The partners liability is
limited, just as in the case of the shareholders in the companies of assets and the
organization and functioning rules are, in their turn, similar to those of this latter
category. By the partners will, expressed in the deed of establishment, the
features characterizing the companies of assets or, quite on the contrary, those of
the companies of persons may be accentuated. In fact, it is just because this type
of company is the product of the influences taken from both categories of
companies, that it appeared the last from the historic point of view.
2. According to the extent of the partners liability:
c) Companies in which the partners are liable in an unlimited and joint manner; the
general partnership and the limited partnerships (simple or by shares) in what
concerns the general partners.
The two coordinates of the liability are defined like this:

1. Unlimited: partners are liable for the company obligations not just within the
limit of their contribution to the company patrimony but, in subsidiary, with their
own one, to the extent in which that of the company is insufficient to cover in
full the company social obligations.
2. Joint; each of the partners will be liable for the full obligation of the company
which was not covered by the use of its patrimony. Therefore, each partners
liability towards the company creditors is not dimensioned to the value of such
partners contribution to the share capital. This contribution gains relevance
only in relationship with the other partners from whom the partners may claim,
by way of regression, the recovery of the amount corresponding to their quota
of participation in the share capital after having paid the creditors the full debt
of the company. Besides, the solidarity of the liability is generally characteristic
to commercial obligations, unlike the civil obligations where the divisibility of
the liability is the rule and the solidarity is the exception. 13
d) Companies in which partners are liable in a limited manner, the joint-stock
company, the limited liability company, the partnerships (general and limited by
shares) in what concerns the limited (sleeping) partners.
The limited liability consists of each partners obligation to be liable for
the company obligations only to the limit of the partners contribution to the
share capital. In order to recover their debts,

creditors do not have the

right to extend their pursuit to the partners personal patrimony.

It is to be specified that the liability up to the limit of the contribution to the share
capital does not identify itself with the payment of an amount matching the contribution
to the share capital, made by each partner in favor of the creditors, but with the risk of
not recovering at least the investment brought as contribution coming due on the date of
the company liquidation. Therefore, the limited liability is the equivalent of the company
liability for its social obligations.
13

The divisible liabilities are divided, according to law, by full right, active and passive, each creditor having the
possibility of claiming to thed debtor or debtors only the quota of the becoming debt and each debtor is exposed to
the pursuit of its creditor or creditors only for the quota of the undertaken debt. Mircea N. Costin, Calin M.
Costin , Dictionar de drept civil de la A la Z / Dictionary of civil law from A to Z, 2nd edition, Hamangiu Publishing,
2007, pag. 327;

From the above examples it becomes obvious the peculiarity which is

characteristic to limited partnerships and to limited partnerships by shares which,
reuniting partners with limited liability (the limited partners) and the partners with
unlimited and joint liability, (the general partners) are found in both categories of
companies.
3.8. Company legal forms. Brief introduction.
After having shown with point 6 the five forms of companies which arte regulated
by the law, in what follows we will try to describe them synthetically, configuring their
specific features.
1. The general partnership
It is the oldest form of company and today it is considered slightly obsolete. Usually, it
brings together a small number of people whose association is based on the
relationships between them, on the reciprocal trust they grant each other. Just as we
said before, it is the prototype of the company of persons. It is adequate for low scale,
family businesses.
Characteristics:
c) The partners liability is unlimited and joint; subsequently, the company creditors
may claim the amounts due to them from the partners also, each one of them
being obliged to pay the full amount owed by the company. But, their liability is
subsidiary to that of the company so that it may be engaged only after having
claimed the payment to the company, as a priority, but with no result. Failure to
cash the amount within 15 days from the notification of the claim gives the
creditor the right to direct himself to any of the partners making him pay the full
debt of the company or, according to case, of the unpaid balance.
d) The company denomination includes, in an obligatory manner, the name of at
least one of the partners accompanied by the phrase general partnership written
in full, not abbreviated. The rule related to the company (denomination)

assignment highlights the relevance of the partners person in this type of

company, including third parties. Subsequently, if the denomination contains the
name of a person which has nothing to do with the company, such person will be
liable in an unlimited and joint manner for the company obligations, just like the
partners. By such a regulation, the legislator meant to protect the interests of third
parties which obtain a first information about the company right from its
denomination, the trust granted to the company being prioritary reported to the
persons of the partners which set it up.
e) The company deed of establishment, signed by all partners in an authentic form,
is the company contract;
f) The share capital is divided into shares of interest. The law does not impose a
minimal limit to the share capital. It will be deposited in full upon de date of the
company establishment and it is composed of:
1. contributions in cash of a compulsory character and, eventually
2. contributions in kind, consisting of goods of an economic value,
3. debts, case in which the partner will stay liable to the company
until the latter cashes the full value of the debt brought as
contribution;
e) the partners may undertake to bring their work as a social contribution whose
value cannot be quantified as part of the share capital, but only in the distribution of the
benefits and of the social asset ;
f) company decisions are adopted with the vote of the partners representing the
majority of the share capital, except for those related to the amendment of the deed of
establishment or to the administrators dismissal for which the agreement of all the
partners is needed.

g) the company administration may be attributed to one or more administrators,

exclusively partners, natural or legal persons. If there is the case of a plurality of
administrators, the deed of establishment will stipulate if they are obliged to work
together or separately.
h)

the partners are bound not to compete with the company and they are

forbidden to hold the position of partner with unlimited liability in another company
in another company with a similar or competitive field of activity; also, they may
not perform operations in the same kind of trade or in a similar one;
i) the company is dissolved if, subsequent to bankruptcy, incapacity, exclusion or
withdrawal of one of the partners, their number decreased to one and the
remaining one does not decide the company transformation into a limited liability
company with a sole partner or, in the case of the decease, if the deed of
establishment did not stipulate the possibility to continue the activity with the
heirs. These are dissolution special clauses to which are added those of a
general character, applicable to any legal form of company. Their analysis will be
done in the chapter dedicated to company dissolution and liquidation.
2. The limited partnership
The company denomination is related to the context of its appearance, during the
Middle Ages, in a period when the social categories which owned assets, the
clergy, the nobility, the military, did not have the possibility of capitalizing them in
commercial activities, either because the law did not allow that or the traders
activity was considered degrading for their social position. In such a context, the
solution they found to capitalize the money they had became the contract of
commenda, on the basis of which they entrusted traders with amounts of money
with a view to their capitalization in businesses and share of the resulted profits.
This type of cooperation, having as its binder the trust also generated the
company liability forms; limited, corresponding to the invested assets, (the
general partners), respectively unlimited and joint, in the case of those to whom

the money was entrusted with a view to their capitalization in profitable business
(who became limited partners). The engagement of the liability of the latter
operates according to the rules which are valid in the case of the general
partnerships: its subsidiary character imposes that payment be claimed, as a
priority, to the company; it is only after 15 days from its fruitless notification that
the creditors may claim it to the limited partners, respectively to one/some of
them.
Characteristics :
c) The first feature is related to the presence, within the company, of the two
categories of partners, the general partners and the limited partners, reuniting the
two forms of liability, limited the limited (sleeping) partners, unlimited and joint
the general partners; the support of their association is the trust, similar to the
general partnership; the minimal number of partners is two; though the law does
not limit the maximal number, usually the said number is small;
b) the company denomination includes, in an obligatory manner, the name of at
least one of the general partners, accompanied by the mention limited
partnership written in full. The reasons why the legislator imposes the inclusion in
the denomination of at least one of the names of the partners with unlimited and
joint liability are similar to those of the general partnership. Subsequently, if the
name of a general partner or even of a third person in relationship with the
company is shown in the denomination, such persons, in their turn, become liable
to the company in an unlimited and joint manner, just as the limited partners. The
interests of the company creditors are protected in this case also.
e) the company deed of establishment is the company contract signed in an
authentic form;
d) it does not have a minimal limit of the share capital and, in this case, just as in
the case of the general partnership, the creditors guarantee being prioritary
granted by the partners and not by the value of the share capital. The partners

contributions to the share capital, provisioned by the deed of establishment, are

similar to those of the general partnership;
g) just as in the case of the partners in the general partnership, the general partner
may undertake to provide their work as social contribution but such a value may
not be quantified in the share capital and it is taken into consideration just for the
distribution of the benefits and of the social assets;
f) company decisions are adopted by the partners representing the absolute
majority of the share capital, except for those related to the amendment of the company
contract and to the administrators dismissal, decisions for which the agreement of all the
partners is necessary. The vote will be exercised, as in the case of the general
partnership, in a way directly proportional with the partners participation in the share
capital.
g) the right to administer the company belongs only to the general partners; in this
case also, the restriction is regulated with a view to the protection of third parties
interests; to limited partners it is recognized the right to perform only certain operations
on behalf of the company, operations entrusted by the company representatives by
mandate entered in the Trade Register. If a limited partner exercises administration
operations without such a mandate, he becomes liable to third parties in an unlimited
and joint manner, just as the general partners.
h) the dissolution causes are similar with those regulated for the general
partnership.
To remember: the partners unlimited and joint liability gives the companies of
persons a series of common, specific features: 1) it is only in their case that the
denomination will include, in a compulsory manner, the name of at least one of the
partners, of one of the general partners, respectively; 2) only in their case the
denomination will be accompanied by the specification of the company legal form written
in full, not with initials; 3) the partners may undertake to bring their work as social

contribution but, as the value of such contribution may not be quantified within the share
capital, it will be in the distribution of benefits and social assets; 4) the law does not
impose a minimal value of the share capital for none of the two company legal forms
Arguments : the credibility of those types of companies is prioritary substantiated
on the partners person; the share capital being insignificant and, on the other hand, the
partners / part of them, having an unlimited and joint liability, third parties may report to
them in order to assess the risks of signing contracts with the company.

The

joint-

stock company
It is the representative form of the company of assets; as a result, in its case, the
stockholders contribution to the capital becomes relevant to the detriment of the
relationship

between

the

stockholders

whose

importance

disappears.

As

consequence, what is characteristic for this type of company is the great number of
stockholders who, most of the times, are not acquainted with each other. The
denomination which is also attributed to this type of company, that of anonymous
company highlights in a supplementary manner this feature.
It is the most complex, most evolved of the company legal forms, adequate for
large scale business which absorb considerable assets. In order to respond to
such a purpose, both for the company set up and for the supplementary infusion
of capital, public subscription may be used (the public offer).
The great number of stockholders and the great value of the share capital, which
are characteristic for the joint-stock company, imposed the regulation of an
adequate

structure,

of

organisms

with

well

defined

assignments

and

competences functioning on the basis of the powers separation principle.

We will grant an adequate space to the analysis of those structures in the chapter
dedicated to the trading companies organization and functioning.
Characteristics :
n) The stockholders are liable in a limited manner for their social obligations;
o) A minimal number of two stockholders, natural and/or legal persons is necessary
for the company set up; (actually, the same number is necessary in the case of

each company legal form, except for the limited liability company with a sole
partner).
p) The company sign includes it own denomination, distinct from that of other
companies and accompanied by the mention joint-stock company written in
full or by the initials S.A ;
d) The company deeds of establishment are the contract of association and the
company by-laws which may be drawn up under the form of one document called
memorandum of association under private signature or bearing a certified date;
the authentic form become necessary only in the case when land was subscribed
as contribution in kind to the share capital or the company was set up by public
subscription;
e) According to the manner of share capital provision for the future company, the
latter may be set up: 1) by full and simultaneous subscription of the share capital
by the signatories of the memorandum of association; the set up procedure, in
this case, is not different from that followed in the case of the other company legal
forms; 2) by public subscription, case in which the share capital is provided also
by other persons than those who initiated the company set up. We will analyze
the procedure of both set up ways in the chapter dedicated to this subject.
According to the manner of company set up, (simultaneous, concurrent) or
continued (by public subscription), the companies of assets may be classified in
closed companies, the ones set up simultaneously, or open companies, the ones
set up by public subscription. The companies which, though set up
simultaneously, subsequent to set up, they increased their share capital by public
subscription will be integrated to the second category. The reciprocal is valid: the
open companies may, in their turn, be transformed into closed companies.
f) The minimal limit of the share capital is 90,000.00 lei. The capital will be
established by contributions in cash and/or economically assessable contributions
in kind and contributions in debts, the latter only in the case of the joint stock
company set up simultaneously. The deposit of 30% of the share capital value is
compulsory at the set up moment and it follows that the balance of 70% be

deposited within 12 months, in the case of the contributions in cash and 2 years,
in the case of those in kind.
c) The share capital is divided into indivisible fractions equal in value of a
minimum of 0,10 lei called shares or stock. They can be nominative
(registered), (1), when they indicate the holder of the share, or bearer share
(2), when the holder is not indicated by name and it is subsequently
considered that the title of ownership on the share belongs to its owner. The
deed of establishment will stipulate, in an obligatory manner, both the number
and the kind of shares the company will issue.
The shares are negotiable securities, (or debt securities) which incorporate into
them a certain patrimonial value corresponding to the value of the patrimony of
the issuing company. They have features of the debt securities but without being
perfectly assimilable to them as they lack the perfectly autonomous character, the
independence from the legal writ from which they issue, i.e. the issuing company
deed of establishment. The ownership of a share implicitly implies the
dependance to a certain company and so, the gain of the rights and obligations
regulated by the deed of establishment of the respective company.
The fundamental rights guaranteed to any share owner (therefore shareholder):
a) the right to participate and vote in the general assemblies; b) the right to cash
dividends.
Preference shares with a right of priority dividend; they represent a special
category of shares which confer on their holder the right to cash profit as a
priority, from the distributable profit, prior to any withholding. It does not confer the
right to vote, just to sit in the debates of the general assemblies of shareholders.
Therefore, for their holder, they may become efficient manners of investing
financial resources, on condition that the company be profitable.
d) The company organization and functioning are carried out through its bodies,
with well defined competences and attributions, structured on the basis of the
principle of powers separations: (1), the general assembly with its two forms of
work, ordinary and extraordinary, (2), the company administrators, usually set

up as the collegial body called board of administration and the directors (in the
case of the administration unitary system) or the surveillance council and the
directorate (characteristic to the company administration dualistic system, (3)
the auditors/the financial auditor;
We will analyze the competences and the manner of work of those bodies in the
chapter dedicated to the trading company organization and functioning.
e) Has the right to issue bonds, as a typical way of capitalization of this type of
company; when it needs funds and when it cannot or does not have the
interest to resort to a capital increase to achieve that aim and neither the
solution of contracting a banking credit is not convenient also, it may issue
securities called bonds. The competence to adopt such a decision comes to
the extraordinary general assembly of shareholders and it will be implemented
by a public offer formulated through an issue prospectus. The total value of
the issued bonds has the significance of a loan contracted by the company
with the obligees (the ones who subscribed bonds). Just like the shares,
bonds may be, in their turn, nominative or bearer bonds. Also, still like the
shares, bonds are securities, equal and indivisible. But, they confer on their
holder, the obligee, rights which are distinct from those of the company
shareholders. Unlike the shareholders, the obligees have just the right to be
reimbursed the owed amount, incorporated in the bond value, as well as the
afferent interest, no matter if the company made profit or not. But then they
may not vote in the general assemblies of the shareholders and they will not
cash dividends, such rights being reserved only for the shareholders. For the
representation of their interests (for example, in the situation in which bonds
are not reimbursed upon maturity) the obligees may meet in a general
assembly.
4.8.4. The limited partnership by shares
It is part of the category of the companies of assets. There are two categories of
shareholders, the general (active) partners and the limited (sleeping) partners,
like in the limited partnership, but unlike it, its share capital is divided into shares,
similar to the joint stock company

Characteristics ;
1. It has two categories of shareholders, the general (active) partners and the
limited (sleeping) partners; in order to set up the company, it is necessary a
minimum number of two shareholders ;
2. The company deeds of establishment are the contract of association and the
by-laws which may be drawn-up under the form of a single writ, called
memorandum of association; the memorandum of association in an authentic
form is not necessary, with the usual exceptions, the company set up by public
subscription or land brought as contribution in kind to the share capital;
3. It may be set up both simultaneously and in a continuous form (by public
subscription);
4. The company sign contains its own denomination, different from that of other
existing companies, accompanied by the specification limited partnership by
shares , written in full ;
5. It is subject to legal dispositions incidental to joint stock companies with
reference to the share capital, to its division into shares, the kinds of shares,
the issue of bonds, general assemblies, auditors;
6. The company administration may be organized exclusively according to the
rules of the unitary system; the administrators may be assigned only from
amongst the active partners, i.e. of those with unlimited and joint liability ;
It is a form of company little met in practice. The disadvantages it shows for the
sleeping partners who, though they provide the consistency of the share capital, they
may not participate in the administration of the company only if they waive their limited
liability, may offer the explanation of this reality. Moreover, the fact that most of the legal
dispositions which govern it belong to the joint stock company, makes easy to explain
the preference for this second legal form compared to which the limited partnership by
shares has only disadvantages.
4.8.5. The limited liability company
It was first regulated in Germany in 1892. It is the result of the combination of
certain features of the general partnership, so, of a company which is adequate

for small business and those of the joint stock company, as a legal form perfect
for large scale business, so that it matches the requirements of the capitalization
of average value assets. Therefore, in this type of company we witness a
combination of features, which customize it, coming from both of the types of
companies from which it is inspired.
Characteristics ;
1. The partners, natural or legal persons, are animated by afectio societatis ,
just as in the case of the general partnerships and have a limited liability,
similar to the shareholders of the joint stock companies; it is the only company
which may be set up in the atypical form of company with a single partner and
the only one whose maximum number of partners is limited to 50;
2. The company deeds of establishment are the contract of association and the
by-laws which may be drawn-up under the form of a single writ, a
memorandum of association;
3. The company sign is composed of its own denomination, capable of
differentiating it from that of other companies, accompanied by the phrase
limited liability company or by the initials S.R.L. (LLC or Ltd)
4. The minimum share capital is 200 lei divided into fractions called shares with
a minimum value of 10 lei each. The deed of establishment will indicate each
partners contribution and the number of shares owned; the full deposit of the
share capital is compulsory upon the company set up, just as in the case of
the companies of persons ;
The capital sources, upon the company set up, will be: contributions in
cash which are compulsory and, eventually, in kind, consisting of goods
economically assessable. Contributions in debts are not allowed. In the case of
the contributions in kind, the deed of establishment will indicate the manner of
their assessment, by the partners agreement or by survey;
Unlike stock, the shares are not negotiable securities, cannot be freely
transacted, the company keeping the features of the companies of persons.
Subsequently, their transmission in favor of third parties can be done only on the
basis of the agreement expressed by the partners who own at least three fourths

of the share capital. Moreover, it imposes the amendment of the company deeds
of establishment and the registration with the Trade Register;
5. The company organization and functioning are provided by the general
assembly of the partners, as body with full decision powers and by its
administrator//administrators who may be partners or not. According to their
will, through the deed of establishment, the partners may emphasize the
companys features of a company of persons or, quite on the contrary, those
of company of assets. Thus, for example, by their will, expressed in the deed
of establishment, they may stipulate that the decisions having as their object
the amendment of the company memoranda of association be adopted not
with the partners unanimous votes, just like the those of the companies of
persons, but with the majority expressly regulated by the deeds of
establishment, just as in the case of the joint stock companies;
6. The audit of the company administration is done either by the partners, in a
non-differentiated manner, just like in companies of persons, or by
auditor/auditors, as specialized structure, according to the model offered by
the companies of assets. When the number of partners exceeds 15, the
auditor/auditors nomination becomes compulsory ;
7. The company may be set up under the atypical form of limited liability
company with a single partner or may be turned into such a company as effect
of the amendment of the number of partners; the company sole deed of
establishment is, in this case, the by-laws. The law imposes a series of special
norms applicable to the limited liability company with one partner, i.e.:
1. A natural or legal person may hold the position of single partner in only one trading
company;
2. A limited liability company with a single partner cannot hold the position of single
partner in a limited liability company ;
3. the value of the contributions in kind to the share capital is determined by survey,
unlike the limited liability company with two or more partners, case in which the
contributions in kind may be assessed by means of an agreement between the partners.

4.9. Legal regime of company subsidiaries, branches, other secondary

headquarters
The need of the company development, the interest of its position consolidation in a
competitive economic environment become the arguments of the decision to expand the
activity, feasible by the set up of certain exogenous structures, outside its registered
headquarters. The most known of them are the company branch and subsidiary. Though
frequently met in practice, they benefit of a brief regulation in Law no.31/1990. On the
basis of those legal dispositions, the doctrine managed to configure exactly their legal
regime.
4.9.1. The Subsidiary.
It is the only one of the exogenous structures of the trading company which has legal
personality being therefore an entity which is distinct from the (parent) company which
set it up. Subsequently, it may have its legal form and even the nationality different from
those of the parent company. With a view to its set up, it will observe the legal
dispositions matching its legal form and will have the legal regime characteristic to the
chosen form. It has its own patrimony and an independent self standing organization,
adequate to the achievement of its objectives and scopes regulated through its deeds of
establishment. Its dependence to the parent company, the filiation link between them
is provided by the audit which the mother exercises in virtue of the majority
participation quota in the branch share capital. Therefore, in this subsidiary, the parent
company has the behavior which is adequate to its position and role of majority
shareholder/stockholder and, in just one case, that of single partner (as it may set up
just

one

company

as

single

partner).

The

mothers

position

of

majority

shareholder/stockholder or single partner in the subsidiary company is the only one

which defines it relationship with the subsidiary. Mothers other possible forms of audit,
feasible, for example, on the basis of business contractual relationships or by the
administration of both companies by the same persons do not define the legal
relationship subsidiary parent company.
The law does not impose an express rule concerning the assignment of the subsidiary
denomination. As it is a distinct trading company, it will obviously observe the incidental

legal dispositions in accordance with the legal form under which it is set up. The
condition of the denomination uniqueness will not allow for its functioning under the
denomination of the parent company only if the mention Subsidiary will be attached to
it and its headquarters indicated. If we take into account the fact that, generally, the
reason why a subsidiary is set up is to diversify the clientele of the parent company, to
extend its area of economic influence to new geographic zones, it can be assumed that,
usually, the option will be in favor of this last solution related to the assignment of the
subsidiary commercial name.
4.9.2. The Branch
Unlike the subsidiary, the branch is a dismemberment without legal personality of the
trading company. Subsequently, it cannot act independent of the parent company
which set it up. It acquires from it just a certain autonomy within the limits of which it
developes its activity. Its activity cannot be different from that of the parent company, it
will be identical or part of it. It is doubly dependant to the parent company; legally and
economically. From the legal point of view, as it lacks personality, it will not have a
denomination, nationality, self standing organization, its patrimony and share capital.
Economically, it cannot detain its own goods, the ones it uses in its activity belonging to
the parent company. It establishes legal relationships with third parties strictly on behalf
of the parent company, as its proxy or consignee.
The branch has the same legal regime as that applicable to other secondary
headquarters of the trading company, called, according to the latters will, agencies,
representative offices, workstations, offices, etc. The difference between them and the
branch is given only by the obligation to enter the latter in the Trade Register
corresponding to the location of its headquarters. Even if it will have the headquarters in
the same county as the parent company, it will be entered in the Trade Register distinctly
from it. Instead, the other secondary headquarters will be recorded only by the Trade
Register where the parent company is registered, irrespective of the county where they
are located.
8.3. A foreign trading company has the right to set up in Romania, with the observance
of the Romanian law, both branches and subsidiaries if the said right is acknowledged

by the law of its organic state. The Romanian subsidiaries of the foreign trading
companies will have Romanian nationality whilst their branches will preserve the
nationality of the company which set them up.
CHAPTER 5
Trading companies set up
The trading company set up, in any of the five legal forms regulated by law, is the result
of going through a procedure precisely regulated at the end of which the company gains
legal personality.
5.1. The trading company deeds of establishment.
The first moment of this procedural step is marked by the manifestation of the partners
will materialized by the draw up of the future company deed/deeds of establishment.
It/they will become the foundation of the future trading company, the legal instrument by
which the partners express their will to associate. 14
In the case of the companies of persons, as simpler legal form, the law stipulates the
contract of association as unique deed of establishment.
Instead, in the case of the companies with a higher degree of complexity, like the
companies of assets, as well as the limited liability company with two or more partners,
the contract of association is completed by the by-laws as the second deed of
establishment.
The two may be drawn up under the form of a single document reuniting the clauses
characteristic to both and generically called memorandum of association.
If Law no.31/1990 on trading companies expressly enumerates the compulsory
stipulations of the contract of association, for each of the five types, instead, it only
14

Ioan Schiau, Titus Prescure, Law on trading companies no.31/1990, Analyses and comments by articles, Hamangiu
Publishing, Bucharest, 2007, pag.42;

specifies the necessity of the by-laws, as a second deed of establishment, without

deciding in any way on its contents. Considering it a deed of establishment
complementary to the contract of association, the doctrine determined that it should
include special dispositions agreed upon by the partners, related to the company
organization and functioning comparable to those usually characteristic to the
regulations of organization and functioning. Actually, in practice, the distinctions between
the content of the two documents are most of the times insignificant. The intention to
assume in the by-laws stipulations of the contract of association may frequently be
ascertained. In such situations, the alternative expressly offered by the law becomes
preferable, i.e. to draw up the two documents under the form of a single writ generically
called memorandum of association.
In the case of the single person trading company (the limited liability company with a
single partner), in the absence of an association relationship, the sole deed of
establishment is the by-laws, as the act of will of a single person, the unique partner (an
uninspired syntagma attributed by the law)
5.2. The form of the deeds of establishment
In the chapter dedicated to the brief description of the trading companies we have
already specified the form imposed by law to the deeds of establishment. Sinthetically,
we remind that it is directly linked to the partners form of liability. Thus, in the case of the
companies in which they are liable to the extent of their contribution to the share capital,
as a rule, the deed of establishment, signed by all the partners, will be drawn up under
private signature, except for the case where land was brought as contribution to the
share capital when the authentic form becomes compulsory. The deeds of establishment
drawn up under private signature acquire a certified date subsequent to either its
attribution by an attorney-at-law or notary public as an exercise of their professional
assignments or by the registration in the Trade Register. In this last case, we find
ourselves in the presence of the application of a legal general disposition included in art.
1185 Civil Code, disposition according to which, the certified date of a document,
therefore the date on which it becomes opposable to third parties, is acquired, amongst

other ways, by presenting the document to a state entity, by its registration in a public
register or by its mention in a writ drawn up by a public officer.
The Contract of association of the companies of persons characterized by the partners
unlimited and joint liability, or at least of some of them (in the case of the limited
partnership), will be done in an authentic form. The same form will have the deeds of
establishment of the joint stock company set up by public subscription.

15

5.3. Compulsory elements of the contract of association

The analysis of the legal texts which regulate the compulsory elements of the contract of
association for each of the five legal forms of companies, allows for the conclusion
according to which the majority of the stipulations are the same for all the company
types. Of course, inherent is also the presence of the specific contractual provisions,
deriving from the features specific to each of the company forms but they are
complementary to the compulsory coincidental ones. The category of the coincidental
contractual dispositions includes:
h) Clauses

concerning

the

partners identification;

(name,

first

name,

citizenship, residence, date and place of birth, partners natural persons numeric
personal

code,

respectively,

denomination,

nationality,

address

of

the

headquarters, number or unique registration code, according to case);

i) Clauses concerning the identification of the future company, namely, those
which stipulate:
b.1.) the company denomination, assigned under the terms imposed by law;
b.2.) company headquarters, as premises where the company documents are held,
where correspondence is being edited, where the company management bodies
have offices. Therefore, the function accomplished by the headquarters is not
indispensably related to the commercial activity of the trading company.
Now, according to the law, the headquarters of several companies may be declared
at the same address only if one of the following conditions is met: 1) the building
structure allows for the functioning of the respective companies; 2) they have at least
15

Usually, the authentic form of the documents represents an exception from that related to their validity unde the
form of a writ under private signature and it is justified by the legislators interest, preoccupation to protect the
signatories of the respective writ, in this case the partners who are liable in an unlimited and joint manner,
respectively the subscribers, in the case of the joint stock company set up by public subscription.

one common partner; 3) the building is under the ownership of at least one of the
partners.
b.3.) the company legal form; the option for a certain legal form must be expressed
by the deed of establishment with the consequence of the assumption of the
obligation to observe the legal provisions characteristic to the chosen legal form;
j) Clauses concerning the company field of activity; the field of activity, the one
which gioves the company its economic profile, is configured by the entirety of the
commercial acts that the partners agreed to perform in order to make profit. Its
determination is done by the use of the CAEN (NACE) classification,
(classification of the activities of the national economy). We need to specify that
the activities included in its content are not selected and listed on the basis of
merchantability criteria. Quite on the contrary, making a record used in the the
activity of statistics reports, the classification also includes non-commercial
activities so that, with a view to the configuration of the traders field of activity it
becomes necessary to select from its content those activities which may be
qualified as acts of trade. Moreover, it becomes necessary the indication in the
deed of establishment of the main activity as well as of the domain in which the
respective activity is included as the main source of the company profit.
On the other hand, the company may carry out only the commercial operations which
are configured in its deed of establishment, as an expression of the principle of the
speciality of its capacity of use by virtue of which it will assume its obligations and
capitalize its rights acknowledged by its deed of establishment .
We need to specify that the running of certain selected activities may be conditioned
by the obtaining of certain supplementary administrative authorizations, some of them
prior to the company set up, others subsequent to the said moment but prior to the
effective initiation of the respective activities.
k) clauses concerning the share capital and the partners contribution; the
deed of establishment will specify the total value of the share capital, its structure,
(cash, kind, debts, according to case), as well as the value of each partners
contribution, according to which the becoming rights in relationship with the

company will be precisely determined, (the voting right, the right to dividends,
etc.). The divisions of the share capital will also be indicated, (shares, stock,
according to case), as well as its distribution amongst the company partners. In
the case of the trading companies for which the law imposes a certain minimal
limit of the share capital, obviously, its observance becomes necessary.
In the case of contributions in kind, the goods brought as such will be described
as well as their way of assessment, conventional or by special survey, according to
case. We need to specify that for the share capital, the value of the respective goods is
of interest and not the goods in their materiality, as physical existence.
In the case of joint stock companies where the deposit of a quota of up to 70% of
the share capital is allowed subsequent to the company set up, the deposit deadline will
also be indicated, obviously, within the legal limit, (12 months for cash deposits,
respectively 2 years for those in kind).

16

For the same type of companies, the indication

of the number and kind of issued stock (nominative or bearer) becomes necessary.
l) Clauses concerning the company administration and audit; the deed of
establishment will indicate the company administrators by name as well as their
identification elements. The power conferred on them will be also specified,
whether they will work together or separately, to whom comes the right to
represent the company in its relationship with third parties.
The complexity of the companies of assets is significantly demonstrated by the
rules related to the administration. Subsequently, in their case, the deed of
establishment will have to determine the chosen system of administration, and,
matching the said system, the distribution mode of the company administration
and representation competences, the duration of the mandate, the manner of
work. Their correct definition becomes a condition of those structures functionality
on which it depends, in the end, the efficiency of the company activity.
In the case of the companies in which the audit of the company administration is
necessary to be attributed to and exercised by specialized structures, meaning auditor
16

The subscribed capital is the one established by the founders in the deed of establishment
representing therefore their promise to give the company contributions up to the meeting of the said
capital value. The deposited capital is the value expression of the contributions effectively deposited by
the partners upon the date of the trading company set up- Ioan Schiau, Titus Prescure, Law on trading
companies no.31/1990, Analyses and comments by articles, Hamangiu Publishing 2007, pag.59-60;

or financial auditor, the deed of establishment will include the identification data of the
first auditors or the first financial auditors, according to case as well as the duration of
their mandate. The appointment of the said audit professional structures is mandatory in
the case of the companies of assets and of that with limited liability having more than
fifteen partners and facultative, in the other situations. With the companies of persons
and those with limited liability with less than fifteen partners this audit comes to the
partners.
m) Company duration; it is up to the partners will to determine the duration for
which the company is set up and such a mention, no matter whether they opted
for a limited or unlimited lapse of time, will be specified as such in the deed of
establishment. If the company was established for a limited period of time, the
maturity of the said deadline becomes reason for the company dissolution if, prior
to that date, the partners did not decide its extension.
n) The participation in benefits and losses; the gains of benefits and their
distribution between the partners under the form of dividends (the association for
risk share) represents, finally, the essential reason of the company set up for
each of its partners. It is the basic criterion of separating the trading company
from other associative structures like, for example, the associations and
foundations, as non-profit organizations. Therefore, it is only natural that the
contents of the deed of establishment define the rules according to which the
benefits are distributed and, in a correlative manner, how are the company losses
dealt with. Rules of distribution may be agreed to recognize the partners
differentiated effort in the performance of the company activity or, on the contrary,
equal distribution quotas may be agreed upon, not correlated with contributions to
the capital which are not equal. There is only one limitation of the partners
decision freedom in what concerns the matter of the participation in the profit and
loss, which is the avoidance of the insertion of certain leonine stipulations, of
clauses stipulating that one or part of the partners acquire all the company
benefits without participating in its losses, respectively such a provision is

considered void without attracting though the nullity of the full contract of
association. In its stead, the suppletive dispositions of the law become applicable
and in accordance to them, the participation in the benefits and losses will be
subject to the rule of proportion with each partners participation quota in the
company share capital.
h) Clauses related to the company secondary registered offices; In the
company deed of establishment the partners will indicate the postal address of the
secondary registered offices they decided to set up or at least the terms under which
they will be set up.
j) Clauses related to the company dissolution and liquidation; the
purposefulness of the two operations, namely, the cessation of the company existence,
justifies the neceesity of the insertion of certain stipulations to that sense within the
company deed of establishment. The condition is considered done both in the case of
the take over, in the contract of association, of the incidental legal dispositions or of their
sheer mention.
5.4. Set up procedural formalities
For the deeds of establishment draw up with the observance of the above mentioned
conditions of form and content, the first required priority is to check the company
availability in terms of denomination, both from the point of view of its novelty (elements
which distinguish it from the existing companies) and from its uniqueness, to the sense
that it has never been assigned already to another existing company or to one with its
establishment in progress. The operation is solved by the booking of the company at the

office of the Trade Register.17 The issued document makes proof of the cover of this first
lawfulness check.
Within 15 days from the draw up of the deed of establishment, the founders or,
according to case, their agents, will apply for the company entry in the Trade Register
with jurisdiction over the area where the company headquarters will be located. The
application for registration, (type form, issued by the National Office of the Trade
Register), will be accompanies by the following documents :
f) The deed of establishment under the form required by law;
g) Proof as to the performance of the deposits consisting of the partners
contributions, according to the deed of establishment; in the case of contributions
in kind, documents will be filed making proof of the partners title of ownership on
the goods brought as contribution to the capital and, should there be the case,
the report of the survey by which the value of the contributed goods was
assessed by the expert nominated by the judge-delegate;
h) Proofs of the declared headquarters18 and of the company availability;
i) The founders, first administrators and, according to case, first directors,
respectively, the directorate and surveillance council first members statement on
their own responsibility, related to the accomplishment of the legal terms to hold
the respective positions;
j) Eventual documents or notices imposed by special laws (it is the case of the
license issued by the Board of Insurance Surveillance and which is necessary to
insurance companies or of the temporary license issued by the National Bank for
banking trading companies, etc.)

17

The Trade Register, as instrument of records and publicity of the traders and their activities is administered by the
entity called Office of the Trade Register, organized by the courts of law in each county and in the city of Bucharest,
on the basis of Law no.26/1990, as amended. The central Trade Register is administered by the National
Office of the Trade Register, public entity with legal personality subordinated to the Ministry of Justice. The
Trade Register is public and subsequently, it is obliged to issue, against a fee, certified copies of the
entries carried out in the register and of the documents filed as well as information related to the
registered data. The registration and the mentioned operated in the Trade Register become opposable to
third parties as of the date of the registration or from their publication in the Romanian Official Gazette,
Part 4 or in other publication, where the law disposes otherwise.
18
The legal ownership of the premises where the company headquarters is declared will be proven,
according to case, by Real Estate Register abstract, rental contract, loan contract, etc.).

Within 5 days from the accomplishment of all the lawfulness requirements, the
application for registration is solved by the director of the Office of the Trade
Register by the Court of Law and/or by the persons assigned by the National
Office of the Trade Register, who, seeing that all the legal terms are met, will
authorize, by resolution, the company set up and its entry in the Trade Register.
Technically, the resolution is communicated in electronic format to the Ministry of
Public Finance which assigns and communicates to the Register the company
unique registration code. Subsequent to registration, another copy of then writ is
communicated to the Official Gazette with a view to its publication. As of the date
of entry, the company gains legal personality. The Certificate of registration,
including the unique code, denomination, legal form, company headquarters and
its main activity, the Trade Register entry number, acknowledges the company
registration, its existence as subject of law. As of the same date, the company is
registered as subject of taxation. The registration procedure integrates the
component which aims the company authorization of functioning, solved on the
basis of a statement on own responsibility signed by its representative, related to
the accomplishment of the legal terms concerning the environment, health,
sanitary-veterinarian, civil protection, labor protection, according to case.
Subsequent to registration and in accordance with the nature of the activity, the
company will assume the liability related to the lawfulness of those activities,
obtaining, should there be the case, the necessary licenses or notices.
5.5. Joint stock companies set up by public subscription
This is the second way which may be followed for the set up of a joint stock company,
besides the usual procedure (simultaneous set up), common to all the company legal
forms regulated by law. Known in the doctrine also under the denomination of continued
set up, it represents a way dedicated strictly to joint stock companies, justified by the
need to provide a massive capitalization to the company, as of the moment of its set up.
The procedure, initiated by the company founders, respectively by the group of persons
which assume the responsibility and the expenses related to the company set up, goes
over the following stages:

q) Release of the issue prospectus, generally, meaning the offer addressed to the
public to subscribe stock in the future trading company. Subsequently, it will
indicate, in a compulsory manner, the essential elements of the future company,
specific to the deed of establishment, except for those concerning the
management and audit bodies, their election being made during the set up
assembly. Under the sanction of nullity, the issue prospectus will be done in an
authentic form.
r) The issue prospectus will be filed with the Trade Register, with a view to its
endorsement by the

authorized persons of the said entity, in order to be

published by the press;

s) Stock subscription; the persons interested by the offer launched by the
prospectus, may subscribe for stock of the future company, signing on one or
more copies of the issue prospectus and depositing at least half of the value of
the subscribed stock in the account indicated by the prospectus.
t) Set up assembly; within 15 days from the closing of the subscription period, the
founders will convene the set up assembly composed of all those who subscribed
stock of the future company, (subscrbers). In the said assembly, every subscriber
has the right to one vote, irrespective of the number of subscribed stock. The
main assignments of the assembly, exercised by the adopted decisions, refer to:
verification of the legal requirements related to the share capital, validation of the
experts report concerning the assessment of the contributions in kind (should
there be the case), approval of the operations carried out by the founders on
behalf of the company as well as the granting of the advantages regulated by the
law in their favor, consisting of the allotment of a supplementary quota of up to
6% of the company profit for a period of up to 5 years as of the moment of its set
up, the nomination of the members of the company management and audit
bodies, the approval of the deed of establishment and the nomination of the
persons who will represent the company on behalf of the subscribers in order to
authenticate the deed and complete the set up formalities.

u) Subsequent to the authentication of the deeds of establishment, the procedural

formalities become identical to those followed in the case of the simultaneous set
up.
We need to underline the founders decisive role in the company set up procedure by
public offer. The liability related to the delivery of the issue prospectus, the
organization of the set up assembly, performance of the deposits, the exactness of
the information communicated, the validity of the operations achieved on behalf of
the company prior to set up offer just a few of the arguments concerning the
regulation and granting of certain advantages and rights in their favor.
In practice, the procedure had, until now, quite a restricted application. The situations
of the share capital increase by public subscription were more frequent. In both
cases, the companies which used the public offer for the set up or the increase of the
share capital become companies of the open type which are subjected to the special
legislation applicable to the domain of equity values.
5.5. Joint stock companies set up by public subscription
This is the second way which may be followed for the set up of a joint stock company,
besides the usual procedure (simultaneous set up), common to all the company legal
forms regulated by law. Known in the doctrine also under the denomination of continued
set up, it represents a way dedicated strictly to joint stock companies, justified by the
need to provide a massive capitalization to the company, as of the moment of its set up.
The procedure, initiated by the company founders, respectively by the group of persons
which assume the responsibility and the expenses related to the company set up, goes
over the following stages:
v) Release of the issue prospectus, generally, meaning the offer addressed to the
public to subscribe stock in the future trading company. Subsequently, it will
indicate, in a compulsory manner, the essential elements of the future company,
specific to the deed of establishment, except for those concerning the
management and audit bodies, their election being made during the set up
assembly. Under the sanction of nullity, the issue prospectus will be done in an
authentic form.

w) The issue prospectus will be filed with the Trade Register, with a view to its
endorsement by the

authorized persons of the said entity, in order to be

published by the press;

x) Stock subscription; the persons interested by the offer launched by the
prospectus, may subscribe for stock of the future company, signing on one or
more copies of the issue prospectus and depositing at least half of the value of
the subscribed stock in the account indicated by the prospectus.
y) Set up assembly; within 15 days from the closing of the subscription period, the
founders will convene the set up assembly composed of all those who subscribed
stock of the future company, (subscrbers). In the said assembly, every subscriber
has the right to one vote, irrespective of the number of subscribed stock. The
main assignments of the assembly, exercised by the adopted decisions, refer to:
verification of the legal requirements related to the share capital, validation of the
experts report concerning the assessment of the contributions in kind (should
there be the case), approval of the operations carried out by the founders on
behalf of the company as well as the granting of the advantages regulated by the
law in their favor, consisting of the allotment of a supplementary quota of up to
6% of the company profit for a period of up to 5 years as of the moment of its set
up, the nomination of the members of the company management and audit
bodies, the approval of the deed of establishment and the nomination of the
persons who will represent the company on behalf of the subscribers in order to
authenticate the deed and complete the set up formalities.
z) Subsequent to the authentication of the deeds of establishment, the procedural
formalities become identical to those followed in the case of the simultaneous set
up.
We need to underline the founders decisive role in the company set up procedure by
public offer. The liability related to the delivery of the issue prospectus, the
organization of the set up assembly, performance of the deposits, the exactness of
the information communicated, the validity of the operations achieved on behalf of
the company prior to set up offer just a few of the arguments concerning the
regulation and granting of certain advantages and rights in their favor.

In practice, the procedure had, until now, quite a restricted application. The situations
of the share capital increase by public subscription were more frequent. In both
cases, the companies which used the public offer for the set up or the increase of the
share capital become companies of the open type which are subjected to the special
legislation applicable to the domain of equity values.
Chapter VI
Trading companies organization and functioning
6.1. The company goals and objectives defined by the deed of establishment will be
achieved through its bodies which are structured on three different levels, with
competences and functions precisely specified: the general assembly, the company
administrators (managers) and the auditors/financial auditors. They materialize the
company will as a legal person, distinct from it partners own will, just as well as the
goods included in the company patrimony do not identify themselves with the partners
own goods. Subsequently, a good and efficient functioning of the company is the
expression of the correct fulfillment of the assignments specific to each of the three
categories of bodies. Hierarchically structured, each of them benefits of clear
regulations which, if faithfully observed, confer on the company the exactness of a well
jointed functional mechanism, based on the principle of the powers, of the assignments
separation, on a precise configuration of the competence limits. In this analysis, the joint
stock company becomes the most conclusive example, its complexity being confirmed
exactly by the rules according to which its bodies are organized and function. To that
sense, the doctrinaire assertion according to which the joint stock company is similar in
its organization to the state organization based on democratic principles becomes
relevant19. In what concerns the other types of companies, including that of the limited
liability one with less than fifteen partners, for the overwhelming majority of the cases,
the third category of bodies, the auditors, is missing, their appointment being facultative
and not compulsory, the role of auditing the company administration coming, in this
case, to the partners.
In what follows, we will analyze synthetically the three categories of bodies.
19

Gheorghe Piperea, Commercial law, Vol.I, Ed.C.H.Beck, 2008, pag.107

6.2. General assemblies

Composed, without exception, of the entirety of the company shareholders/stockholders,
to the sense that each one of them has the right to participate and vote in these
assemblies, as holder of the number of votes determined by the number of
shares/stock/shares of interest he owns, the general assemblies represent the
deliberative body with the supreme character at the company level. They have the role
to decide both on current as well as fundamental issues related to the strategy and basic
directions of the trading company evolution. In the most expressive manner, the
company will is manifested at the level of the general assembly. 20 Each partners
personal will related to the company will be materialized only by vote, contributing to the
articulation of the company will by the number of expressed votes. Therefore, the writs
issued by the company are not the stockholders writs but of the company which
expresses itself through its bodies.
6.2.1. Forms of work. Attributions.
In the case of the joint stock companies, the general assemblies of stockholders meet in
ordinary and extraordinary sessions, depending on the issues that need to be approved,
each having express, unmistakable attributions and specific work conditions. Thus;
o) The ordinary general assembly meets at least once a year, during the first five
months from the closing of the financial exercise, (i.e. the 31 st of December of
each year), its role being just that of the analysis of the closed year through the
results

reflected

by

the

administrators/surveillance

financial
council

situations,

and

by

the

auditors/financial

report
auditors.

of

the

To its

competence also comes the election and the dismissal of those bodies, as well
as the establishment of the appropriate pay for the performed activity
Sinthetically, it can be said that, generally, it rules on the company ordinary
problems, i.e. usual, regular, current.

20

To that sense, see Gheorghe Piperea, op.cit. pag.171

p) The extraordinary general assembly, meets anytime it is necessary to decide

on problems of greater importance for the company life and evolution,
(extraordinary problems). Generally, we are speaking here about decisions which
have as effect the amendment of the company deed of establishment, (field of
activity, registered headquarters, share capital, legal form, company merger or
division, dissolution and liquidation, etc.)
The difference between the decisional competences is also highlighted by the conditions
of the necessary quorum and majority, differently regulated for the two types of
assemblies. Thus, whilst in the case of the ordinary assembly, in order to have it validly
convened, for the first summons it is necessary the presence of the stockholders
representing at least one fourth of the total number of voting rights, with the second
summons, if the first does not meet the legal terms of quorum or if it cannot work in a
valid manner for lack of the majority which is necessary to adopt decisions, the session
is statutory irrespective of the share of the present or represented capital, the decisions
being adopted with the vote of the majority of that capital. Instead, the extraordinary
general assembly, needs a minimal quorum both at the first and second summons,
respectively one fourth of the total number of voting rights for the first summons and one
fifth of the said voting rights for the second, if the first cannot sit validly for lack of
quorum or it cannot adopt decisions for lack of the necessary majority. The regulated
quorum differences are justified by the object of the decisions coming to their specific
attributions. Given the fact that the competence of the ordinary assembly includes
issues related to the company current activity, not being able to adopt decisions related
to such issues means the obstruction of the activity. It is the reason why, upon the
second summons, the ordinary general assembly is validly convened irrespective of the
share of the present or represented voting rights.
We need to specify that, by the deed of establishment, the stockholders may agree upon
more rigid quorums, higher than the legal ones but certainly not inferior to them.
6.2.2. Summons rules
The great number of stockholders which is specific to joint stock companies imposes
exact rules for their summons at generals assemblies in order to observe everyones

right to participate and vote in such assemblies. Any deviation from them, actually from
any of the legal dispositions concernint the organization and adoption of decisions in
general assemblies creates good grounds for their successful abolishment by interested
stockholders and even by any interested third parties if such party can make proof of
absolute nullity reasons of the said decisions.
Subsequently, the rule recognized by the law as the most efficient one for the
achievement of the summons procedure consists of the publication of the convener
in the Official Gazette and in a widespread newspaper of the area where the
company headquarters is located. From this rule, applicable alternatives may be
regulated in the case of the joint stock companies with registered stock (for
example, registered letter, letter sent by electronic means). The convener, published
at least 30 days prior to the date established for the assembly, will include the
necessary information which is useful for its development (meeting date and place,
agenda, etc). The memos will be made available for the stockholders by the
administrators/directorate, in order to offer them the possibility to document
themselves to have a correct exercise of their rights during the meeting. With the
same purpose, additions to the agenda can be made by interested stockholders only
during the first fifteen days following the publication of the convener, the said
additions being also published. The obligation to convene the assembly comes to
the company administrators/directorate, out of their own initiative or upon the
request of the stockholder(s) representing at least 5% of the share capital or even
less if such a threshold was determined as such by the deed of establishment
6.2.3. Cancellation of the decisions of the general assembly
The decisions adopted under the terms of the law and of the deed of establishment are
binding for all stockholders including those who voted against them (the minority obeys
to the majority). Just as we said before in this chapter, they express the company will as
legal person distinct from that of the stockholders which set it up and therefore from their
individual wills. The unlawful and non-statutory decisions may be attacked in court by
way of the action for annulment by the stockholders who voted against and requested
that their vote be mentioned in the assembly session minutes as well as by those who

did not sit in the meeting or even by interested third parties if they can make proof of
grounds for the absolute nullity of the adopted decisions.
6.2.4. Partners assembly in companies of persons and in the limited liability
company
The small number of shareholders which is characteristic to companies of persons and
even to that with limited liability obviously generates significant consequences on the
rules which are incidental to body will full decisional competences. Thus, in the case of
the limited liability companies, the two work forms of the general assembly, the ordinary
and the extraordinary, are not institutionalized anymore, just the assembly of the
shareholders. As a rule, the said assembly decides in a valid manner on the basis of the
shareholders and shares majority except for the decisions having as object the
amendment of the deed of establishment, action for which the shareholders unanimity
becomes necessary if, by the deed of establishment the reserve rule was not set up, i.e.
the amendment can be done with a certain majority of shareholders and shares. In the
case of this type of company, the dispositions applicable to the joint stock companies
also become incidental with reference to the cancellation of the unlawful or non-statutory
decisions by way of the cation for annulment.
The degree of institutionalization of the general assembly decreases therefore as the
company legal form becomes simpler, missing completely in the case of the companies
of persons. It becomes improper in the said companies to regulate the general assembly
of the two or three partners. In their case, the law sticks to two basic work rules, i.e. the
adoption of the current decisions with the agreement of the shareholders representing
the majority of the share capital and of those related to the amendment of the deeds of
establishment with their unanimous agreement.
6.3. Company administrators and managers.
The notion of company administration subordinates the ensemble of activities specific to
the effective achievement of the company field of activity, cumulating attributions related
to patrimony administration and company representation in its relationships with third

parties. In principle, the administrators fulfill a general mandate entrusted to them by the
general assembly of shareholders, having as its object the effective performance of the
company objectives and scopes. Subsequently, in the relationship established between
the different categories of company bodies, they represent the body structured at the
second level of competences, subordinated to the general assembly of shareholders.
The different level of complexity of the five types of trading companies is significantly
reflected also by the dispositions related to the administrators. Thus, the last
amendments brought to the Law on trading companies no.31/1990, by Law no.441/2006
and by the Government Emnergency Ordinance no.82/2007, are substantially dedicated
to company administration, especially to the joint stock one. The integration and
harmonization effort of the domestic legislation in the matter of the corporate law with
that of the European Union is conclusively highlighted in the new approach of the
concept of administration by the takeover of the corporate governance principles whose
scope is, just as the specialty doctrine relevantly concluded, to contribute to the
promotion of certain rules which ensure the transparency, integrity and efficiency of the
business environment, by the fair distribution of the attributions related to deliberation,
administration and audit between the company different power centers, under the terms
of the adequate protection of the public interest. 21 The new legal dispositions
reconfigure the concept of administrator, attributing to this position a professional
character and attributes like professional diligence, prudence, good faith in business
decisions, loyalty became part of it.
6.3.1. Joint stock companies administration systems.
The same corporate governance principles 22 led to the regulation of two distinct
administration systems in the case of the joint stock companies, i.e.:
21

Ioan Schiau, Titus Prescure, op.cit., pag.411

The principles stipulate rules (a) concerning the partners rights exercise and protection, under the terms in which
their adequate information is ensured, in order to facilitate the making of a decision and to integrate their vote in an
efficient and transparent deliberative mechanism, (b) related to the partners fair treatment, with a special look on the
adequate protection of the minority partners, (c) related to the participation and involvment mechanisms of the
persons interested in the company governance (like creditors, employees and their representative bodies, suppliers,
business community and environment), d) converning the access to information and the transparency of the
decisional mechanisms as well as the ways of exercising and external efficient and qualified audit on the company
activity and, finally, (e) concerning the company administartors and managers liabilities. Ioan Schiau, Titus
Prescure, op.cit., pag.411-412;
22

f) The unitary system, inspired by the French legislation

g) The dualistic system, established by the German legislation and of German
inspiration (North European countries)
In what follows we will try to take a synthetic look at their main features. Thus,
6.3.2. Company administration unitary system;
The company administration comes to the administrator(s), (always an odd number),
appointed by secret vote by the ordinary general assembly. In the case of the companies
whose financial situations are audited, the administrators number will not be smaller
than three. When there are more administrators, they compose the Board of
Administration, collegial body whose instrument of work become the decisions adopted
with the majority of the members (unlike the situation of the administrators plurality who,
unorganized in a Board, decide independently). The Board of Administration members
may be stockholders or non-stockholders. The Board will be presided by a president
appointed from its members, either directly by the general assembly or even by the
Board members. The administrators may decide that part of the attributions coming to
them be assigned to certain directors, natural persons out of whom one will be
appointed general manager. They will run the company under the surveillance of the
Board of Administration. The notion of manager (director, executive) gains a new
significance in the sense of art.143 of Law no.31/1990, distinct from that which
designates the persons with management executive positions, (financial, technical,
marketing manager, etc.). Subsequently, the obligation established for the administrators
and for the directors with delegated assignments, i.e. not to be the company employees
for the duration of their mandate fulfillment does not apply but strictly to this category of
executives. Company representation in its relationships with third parties comes to the
president of the Board of Administration or to the general manager when the Board
decided to use the delegation of assignments. The executives may be administrators or
not, on condition that the majority of the administrators be non-executives (i.e., they
must not be directors). Moreover, at least part of the administrators will be independent.
Though it does not define the notion, the law offers as examples the criteria which define
the status of independence, (e.g.; for the last five years, the person has not been an

employee of the company or of a company controlled by the latter during the last five
years, has not been a significant company stockholder and has not had nor did he have
business relationships with the company for the last year, etc.).
In order to benefit of specialized, professional documentations in the decisions it will
adopt, the Board of Administration may set up advisory committees which will draw up
recommendations, specialized briefings.
1. Company administration dualistic system;
The company management mechanism is regulated on two levels, with well
delimited attributions, namely a) the surveillance council and b) the directorate. The
analysis of the latters competences allows the conclusion that they are comparable
to those becoming to the board of administration of the unitary system. Thus, the
members of the directorate exercise the company management as professional
managers, in order to ensure the company sustainable development. In this
endeavour, the surveillance council becomes the supervisor, the auditor of the
activity of the directorate. It does not exercise effective management attributions. The
two functions, management and management surveillance are completely separate,
the members of the directorate not having the possibility of being, at the same time,
members of the council or surveillance.
The company representation in its relationships with third parties belongs to the
members of the directorate. Whilst the appointment and dismissal of the members of the
directorate comes to the surveillance council, the appointment and dismissal of its
members lies with the competence of the general assembly.
2. Common dispositions to the two administration systems
Out of the categories of rules applicable to both systems, we mention:
a) the duration of the

administrators mandate, respectively of the surveillance

council and directorate members is of a maximum of four years, except for the
mandate of the first members of the board of administration which is of 2 years;

b) the directors, in the unitary system and the members of the directorate, in the
dualistic system, are natural persons; instead, the administrators or the members of
the surveillance council may be legal persons;
c) a natural person may not cumulate more than five mandates as administrator
and/or member of the surveillance council in trading companies headquartered in
Romania;
q) Both the board of administration and the surveillance one work in sessions which
adopt decisions with the majority of the members number and who convene
anytime need arises but not less than once every three months. Both categories
of bodies have the right to set up consultative councils for information and
documentation purposes, useful in the decision making process;
r) The legal relationships established between the four categories of bodies and the
structures which appointed them are specific to the contract of mandate ;
e) during the fulfillment of the mandate, the administrators, directors, members of the
surveillance council and of the directorate cannot be employed by the company;
f) the legal liability of the administrators, directors, members of the surveillance
council and of the directorate is rigorously regulated by law and the joint liability stays
a characteristic valid for each one of them.
6.3.5. Administration of the companies of persons and of the limited liability
company; we have introduced the applicable rules in the chapter dedicated to the brief
analysis of each of the mentioned companies.
2. Company administration audit;
It is done by specialized bodies in companies of assets and in the limited liability
company with more than fifteen shareholders.
The two structures which are specialized in the performance of such an audit are the
board of auditors and the financial auditor. The option for one of them is allowed
except for the situations in which the company is subject to the legal obligation related
to audit or when it opted for the dualistic administration system when the appointment
of the financial auditor becomes compulsory.

6.4.1. The Auditors; their appointment matches the traditional solution concerning the
exercise of the company administration audit and to that sense the competence lies
with the general assembly. According to law, the board of auditors is composed of
three members and a substitute, appointed for a period of three years with the
possibility of being re-elected. The auditors may be elected from amongst the
stockholders. Compulsorily, at least one of them will be a licensed or an expert
accountant. Their main assignments refer to the surveillance of the company
administration, to the control of the financial situations and they are bound to inform
the general assembly on the manner in which the company patrimony was
administered by its administrators and, should there be the case, on the deviations
found in this managerial activity.
6.4.2. The Financial auditors.
They are specialists, natural or legal persons who acquire this position under the terms
which are specific to the profession and who are, subsequently, enrolled in the
Romanian Chamber of Financial Auditors. The financial auditor is outsourced person
who enteres in a contractual relationship with the company subsequent to his
appointment by the general assembly. The trading companies which opted or were
obliged to appoint the financial auditor 23 have the complementary obligation to
nominate and internal auditor as well. Unlike the financial auditor who is not a
company employee, the internal one may hold such a position. The specific
assignments for each of these professions are regulated by express legal dispositions.
On the whole, they are similar to those of the auditors.

23

According to the Order no.1752/2005 of the Ministry of Public Finance, subject to audit are the financial
situations of trading companies whish, on the date of the balance sheet overcome the limits of two of the
following criteria, called size criteria: a) total assets 3.650.000 EURO, net turnover 7.300.000 EURO, and
average number of employees: 50.

CHAPTER VII
Amendment of the trading company deeds of establishment
7.1. Profit making, the achievement of the scopes and objectives for which it was set up,
as an end which is tied to the very essence of the trading company, often justifies its
need of amendment and adaption to actual circumstances and conditions of the
economic environment in which it develops its activity. As the company deed of
establishment is the thing which personalizes it, defining its specific conditions, the
company modification means, actually, the amendment of its deed of establishment.
Generally, any of the clauses inserted in its content may make the object of the
amendment, like, for example, those related to the partners, legal form, field of activity,
share capital, duration of functioning, etc.
7.2. Deed of establishment amendment procedure
As the expression of the partners will, the deed of establishment may be amended still
as the result of their will, during the session of the company general assembly. Such a
decision will be adopted unanimously in the case of the companies of persons and of
the limited liability one, (if, in its case, a derogatory norm was not introduced by the deed
of establishment allowing for its amendment with the majority of shares) respectively,
with the majority which is necessary for the adoption of decisions in the extraordinary
general assembly, in the case of the companies of assets.
In order to gain opposability to third parties, the amending decision will be entered in the
Trade Register, subsequent to the prior check of lawfulness exercised by the Trade
Register personnel assigned with such attributions or, according to the nature of the
amendment, by the court of law, and it will be published in the Official Gazette. Thus the
procedure becomes comparable to that followed at the moment of the company set up.
The amending writ will be edited with the observance of the terms of form provisioned by
the law for the deed of establishment. Also, it will be accompanied by the updated deed
of establishment including all the successive amendments it benefited of.

In the case of the joint stock companies, if certain competences of the general assembly
related to the amendment of the deed of establishment were delegated to the board of
administration or to the directorate, as case may be, then, obviously, the amendment
becomes the result of the decision of the said bodies.
The procedure, synthetically shown above, corresponds to the amiable, conventional,
generally applicable solution. As reserve alternative, accessible in the case of the
iompossibility to achieve the partners legal or statutory agreement, the amendment may
be ordered, in certain situations, by judicial ways (for example, in the case of one
partners dismissal).
7.3. Company share capital modification;
From the ensemble of the company possible modifications we have selected the one
related to the share capital. It is one of the main and most frequent modifications of the
trading company and, subsequently, of its deed of establishment. The share capital, as
the entirety of the value of the partners contribution, represents an element of liability
in the company patrimony, reflecting its debt to its own partners, mature upon the date of
the company dissolution and liquidation. While the patrimony is fluctuating, dynamic,
directly influenced by the company activity, the capital is fixed. Subsequently, its any
modification, to the sense of its increase or decrease, become the attribute of the
general assembly of the partners or, in the case of the joint stock companies, of the
board of administration or of the directorate should they have been mandated to that
sense by the general assembly
7.3.1. Share capital decrease ;
Technically, the share capital decrease may be achieved by the following procedures:
s) The decrease of the number of stock or shares, case in which their par value
stays bthe same;
t) Decrease of the stock or shares par value;
u) The gain of the company own stock by the company and then their cancellation

If the decision concerning the decrease is not justified by losses, therefore by the
decrease of the company assets below the value of the share capital, other procedures
may be used, such as:
aa)Partners total or partial exemption of the owed disbursements; the procedure is
applicable strictly in the case of the companie of assets, because it is only in their
case that the law allows for the full deposit of the share capital on a date
subsequent to the company set up;
bb)The reimbursement to the partners of a quota of the contributions, proportional
with the share capital decrease and calculated in equally for each stock or share;
cc) Other procedures provisioned by law.
Irrespective of the cause and manner of achievement of the share capital decrease, its
value, subsequent to the decrease, may not be less than the minimal value established
by law.
In terms of the procedure, the measure goes through two stages in order to be
completed. It is necessary to have a first decrease decision, in principle, given by the
general assembly of the partners and, within two months from its publication in the
Official Gazette, such decision may be followed by the second, that related to the
effective decrease. The two months interval is regulated in favor of the company
creditors, owners of debts previous to the publication of the share capital decrease
decision. They have the right to oppose to this measure, case in which, the decrease
decision may be completed only after the payment of their debts or the guarantee of
such payment.
7.3.2. Share capital increase
Economic sources used for the share capital increase may be:
k) External to the company, representing the funding provided by the partners
under one of the regulated forms and for the company set up and which consists
in new contributions brought by the partners (in cash, in kind);
l) Internal sources, representing a self-funding of the company; they do not oblige
the partners to new contributions, the increase being carried out from different
resources accounted for in the company liabilities, such as: (1) incorporation of

reserves, except for the legal one, (2) incorporation of the benefits or (3) of the
issue premiums, (4) compensation of the debts on the company with its stock.
The decision to increase the capital out of the said sources is subsequently
materialized by the amendment of the accountancy records

between those

different accounts of liabilities and it follows that the issued stock be distributed
between the company stockholders with the observance of their share capital
contribution quotas. This what the doctrine generically called accounting
increase of the patrimony, as none of the shown solutions involves external
conbtributions of the stockholders/shareholders.
Both categories of capital increase sources are accessible to all the company legal
forms.
7.3.3. In the case of the companies of assets, the share capital increase procedure by
new contributions is done in two phases; a) the adoption of the increase decision
followed by the company stockholders exercise of the preference right, within a 30 days
interval from the date of the decision publication by the Official Gazette; b) the adoption
of the decision to increase the capital by the effectively subscribed amount, according to
the exercise of the preference right.
The preference right is a means of protection of the old stockholders who assumed the
risk of launching the company and strived for its prosperity 24. It is, therefore, a favor to
them, to subscribe with priority stock from the new issue. Failure to observe it becomes
grounds for the cancellation of the increase decision thus adopted. The law allows for
the limitation or suspension of the preference right in determined situations. But, the
generalization of such a measure is forbidden.
The new stock, issued in exchange for the contributions in cash will be deposited in a
proportion of 30% on the subscription date and the balance will be paid within a maxim
um of 3 years from that date. During the same term the contributions in kind will have to
be deposited too.

24

Ion Bacanu, Capitalul social al societatilor comerciale, Ed. Lumina Lex, 1999, pag.131;

Irrespective of the increase source which was used, the decision of the general
assembly produces effects only if it was fulfilled within one year from its adoption date.
By the company deed of establishment or of amendment, its administration bodies may
gain the mandate to increase the company share capital within the limits authorized by
the general assembly and during a period of time of a maximum of 5 years from the
adoption of the said measure. The limits of the authorized capital will not, though, be in
excess of half of the value of the subscribed share capital existing at the moment of the
authorization.

Chapter VIII
Partners exclusion and withdrawal
8.1. Both operations regulate solutions concerning the partners separation, of this
position cessation, achievable though only under certain terms and with the observance
of certain express provisions of the law, applicable in order not to affect the companys
existence itself.
8.2. Partners exclusion
The exclusion institution is operable only in the case of the companies of persons, of the
limited liability one and of the limited partnership by shares, therefore, generally, of the
types of companies where the element affectio societatis is relevant. It is not applicable
to the joint stock companies which are characterized by the lack of relevance of the
relationship between the stockholders. Or, exclusion often is exactly the result of such
relationships alteration, of the irremediable defeat of the convergence of interests which
reunited the partners at the moment of the company set up.
8.2.1. Exclusion grounds
The law counts the following exclusion grounds of the partner in a general partnership,
of a limited partnership, of the limited liability company or of the active partner in a
limited partnership by shares:

a) the parners denial to bring the contribution to the capital which he undertook to bring
though he was notified of the delay;
b) the bankruptcy of the partner with unlimited liability or his legal incapacity status;
these grounds are applicable only to partners with unlimited liability. In this case, the
main exclusion argument becomes the protection of the company interests by the
elimination of the risk it may represent for it the bankrupt or incapable partner;
c) in the case of the partner with unlimited liability who (1) interferes without a right in the
sdministration, (2)

uses the company capital in his own or other persons interest

without the other partners consent or (3) performs acts of disloyal competition with
repesct to the company;
d) in the case of the administrator partner who frauded the company or used the
company capital or signed on its behalf in operations contrary to its interests.
Other exclusion grounds than those contemplated by the law may be agreed by the
deed of establishment.
8.2.2. The exclusion procedure
Irrespective of the grounds which justify the exclusion, without exception this measure
will be ruled by the court of law. The court of law irrevocable exclusion award becomes
the writ on the basis of which the Trade Register will enter the amendments of the deed
of establishment as effect of the exclusion.
8.3. A partners withdrawal from the company
8.3.1. If the exclusion becomes a handy measure for the company or for the other
partners, against the respective partners will, having the effect of his removal from the
company, instead, the withdrawal represents the expression of the intention and
therefore of the manifestation of the partners will to put an end to this position.
Unlike the exclusion which may be ordered, without exception, only by the court of law,
the withdrawal of a partner from a general partnership, a limited partnership or a limited
liability company may be carried out both in an amiable way (1) when it was agreed

upon by the partners and by judicial ways as well, (2) when an agreement can not be
met
In the first case the withdrawal operates:
a) as the effect of the agreement of all partners;
b) in the conditions regulated by the deed of establishment (which is, in fact, also the
agreement of all parteners, whose effects will produce in the future, on the date of the
manifestation of the intent of withdrawl);
c) in the case in which the partner does not agree with the amendment of the deed of
establishment regarding: c1 the modification of the main object of activity; c2 moving
the headquarters abroad; c3 chaging the legal form of the company; c4 merger or
division of the company.
The alternative of juridical withdrawal represents a final solution applicabile in the case
in which none of the above conditions are met (the amiable solutions)
It obliges the partener decided to withdrawl to prove in front of the court of law the
existance

of

solid

grounds

for

his

decision

(for

example

irreconcilable

misunderstandings with the other parterners)

Just like in the case of the exclusion, the irrevocable court award by which the
withdrawal was ordered, becomes the writ on the basis of which the Trade Register will
enter the amendments that this operation implies on the deed of establishment,
stipulating the way of redistributing the shares between the remaining partners.
8.3.2. Similar to the exclusion, the withdrawal is specific to companies where the
relationship between the partners is relevant. Besides, in the case of the joint stock
companies, the cessation of the position of stockholder becomes a much more simpler
operation, feasible by the free sale of stock, unconditioned by the agreement of the
other company stockholders but, eventually, only by the observance of their right of
preference if such a condition was entered in the issuing company deed of
establishment. However, as an exception, the law has in view some determined,
limitative situations in which a stockholder may exercise the right to withdraw from the
company, i.e.: when the extraordinary general assembly decided (1) the change of the

field of activity, (2) the move of the headquartersof the company abroad, (3), the change
of the company legal form, (4) merger or division (to remember: these situations
represent motives of withdrawl for the companies of persons and for the limited liability
company) . The withdrawal measure, in any of the shown situations, was regulated with
a view to the minority stockholders protection and they have thus the right to decide to
discontinue their position when the company decision do not reflect their interests
anylonger.

As a distinction, it does not lead to the amendment of the deed of

establishment, the distinction being derived from the features which differentiate the
companies of assets from those of persons, and , in this particular situation from that
with limited liability.

8.4. The excluded or withdrawn partners rights

The excluded or withdrawn partner is entitled to the payment of his money dues
matching his participation quota in the share capital. Their value will be determined by
the partners agreement or, in the case of misunderstandings, by an expert appointed on
the basis of an agreement or by the court of law and it will be directly reported to the
value of the company patrimony on the date of the exclusion or withdrawal operation.
The only difference concerning the payment between the excluded and the withdrawl
parteners is the fact that while the first can not benefit by the payment in kind, by
attributing some of the goods from the patrimony of the company, the withdrawl partners
benefit from this right, if the other partners agree.
In the case of the joint stock companies, the law imposes the determination of the stock
price according to certain rules whose application lies with the obligation of the expert
appointed to that end by the judge delegate. Thus, he will determine the price as an
average of at least two methods of evaluation recognised by law on the date of the
evaluation. This solution can be used as well for the other types of companies.
In all the cases, the payment obligation of the excluded or withdrawn person comes to
the company.

CHAPTER IX
Trading companies merger and division
9.1. Both merger and division represent complex, ample economical-legal procedures
which materialize the decision concerning the company reorganization, restructuring,
motivated by the need to adapt to economic realities and increase activity efficiency.
While the first, the merger, has the effect of the concentration of the patrimonies of the
involved trading companies, the second, the division, symmetrically opposed, divides in
a total or partial manner the patrimony of the company which is subject to division with a
view to unite it to another existing company/companies or to companies thus set up. The
reason of such an endeavor may be represented by the need of the activity
specialization, by the preoccupation to give the company dimensions easier to
coordinate, by the misunderstandings between the partners, etc.
9.2. Merger definition and types
It is the economical-legal operation meaning the reorganization of the involved
companies by which :
m) The patrimony of one or several companies (absorbed) is transferred in full in
favor of another company (absorbing) and the stockholders/shareholders of the
absorbed companies which will cease their existence will acquire, in exchange,
stock/shares in the absorbing company;
n) The patrimonies of two or several trading companies are transferred in favor of a
company which is set up this way; the first companies cease to exist (they are
dissolved

without liquidation) and

the

stockholders/shareholders acquire

stock/shares in the newly set up company.

The first definition corresponds to the merger by absorption and the second one to the
merger by fusion. In both variants, the distribution of stock/shares in favor of the
involved companies stockholders/shareholders may be accompanies by the paymentn
in cash of a maximum of 10% of the par value of the stock/shares thus distributed
(merger bonus) meants to balance the stock/shareholders rights.

9.3. Division definition and types

This is the economical-legal operation by which :
a)

the patrimony of a company is divided in

full between two or several existing

companies or which are thus set up, (total division).

b) part of the company patrimony is detached in order to be united to a pre-existing
company or to one which is set up this way (partial division or by detachment). The
stock/shares issued by the company which benefits of the detachment (the one to which
the detached patrimony was incorporated) may be distributed :
b.1. in favor of the stock/share holders of the company to which the detached
patrimony belonged, (detachment in favor of the partners);
b.2. in favor of the company to which the detached patrimony belonged
(detachment to the company interest).
Essentially, both in the case of the merger and of the division, an exchange of
stock/shares takes place between the involved companies.
There is no relevance attached to the legal form of the trading companies involved in the
merger of division as the performance of the operation is possible both between
companies having the same legal form and between companies of different legal forms.
Obviously, no merger or division can be done between the branch and the parent
company or any of its secondary headquarters, as well as between a trading company
and other types of traders (natural persons, cooperative companies, etc.)
9.4. Merger and division stages
The procedure goes over the same stages for any of the operations, namely :
v) Adoption of the decisions by the general assemblies of the involved trading
companies, with unanimity of votes or, in joint stock companies, with the majority
which is necessary to adipt decisions in an extraordinary general assembly ;
w) Merger/division project draw up, by the administrators of the companies involved
in the operation; the project will mention information concerning the participating
companies, the operation substantiation and terms, the conditions concerning the
allocation of stock/shares in the company which benefits of the merger/division,

the date as of which those stock/shares give their owners the right to participate
in the profit, the exchange rate, the date on which the financial situations of the
participating companies were approved, etc.
x) Merger project endorsement and publication; the merger/division project, signed
by the administrators, is filed with the Trade Register to which each participating
company is incorporated, accompanied by the declaration of the company which
will cease to exist, regarding the way its passive will be paid, as well as the
declaration regarding the way in which the project was advertised, in the Official
Gazette or on its web page. In this latter case, the office of the Trade Register
where the company was registered will publish, without charge. In term of 3 days
from the depositing of the project, The National Agency of Fiscal Administration
will be informed about this operation by the office of Trade Register.
y) Opposition of the creditors of the companies participating in the operation ; within
30 days from the publication in the Official Gazette, creditors having certain ,
liquid debts, prior to the project publication date have the right to oppose the
division/merger decision if they consider that the operation will diminish or even
compromise their chances to capitalize the debt. The procedure will be resumed
either subsequent to the solution given to the opposition, or after the payment of
the said creditors or after the moment those creditors accept the payment
guarantees offered by the company in debt.
z) Adoption of the general assembly decision on the merger or division; The
administrators of the participating companies are bound to inform the
stock/shareholders on the operation terms and consequences. To that end, they
have the obligation, prior to the assembly, to make available the the documents
necessary to express the vote in full awareness: the merger/division project, the
administrators report, respectively that of the members of the directorate, of the
experts appointed to that scope, the annual financial statements and the
administration reports for the last three financial exercises, the auditors report or,

according to case, of the financial auditor, the records of contracts in progress

with values in excess of 10.000 lei and the manner of their distribution in the case
of division.
aa)On the basis of such documents, the partners extraordinary general assembly or,
according to case, the shareholders assembly, on the basis of unanimous votes,
will analyze and vote on the operation, also approving the amendment of the
absorbed or divided company deed of establishment, as well as the deed of
establishment of the companies resulted by merger/division, should there be the
case.
9.5. Merger/division effects;
The operation, complex and with a long development, (a minimum of three months), will
produce its effects as of the date of the entry in the Trade Register of the resulted last
company or, according to case, on the date of the registration of the decision adopted by
the last general assembly which approved the operation, in both cases, if the
stock/share holders did not agree on another date during the financial exercise. The
main effects may be classified in two categories:
dd)Effects related to the patrimony of the involved companies; thus, on the date of
the merger or division, the patrimony of the absorbed companies or, according to
case, of those which merge, as well as of the company fully divided is transferred
in

favor

of

the

company/companies

which

benefit

of

the

operation,

correspondingly increasing their patrimony and implicitly, their share capital;

ee)effects related to the stock/share holders of the companies which cease to exist
by merger/division, (absorbed, merged or divided companies); they become
stock/share holders of the companies which benefit from the operation
(absorbing, resulted from merger or division, according to case) acquiring the
number of stock/shares determined by the rate of exchange and, eventually the
amount in cash allocated to that exchange; in the case of the detachment to the
company interest, the stock/shares come to the company from which the
patrimony was detached and not to its stock/share holders;

ff) the cessation of the existence of the absorbed company, of those which merge by
fusion or of those fully divided, according to case. The transfer of their patrimony
in favor of the operation beneficiaries is assimilated to a division without
liquidation. Devois of patrimony, they will be stricken out the Trade Register,
ceasing to exist as legal persons.
CHAPTER X
Trading companies dissolution and liquidation
10.1. These are the two stages which prepare the cessation of the company legal
existence. While the set up procedure corresponds to the company birth, the
organization and functioning rules define the period of its existence, of proper activity,
those related to dissolution and liquidation characterize its final moment, its death, as
distinct subject of law. The importance of the two procedures and, therefore, their
complexity is justified by the need to regulate the legal relationships with its various
creditors as well as with its own stock/share holders, a context in which the dissolution
of its social patrimony will be carried out.
10.2. Trading companies dissolution
The dissolution represents the first moment of the procedure related to the cessation of
the company existence. Therefore, the company entry in the dissolution procedure does
not mean that its existence as a legal person ceases. This effect will appear only
subsequent to the completion of the second procedure, the liquidation, which succeeds
to dissolution.
But, as of the moment of its dissolution, the company reconfigures its priorities, it cannot
carry out its usual, specific activity, but strictly the operations preparing the liquidation.
Otherwise, the admninistrators become personally and jointly liable of the consequences
of this interdiction breach.
Dissolution grounds may be classified as follows :
e)

general, applicable to all the types of trading companies ;

f)

special, applicable just to certain types of companies

10.2.1. General causes of dissolution

d) the time established as company duration elapsed ; it concerns the trading
companies set up for a determined period of time. Upon the completion of the
deadline provisioned by the deed of establishment, the company is dissolved by
right, without any formality accomplishment being necessary. In order to avoid
dissolution, the duration may be extended with the partners agreement
expressed at least three months prior to the deadline fulfillment.
e) The impossibility of the performance of the scope of activity or its achievement ;
this is a cause applicable to companies set up with a view to the performance of a
determined scope of activity, for example, the building of a stadium, of
neighborhood of homes, etc. The completion of the objective or, quite on the
contrary, the impossibility of its achievement become grounds of the company
dissolution.
f) Declaration of the company nullity, for one of the causes expressly regulated by
law (eg. Breach of the dispositions related to the minimal share capital, to the
minimal number of partners, the lack of compulsory provisions from the deed of
establishment, an illegal field of activity, etc).
g) The decision of the partners assembly; the decision will be adopted with the
unanimity of the partners vote in the case of the companies of persons and of
that with limited liability and, respectively, by the extraordinary general assembly,
in the case of the companies of assets.
h) Court of law ruling ; this is the reserve solution, incidental when solid
grounds prevent the the adoption of the decision of the general assembly, (like,
for instance, serious misunderstandings between the partners) ;

i) Company bankruptcy ; the company filing for bankruptcy, according to Law no.:
85/2006, determines the dissolution, given by the writ (award) of the syndic judge;
j) Other causes, regulated by law or by the deed of establishment;
The notion of other causes summarizes also those general causes which may be
invoked by any interested person by court proceedings, (causes of a legal nature),
namely :
1. the company does not have statutory bodies anymore or those bodies cannot
meet anylonger ;
2. the company ceased its activity, it does not have a known headquarters or it
does not fulfill the terms related to the headquarters or the partners
disappeared or they do not have a known domicile or residence; the first of
them operates only if the lack of activity, the suspension of its functions lasted
for a period in excess of three years.
3. the company did not complete its share capital according to law; the
disposition is applicable strictly to companies which did not fulfill in time the
obligation to increase their capital up to the minimal limit imposed by the law,
(when that minimal limit was increased subsequent to the company set up).
The causes shown from 1 to 5 are defined by the doctrine as sanction causes due to
their role of draining the economic environment of the companies which deviate from
their legal and professional obligations.
10.2.2. Special dissolution causes ;
h) The joint stock company is dissolved (1) in the case of the loss of one half of
the share capital, (2) in the case of the share capital decrease below the legal
minimum or when the company has one stockholder and not two or more for a
period longer than 9 months.
i) The limited liability company is dissolved (1) in the case of the loss of half of
the share capital value and the partners do not decide its remaking or its
decrease to the amount left, on condition that the said amount is not below the
legal minimal value, as well as in the case of the bankruptcy, incapacity,
exclusion, withdrawal or decease of one of the partners, when, due to such

causes, the partners number was decreased to one alone and that partner
does not decide to turn the company into one limited liability company with a
single partner or, in the case of the decease, to continue the company with the
heirs of the deceased ;
j) The general partnership is dissolved for the reasons shown at point c), except
for that related the decrease of the share capital.
The reasons shown at point c) are applicable to the limited partnerships and to the
limited partnerships by shares if the respective causes refer to the single active or
sleeping partner.
10.2.3. The dissolution procedure
The dissolution may be (1) by law, (for example, upon completion of the company
duration), (2) voluntary, (when it is decided by the partners convened in general
assembly) or (3) judicial, when it is ordered by the court of law, for one of the legal
causes. According to case, the writ which ordered the dissolution (the decision of the
general assembly or the court of law award) will be filed with the Trade Register and it
will be published by the Official Gazette.
10.3. Trading companies liquidation;
It is the procedure subsequent to dissolution. The competence of its ongoing lies with
some professionals the liquidatora specialized and authorized to that sense. They
will be appointed either by the general assembly of share/stock holders or by the court
of law, depending on the manner in which the dissolution was ordered to be
accomplished.
The start of their job is conditioned by the accomplishment of certain publicity
formalities: the entry in the Trade Register and the filing of the signature specimen. On
the date of their fulfillment, the administrators mandate ceases as the liquidators
become the main actors of the liquidation procedure, structured on the following
operations :

f) The achievement, together with the administrators, of an inventory and a

company balance sheet in order to ascertain the exact situation of its assets and
liabilities;
g) Take over of the company patrimony as well as of its books, on the basis of a
handover takeover report signed with the administrators ;
h) Payment of the company creditors; to that end they are entitled to sell the
company goods, piece by piece, by public auction and they are also entitled to
cash the company debts, pursuing its debtors including by proceedings instituted
against them in a court of law. The amounts thus resulted will be allocated to the
payment of the creditors. The insufficiency of the company patrimony goves the
liquidator the right to pursue the partners with unlimited liability when there is the
case.
i) The last liquidation step will consist of the draw up of the final financial statement,
accompanied by the proposal to distribute the net assets between the share/stock
holders. Normally, its value should allow for the refund of the value of the
partners contributions. Of course, if it is not in excess of those contributions, the
amount will be distributed between the partners according to their participation
quotas in the share capital. Obviously, if through the company creditors payment,
its assets were consumed, the partners will lose the chance to be reimbursed
with the value of their contribution and thus their liability for the company debts
becomes mature.
The final financial statement, accompanies by the assets distribution project will be
entered in the Trade Register. The dissatisfied share/stock holders have the right to
oppose against the proposal. After its solution or after the expiry of the legal deadline
within which the opposition may be formulated, the assets distribution proposal is
considered approved, the share/stock holders being entitled to the payment of their due
amounts.
The procedure is completed with the company being stricken out the Trade Register
upon the liquidators application formulated within 15 days from the date of the last
liquidation act. As of the date of its strike out, the company ceases its existence as legal

person, as distinct subject of the law. The Certificate of cancellation is the company
document of decease.
The cancelled company registers will be archived for a period of 5 years through the
liquidators care, either to one of the partners, appointed by the majority in the case of
the companies of persons and of that of limited liability, or by the Trade Register, in the
case of the companies of assets.
CHAPTER XI
Autonomous administrations. Cooperative society. Economic Interest Groups and
Economic Interest European Groups
We will make only a brief introduction of each of these categories of traders legal
persons in order to allow our readers correct distinctions, useful in practice.
11.1. Autonomous administrations;
From the legal point of view, they were established by Law no.15/1990 concerning the
reorganization of the state companies into autonomous administrations and trading
companies, one of the first regulatory deeds meant o create the legal framework
adequate to the passage to the free market economy. Established either by government
decision or by the order of the local administration bodies, in accordance with their
national or local importance, the autonomous administrations have legal personality and
function on the basis of administration and financial autonomy. They are present in
strategic fields of the economy, the ones that the state would have liked to control. It is to
be noticed that, at present, their share in the category of the traders was significantly
decreased as effect of the economic policy reconfiguration, less and less concordant
with the idea of the state monopoly in domains of economic interest. .
11.2. Cooperative Organizations (cooperative societies);
They belong to the category of the retail cooperatives, the handicraft ones, the
handicraft cooperative societies by shares, the small handicraft cooperatives and their
associations.

They are legal persons with private capital established by the free association of their
members (at least 5) in order to achieve the trade acts identified in their deeds of
establishment. They acquire legal personality as of the date of their registration in the
Trade Register, just like the trading companies. They have a variable share capital, of a
minimum of 500 lei, divided into shares of a minimum par value of 10 lei. The shares
owned by a cooperative member cannot exceed 20% of the share capital. Each
cooperative member is entitled to one vote in the general assembly, the number of
owned shares being irrelevant. As a rule, the position of cooperative member is
cumulated with that of cooperative society employee. The gain of the membership, just
as the exclusion or withdrawal are conditioned by the approval of the general assembly.
The cessation of the membership is followed by the payment of the shares, at their par
value and of the eventual dividends calculated on the basis of the annual financial
statements drawn up at the end of the financial exercise of the year when the cessation
case came up. The patrimony of the cooperative society is composed of a divisible part
and of an indivisible one. Any alienation or transfer of the use of tangible assets owned
by the cooperative can be done only by payment and only if approved by the general
assembly.
11.3. Economic Interest Groups (EIG);
Of French inspiration, they were introduced in the domestic law in 2003 by Law no.161.
They represent an association for a determined period of time of two or more natural or
legal persons with the aim of improving the members economic activity as well as the
results of the said activity. The group may have the quality of a trader or not. Though, in
both cases, the registration with the Trade Register is compulsory, the quality of trader is
not the result of such registration but that of the will of the group, expressed as such in
the deed of establishment with reference to the nature of the activities which will be
carried out. It gains legal personality as of the date of the registration which is done on
the basis of the deed of establishment which needs to be authenticated. The
establishment of the share capital is facultative, and its structure and value are, in their
turn, decided freely by the group members. On the other hand, the share capital does
not give entitle those who contributed it to shares or stock. The general assembly of the

members and the administrators are the bodies which ensure the organization and
functioning of the group according to rules similar to those applicable to the general
partnerships. The comparison stays valid also in what concerns the unlimited and joint
liability of the group members for its debts.
11.4. Economic Interest European Groups (E.I.E.G.)
The definition given to the economic interest group is also valid for the European one. Its
specificity derives from the following features:
a) its members may be only companies, firms, legal persons of public or private law
which were set up in accordance with the legislation of a member state, as well as
natural persons who develop industrial, commercial, handicraft or agricultural activities
or who supply professional services on the territory of one of the European Union states.
It is entered in a specially designated to that aim on the territory where the group
established its headquarters, the registration being done on the basis of the contract of
association called deed of establishment.
CHAPTER XII
Commercial Insolvency
12.1. The institution of insolvency, irrespective of the denomination of which it benefited
in time, is a traditional one having its beginnings lost in ancient times. Generically
defined, it corresponds to the crisis period of the debtor trader, manifested by the
impossibility to cope with his payment liabilities due to lack of money availabilities.
During Middle Ages, the debtor was treated with contempt, discredited, being
considered guilty for his failure in business 25. The modern period, through the French
Commercial Code of 1807, (which offered the first coherent, systematic regulation in
what concerns the bankruptcy), did not move away completely from this approach. The
infamous attitude towards the broke debtor was preserved and during the procedure, the
said debtor was incarcerated in the debtors prison or detained at home and, moreover,
25

The Roman laws treated the broke debtor as a felon and, subsequently, sent him to jail or subjected him to
degrading, dishonoring actions like binding him up to the infamy pillar or the destruction, in the presence of the other
traders of the counter on which he showed his merchandise at the market. As a matter of fact, from this last
operation, (the bench destruction, table, counter in Italian banca rotta), sprang the term bankruptcy, having the
significance of the serious facts of the broke debtor, facts punished by the penal law.

he was deprived of certain professional and civil rights in order to be removed from the
commercial circuit. The codes inspired by the French one, therefore the Romanian
Commercial Code of 1887 included takeover the same attitude towards the broke
debtor. It is only to the contemporary period that belongs the merit of having changed
the accent from the idea of bankruptcy and, therefore, of the debtors removal from the
commercial life with that of attempting to save him, with the beneficial effect of offering
the creditors, on one hand, the chance of their debts recovery and, on the other, to offer
the debtor a last possibility of salvation, of bringing him back to the commercial circuit.
Determinant in the new approach was the idea that not always the financial difficulties
intervened in the debtors activity express his lack of professionalism or his guilt in his
business administration. Quite on the contrary, they may be independent of his conduct,
may be strictly the result of an unfavorable economic conjuncture. Subsequently, in such
a situation, when the economic difficulties he is facing cannot be attributed to him, the
debtors removal from the economic circuit seems no longer the optimal solution. It was
the reasoning which justified a new legislative approach, materialized in the regulation of
two procedures, besides that of the bankruptcy, i.e. one procedure of judicial recovery of
the debtors activity meant to give a chance to his survival. Bankruptcy stays the
extreme solution, applicable when the attempt of judicial recovery failed. The new
concept was for the first time configured in the domestic legislative framework by Law
no.64/1995, (of strong A merican inspiration), and it was improved by the law replacing
it, namely the Law on insolvency no.85/2006.
12.2. Notion;
12.2.1. The notion of insolvency
According to art.3 of Law no.85/2006, the insolvency is that status of the debtors
patrimony which is characterized by the insufficiency of available funds for the payment
of the certain, liquid and collectible debts. Therefore, the status of insolvency
corresponds to the debtors incapacity of payment due to the lack of money availabilities
necessary to carry out the said payments. It is not mistaken for the payment denial; for
example, the debtor who denies the payment performance for failure to observe the
terms of quality

agreed for the delivered merchandise cannot be considered in

insolvency. In exchange, he is in insolvency if failure to pay is due strictly to the lack of

money availabilities for payment accomplishment.
Unlike insolvency, the status of illiquidity corresponds to a financial imbalance occurred
in the debtors patrimony, materialized in the greater value of the elements of liability
than that of the patrimonial assets. To start the insolvency procedure it is not necessary
that the debtor be illiquid, it is enough if he finds himself in insolvency, i.e.:
j) He cannot cope with the payment liability of an amount of money due to lack of
availabilities;
k) His debt consists of an amount of money which is certain, liquid and collectible.
The debt whose existence is not denied, it is undoubtful, it does not make the object of a
dispute is certain.
The debt whose amount is determined is liquid.
The debt which is mature, the creditor being entitled to claim its payment, is collectible.
Therefore, in order to open the procedure, debts which do not have as their object a
certain amount of money will not be taken into consideration. The nature of the debtors
debts does not have any legal relevence; the procedure may be started irrespective of
the fact that the debts are budgetary, commercial, salaries, etc.
Moreover, for the start of the insolvency procedure, the amount not paid upon maturity
must be of a minimum of 45.000 lei, (threshold value). Debts below this threshold
value cannot justify the start of the procedure.
12.2.2. The notion of insolvency procedure; its ways of achievement
The insolvency procedure consists of the ensemble of the legal norms by which the
creditors pursue the payment of the debts incurred by the debtor found in a status of
insolvency.
These norms regulate two categories of procedures, namely:
g)

The general procedure according to which, after the observation

period, the debtor is subject successively to the legal reorganization
procedure and to the bankruptcy procedure or, separately, only to one
of the two procedures;

The period of observation is the one between the moment of the procedure opening
and that of the approval of the reorganization plan, or, according to case, of the
bankruptcy.
It may be noticed that the succession of the two procedures is not compulsory, that, in
order to open the bankruptcy procedure it is not invariably necessary to go over first and
fail the judicial reorganization procedure.
h)

The simplified procedure; it is applicable to debtors expressly

mentioned by the law (listed at pct.12.3.); they enter directly in the
bankruptcy procedure, either at the same time with the opening of the
insolvency procedure or after a period of observation of a maximum of
50 days.

12.2.3. Insolvency procedure ways of achievement;

The insolvency procedure is unique but feasible by expressly regulated ways and
proceedings. As proceedings, the law distinguishes between:
a) the procedure of the legal reorganization, which implies the draw up, approval and
implementation of a reorganization plan with a view to provide for the operational and/or
fincncial restructuring of the debtor or the liquidation of one of the items of his wealth in
order to continue the debtors specific activity so that, out of the amounts obtained, the
creditors be paid;
b) the procedure of bankruptcy; consists of the liquidation of the debtors wealth in
order to pay the creditors attracted in the procedure resulting in the cessation of activity
and the debtors cancellation from the Trade Register.
12.3. the characters of the insolvency procedure;
k) It is a legal procedure, as it develops under legal control, in a court of law, by
entities specifically invested with assignments in the procedure application;

l) It is a concurring, collective procedure; this character is given by the fact

that it brings together in the procedure, on the creditors list, all the debtors
creditors with a view to the satisfaction of their debts; practically, they enter a
contest, each one of them aiming at the payment of his debts out of the
debtors patrimony;
m) It is a procedure with personal character, because, depending of the
debtors person, of the category he is part of, it c an be determined whether
the general or the simplified procedure will be applied;
n) It has a character of remedy, when the legal reforganization procedure is
applied and it has a character of enforcement, when, within the bankruptcy
procedure, the debtors wealth is sold.
12.4. Categories of debtors subject to the procedure of insolvency
12.4.1. According to law, the general procedure may be initiated against the following
categories of debtors:
gg)Trading companies, irrespective of their legal form;
hh)cooperative societies;
ii) cooperative organizations, as associative forms of the field of agriculture;
jj) agriculture companies, set up according to Law no.36/1991, as companies of a
private type with a variable capital, illimited and variable number of members,
having as scope the agricultural exploitation of land, tools and of other means
brought to the company;
kk) economic interest groups;
ll) any other legal person of private law which develops economic activities too; it is
the case of the associations and foundations set up on the basis of the
Government Ordinance no.26/2000, which, in order to achieve their nonprofitable objectives (humanitary, sportive, cultural, etc.) may develop commercial
activities too and form the income made the scopes and objectives of the
association/foun dation are supported.
12.4.2. The simplified procedure;

It is applied to the following categories of debtors in a state of insolvency;

d) traders natural persons;
e) traders natural persons holders of an individual enterprise;
f) family enterprises;
g) trading companies, cooperative societies, cooperative organizations and
economic interest groups which fulfill one of the following conditions :1) they do
not have any items in their own patrimony; 2) their deeds of establishment or
accountancy books cannot be found; 3) the administrator cannot be found; 4)
they do not have headquarters any longer or the location does not correspond to
the address entered in the Trade Register;
h) all the categories of debtors who applied themselves for the initiation of the
procedure but who fail to file the following documents within 10 days from the
application registration: the complete list of the goods owned as patrimony, the list
of creditors, of the current activities they intend to develop during the period of
observation, the statement concerning the intention of entering in the simplified or
reorganization procedure;
i) trading companies dissolved prior to the introductory application; if, during the
company voluntary liquidation it is found that the company is in insolvency, it will
be subjected to the procedure of bankruptcy; thus, the liquidation procedure run
according to Law no.31/1990, is turned into a judicial procedure of bankruptcy.
g) debtors who, by the introductory application, stated thei intention to file for
bankruptcy or those who, due to the fact that for the last 5 years they have been
subject again to the procedure of legal reorganization, they lost the right to benefit
again of that procedure entering directly into bankruptcy;
12.5. The participants in the procedure of insolvency
14.5.1. A forst category of participants is represented by the courts of law, respectively
by the court on whose territorial jurisdiction is the debtors headquarters and the court
of appeal, as court of control meant to censor by way of appeal the rulings given by the
syndic judge in exercising his duties in the procedure.

The application for the procedure initiation is addressed to the court and its solution will
come to one of the judges of the said court, called syndic judge. By his assignments he
has a decisive role for the full suration of the procedure running, from its start to its
completion; he orders the procedure initiation, rules on the debtors eventual appeal
against the application for procedure initiation formulated by the creditos(s), nominates a
temporary legal administrator or liquidator, according to case, (the final appointment
coming to the first assembly of the creditors), judges on the application withdraw the
debtors right to run his activity, to make him liable for his proven guilt in the manner of
exercising his assignments, judges on the legal administrator or liquidators actions
having as object the cancellation of certain fraudulent deeds carried out by the debtor,
pronounces the procedure closing award, etc.
12.5.2. The legal administrator; is the natural or legal person authorized under the
terms of the law as practitioner in insolvency 26; his/its provisional (temporary) comes to
the syndic judge by the award concerning the initiation of the general procedure; the
creditors assembly, in its first session, either will acknowledge or will appoint another
legal administrator. As a whole, this position means a complex ensemble of
assignments; subsequent to the examination of the debtors economic situation, he will
draw up a report concerning the causes which generated the status of insolvency,
indicating the eventual responsible persons whose liability may be engaged, will
examine and propose either the continuation of the observation period within the general
procedure or the entry in the simplified procedure; will draw up the debtors activity
reorganization plan, will survey the debtors patrimony administration operations, he will
manage, partially or totally, the latters activity, will convene, chair and ensure the
secretariate of the creditors assembly sessions, will draw up the applications related to
the cancellation of the fraudulent documents signed by the debtor and which resulted in
damages brought to the creditors, will decide whether to continue or terminate certain
contracts signed by the debtor, he will survey the recovery of the debtors debts, etc. his
activity is subject to the audit of the syndic judge on the basis of the reports drawn up for
each judgment session deadline established during the procedure running.
26

The legal status of the practitioners in insolvency is regulated by Government Ordinance no.86/2006, as amended.

12.5.3. The legal liquidator; if during the period of observation and for the duration of
the reorganization procedure the leading actor is the legal administrator, instead, in the
case of the bankruptcy procedure (either general or simplified) this role belongs to the
legal liquidator, appointed, in his turn, from the practitioners in insolvency. The rules
concerning his appointment are the same as for the legal administrator. He exercises
attributions comparable to those of the administrator, adapted though,obviously, to the
bankruptcy procedure which he governs under the audit of the syndic judge. Thus, his
priorities are oriented and subordinated to the liquidation of the debtors wealth under
efficient terms in order to allow for the payment of the creditors enrolled in the
procedure.
12.5.4. The creditors assembly and the board of creditors;
The creditors assembly is composed of all the known creditors of the debtor subject to
the insolvency procedure. Working in sessions convened by the legal administrator or
liquidator, according to case, it offers the legal framework in which the creditors have the
possibility to discuss and approve the documents and operations characteristic to the
procedure.
The board of creditors, designated by the syndic judge or elected by the creditors
assembly, in a team of 3-7 or 3-5 creditors from among those with guaranteed debts and
those unsecured, according to the value, has the competence: to analyze the debtors
situation and make recommendations to the creditors assembly with reference to the
continuation of the debtors activity and to the proposed reorganization plans, to draw up
reports he will present to the creditors assembly concerning the measures adopted by
the legal administrator or liquidators, to apply for the removal of the debtors right of
administration, etc.
12.5.5. The special administrator;
It is the natural or legal person appointed by the general assembly of the insolvent
debtors share/stock holders, mandated to represent its interests within the procedure.
He/it will administer the debtors activity as long as this right was not removed. As of the

moment of the administration right removal and its takeover by the legal administrator or
liquidator, according to case, the special administrator will have only the role to
represent the interests of the debtors share/stock holders.
12.6. Insolvency procedure initiation and its effects
The insolvency procedure is initiated on the basis of an application addressed to the
court either by the debtor, or by any of his creditors or by the persons or entities
expressly provisioned by law.
12.6.1. The debtors application;
The debtors application for the initiation of the procedure is:
b) compulsory, when the debtor finds he is insolvent, i.e. due to the lack of money
availabilities he is not capable to cope with his payment liabilities related to
certain, liquid and collectible debts of at least 45.000 lei;
Failure to file the application or filing it with a delay in excess of 60 days is punished by
the law being qualified as a crime.
c) facultative; when insolvency is iminent, the debtor being capable to
demonstrate, supporting his application, that he will not be able to pay the
engaged collectible debts upon maturity;
BY the application to initiate the insolvency procedure the debtor has the right to opt for
the application of the simplified procedure or that of legal reorganization, within the
general procedure, except for those of the debtors which were subject to the procedure
during the last 5 years which preceded its initiation.
12.6.2. The creditors application;
The right to apply for the initiation of the procedure comes to any creditor in possession
of a debt of a minimal value of 45.000 lei valoare, debt which is certain, liquid and
mature for at least 90 days. In practice, creditors are the most frequent initiators of the
application to institute the procedure.
The application for the initiation of the procedure is examined by the syndic judge who,
should he find that the legal terms are met, will pass it. In the case of the creditors
application, the debtor benefits of a deadline to contest it if he considers and may prove

it that he is not in an insolvency status. Instead, if his appeal is denied, he may no longer
apply for legal reorganization, such a right becoming only to the legal administrator or or
to creditors having together or separately a minimum of 20% of the value of the
statement of affairs.
12.6.3. Procedure initiation effects;
a) the debtor looses the right to manage his activity any longer, to administer and
dispose of the goods of his own patrimony, except for the case in which he stated his
reorganization intention by the introductory application. It follows that such rights will be
exercised, as shown before, by the legal administrator or liquidator;
b) the judicial and extra-judicial actions initiated individually by the debtors creditors
prior to the initiation of the procedure are suspended with a view to the recovery of their
debts; the law forbids both to continue such actions and to initiate new ones;
c) The course of the prescription of the actions for the achievement of the debts against
the debtor is suspended for the full duration of the insolvency procedure;
d) Interest, increases, penalties running is suspended; they cannot be added to the
debts born prior to the procedure initiation, except for the guaranteed debts;
e) the debtor legal persons administrators are not allowed to alienate stock or shares
they own in the respective debtor without the agreement of the syndic judge;
f) The debtors stock is suspended for transactions on regulated markets (when the
debtor is an open type trading company);
g) any fraudulent legal document or any document by which patrimonial rights were
transferred to third parties, signed by the debtor and having resulted in damages to the
creditors during the three years preceding the procedure initiation, may be cancelled by
the syndic judge on the basis of the legal administrator or liquidators application. As
cancellation effect, the services carried out on the basis of the cancelled document will
be returned to the debtors patrimony;
h) the legal administrator has the right to preserve or terminate the debtors contracts in
progress on the date of the procedure initiation;

12.6.4. Procedure initiation notification;

The procedure initiation will be notified to all the creditors, to the debtor or to the
Register where the debtor is entered, according to case.
12.6.5. Debts statement by the creditors;
Creditors who have debts prior to the date of the procedure initiation will file with the
insolvency file recorded in court, an application for the admittance of their debts.
Subsequent to their examination by the legal administrator or liquidator, the preliminary
list of debts will be drawn up. The said debts may be denied by the debtor, creditors or
any other interested party. Subsequent to the solution given to the contestations, the list
of debts stays final. Creditors whose debts are on the said list compose what the
doctrine calls the statement of affairs (statement of assets and liabilities).
12.7. The legal reorganization procedure
The insolvency general procedure may consist, as shown before, of the legal
reorganization or of bankruptcy. The legal reorganization procedure implies the draw up,
approval, implementation and observance of a reorganization plan proposed by the
debtor, by the legal administrator or by one or several creditors who own at least 20% of
the total value of the debts included in the final list. The plan may stipulate either the
debtors activity restructuring and continuation, either the liquidation of some of his
goods resulting in the corresponding restriction of the activity or a combined variant of
the two alternatives. It is compulsory that the plan indicates the payment schedule of the
debts entered on the list. The duration of the plan application may not be in excess of 3
years, as of the date of its confirmation. The syndic judge will confirm the plan which
was accepted by three of the four debts regulated by law, i.e; 1) creditors with
guaranteed debts, 2) budgetary creditors, 3-4) unsecured creditors, grouped into two
categories.
Therefore, the legal reorganization procedure implies the achievement of the confirmed
reorganization plan. Failure to achieve it will result in the start of the bankruptcy
procedure. The same consequence will also happen in the case the debtor does not

stgick to the plan or when the said plan is not efficient, it does not provide for the
recovery. The bankruptcy does not make the creditors reimburse the amounts received
in the case of the legal reorganization procedure.
12.8. Bankruptcy
The bankruptcy procedure is defined as being the insolvency procedure which is
concurring, collective and egalitarian which is applied to the debtor with a view to the
liquidation of his estate in order to cover the liabilities and it is followed by the debtors
cancellation from the Register in which he was entered.27
According to law, bankruptcy may be ordered in the following cases:
k) by the debtors request to enter in the simplified procedure, stated by the
introductory application;
l) when the debtor did not state by the introductory application his intention of
reorganization or when his appeal against the creditors application to open the
procedure was denied;
m) when no reorganization plan was proposed by none of the persons who had such
a right, according to law or when none of the proposed plans was accepted and
confirmed;
n) when the debtor stated his intention of reorganization but did not propose a
reorganization plan or such plan was not accepted and confirmed;
o) the reorganization plan proved to be inefficient;
p) Upon proposal of the legal administrator, in the cases provisioned by law.
The syndic judges award concerning the bankruptcy will be notified to all the
creditors, to the debtor and the Trade Register office or, according to case, to the
register where the debtor is recorded. As during the procedure, the debtors
patrimony will be liquidated with a view to provide cash for the creditors payment, it
is necessary first to make the inventory of the debtors estate, more exactly of the
value of the patrimonial assets which may offer the debts payment sources. The
goods which compose this estate will be inventoried, sealed and preserved in order
to be capitalized within the procedure. Their liquidation will be carried out by the legal
27

Stanciu D. Carpenaru, Drept comercial roman, 4th Edition, revised and completed, Universul Juridic Publishing,
Bucharest, 2007, p.682;

liquidator under the survey of the syndic judge. The sale may be done either in bulk
as an ensemble in a state of functioning, either individually, by pub lic auction, direct
negotiation or a combination of the two solutions. But, the adopted solution will be
presented for approval to the creditors; assembly. The money obtained by the sale of
goods will be deposited in the bank account open for the account of the debtors
estate in order to be used for the creditors payment. It follows that its distribution be
achieved on the basis of the plan drawn up to that end by the liquidator and with the
observance of the order imposed by the law according to the nature of the debts. 28
The holders of debts of a certain category may benefit of the amount only after the
payment of those from the hierarchically superior category and, at the level of the
same range of priority, the amounts will be distributed proportionally with the amount
allocated for each debt through the final consolidated list. If the amounts which will
be distributed are insufficient for the full payment of the debts with the same level of
priority, a bankruptcy quota will be distributed to the holders of such debts, consisting
of an amount proportional to the percentage that the debt owns in the category of the
respective debts. The final distribution of the amounts, with the observance of the
above mentioned rules, will be done by the liquidator after the approval of his final
report related to the liquidation by the syndic judge.
12.9. Insolvency procedure closing
The insolvency procedure will be closed in the following situations:
bb)

No debt admittance application was filed by the creditors when the

procedure initiation was requested by the debtor;

28

According to art.123 of Law no.85/2006, the distribution of the amounts will be done in the following order: 1)
fees, stamps or any other procedure related expenses, including expenses necessary for the preservation and
administration of the goods of the debtors estate, as well as the payment of the persons involved, employed in the
procedure, (e.g. the legal administrator/liquidator, etc.); 2) debts coming from the labor relationships, 3) debts
representing credits, with the afferent interest and expenses, granted by credit entities subsequent to the procedure
initiation as well as debts resulting from the debtors activity continuation subsequent the procedure initiation; 4)
budgetary debts, 5) debts representing the amounts owed by the debtor to third parties on the basis of maintenance
obligations, allowances for minors or the payment of certain periodical amounts for the provision of subsistence
means; 6) debts representing the amounts established by the syndic judge for the daily needs of the debtor and of his
family, if the debtor is a natural person; 7) debts representing banking credits, with the afferent expenses and interest,
those resulted from products deliveries, service provision or other works as well as from rent; 8) other unsecured
debts, 9) subordinate debts, in the following preference order :a) credits granted to the debtor legal person by a share
or stock holder owning at least 10% of the share capital, respectively from the voting rights in the general assembly
of shareholders or, according to case, by a member of an economic interests group and then the debts coming from
acts free of charge

cc)When there are no goods in the debtors estate or such goods are insufficient to
cover the administration expenses and no creditors offers their payment; in this
case, once the procedure is closed, the syndic judge will order the cancellation of
the respective debtor from the register where he is entered;
dd)

The legal reorganization procedure may be closed by the syndic judge by

award if all the payment liabilities assumed by the confirmed reorganization plan
were paid;
ee)The bankruptcy procedure will close after the full distribution of the amounts
resulted from the debtors estate and the eventual deposit of the amounts not
claimed and the debtor cancelled; b) the procedure may be closed event before
the full liquidation of the goods composing the debtors estate, after the creditors
payment, if the partners of the respective debtor request that. The left goods will
pass onto the joint ownership of the share/stock holders, in accordance with their
participation quotas in the share capital; c) in the other cases, the procedure will
be closed only after the full liquidation of the debtors estate and his/its
cancellation.
12.10. Management bodies members liability
When the debtors status of insolvency is imputable to the members of its
management bodies, the law allows for the engagement of their liability, under
certain terms, upon the request of the legal administrator or liquidator or of the board
of creditors, when the legal administrator or liquidator do not exercise such
prerogatives. According to law, it is possible to engage the liability of any person of
the category of those who held management or surveillance positions in the debtor
legal person and who, by their own deeds, caused the debtors status of insolvency.
In the category of the facts imputable to them and which engages their liability, the
law has in view:
o) The use of the legal persons goods or credits for ones own benefit or to the
benefit of other persons;
p) Performance of trade acts for ones personal interest but under the coverage of
the legal person;

q) Having ordered, for personal interests, the continuation of an activity which

inevitably led the legal person to payments cessation;
r) They kept a fictitious accountancy, they made accountrancy documents
disappear or they did not keep the accountancy books according to law;
s) They embezzled or hid part of the assets of the legal person or increased
fictitiously its liabilities;
t)

in the month preceding the payment cessation they ordered payments or paid
preferentially a certain creditor to the damage of the others;

Liability engagement imposes the proof that any of the mentioned facts was done.
The payment cessation status is not by itself a proof as to the guilt of the
management bodies. So that it may be imputable to them and, therefore , make them
liable for the debtors liabilities, facts as those mentioned above must be proven,
facts which make obvious their contribution to the debtors status of insolvency.
The competence to solve the application related to the engagement of the
management bodies liability lies with the syndic judge during the insolvency
procedure after knowing the debtors liabilities. In accordance with the administered
evidence, they may be obliged to pay the debtors liabilities or of part of the said
liabilities which was not covered by the liquidation of its estate. The liability
dimension will therefore be correlated with the facts imputed to them. The joint
liability rule is preserved in the case that the liability of several persons is
established.

CHAPTER XIII
NEGOTIABLE AND PAYMENT INSTRUMENTS
13.1. We have selected the main credit and payment instruments in order to briefly
analyse them in this chapter. We should mention that these instruments are part of a
heterogeneous and rich in content group of legal instruments meant to support the
activity of the professionals working in the complex field of business. Besides the
negotiable instruments, this group contains other instruments such as contracts,
arbitration as alternative solution to the settlements of patrimonial and trading
disputes.
13.2. The negotiable instruments are part of the legal instruments group widely used by
professionals in economy, due to their function of meeting basic needs, among which
the credit is essential. The dynamics of goods and services circulation, which are greatly
supported by credit operations, require efficient payment mechanisms. The negotiable
instruments meet these requirements.
13.3. From all the credit and payment instruments and mechanisms that currently exist,
we have selected in this chapter those instruments considered not only traditional, but
also having the widest applicability, which is preserved even in the current economic
context marked by digitalized or electronic circuit of the information and documents.
Thus, from the big composite category of the negotiable and payment instruments, we
shall consider hereafter, in a synthetic approach, the following instruments: the bill of
exchange and the promissory note as negotiable instruments, and the cheque as
payment instrument.
13.4. Without insisting on the terminological inconsistencies noticed for the first two
instruments, we just want to say that we opted for the traditional terms used in the
Romanian theory, namely negotiable instruments. The two categories of instruments (bill
of exchange, promissory note) have other names too, such as "commercial papers
- inspired from the French theory, drafts or notes of hand or credit instruments".

These are all equivalent names, the only difference being that some of them are more
generic and include theoretically other categories of instruments or securities. Without
going into details, we just conclude that, beyond the theoretical distinctions and
classifications, the common denominator of this terminological diversity for the
instruments it defines is their basic function that of credit or payment. Eventually, we
can say that any of the terms mentioned above is correct when referring to a bill of
exchange or a promissory note. Even if sometimes the cheque is also included in this
category, because many of the principles applicable to the bill of exchange and to the
promissory note are also applicable to it, the correct perception is that the cheque has
only payment functions and no credit function, as it will be argued in the cheque section
from this chapter.
13.5. Definition of the credit instruments: negotiable documents that allow the
issuers to exert their debenture rights mentioned therein or transfer these rights to third
parties at maturity29. Documents (instruments) issued in the shape and with the
elements expressly provided for in the law, containing a patrimonial right, mentioned in
their content and whose owner is the bearer.
13.6. Particularities (legal features) of the negotiable instruments
a) The document called negotiable instrument (bill of exchange, promissory note) has a
formal character (also called constitutive), meaning that the document issued on
paper contains a patrimonial right, so that, without this document, this right does not
exist or, in other words, if the document is handed over the right it contains is handed
over with it (similarly to the circulation of a banknote). Thus, the document (instrument)
generates and contains the right, the bearer being the owner of the right written down
and contained in the document. In order to offer certainty regarding the existence and
the extent of the right recorded on the instrument and, on the other hand, to offer
protection to its signatories, namely the people who commit themselves to pay the rights
written down on the instrument by signing it, the law provides for certain mandatory
mentions to be made on the document for it to be valid. Without these mentions, the
29

Ioan SCHIAU, Drept comercial, Ed. Hamangiu, 2009, pag. 527

document cannot be considered a negotiable instrument. From this point of view, this
instrument is a registered standard form. For instance, for the promissory note to be
valid, it is mandatory that the following elements be mentioned on it: the name of
promissory expressed in the language employed in drawing up the instrument;, the
unconditional promise to pay a certain sum of money, the date and place of the
instrument issue, the maturity date and the place of payment, the name of the person to
whom or to the order of whom the payment should be made, the signature of the issuer.
Similarly, a cheque should mandatorily contain elements such as the name of cheque
in the language of the document, the unconditional order to pay an amount of money,
the name of of the person who is to pay (called drawee), the date and place of issue, the
name and the signature of the issuer (drawer).
b) Literality; this feature refers to the fact that the right, its existence and its extent, are
exclusively determined by what is written down on the document (instrument). Its
content is complete, it cannot be modified, interpreted or contradicted through extrinsic
evidence or/and through additional elements, in favour or to the detriment of the
document issuer or beneficiary.
c) Autonomy; this feature of the negotiable instruments is given by the independent
character of the right written down on the instrument as compared with the fundamental
legal relation that led to its issue. For instance, the payment of a product was made by a
promissory note. The beneficiary of this note (the seller of the product) becomes the
owner of the right to have the amount of money written down on the promissory note.
However, the beneficiary will have the possibility to opt not to cash in the money, but to
transfer it to another person in order to pay up a debt to that person, resulted from a
different legal relationship (for example, from a service provision contract), independent
of the relationship leading to the instrument issue (the sales contract). This circuit of the
promissory note is possible precisely because it contains an autonomous right, which is
independent of the fundamental legal relationship that led to its creation. This is the
feature that gives the negociable instruments an abstract, noncausative character, and
is defined by the possibility that the instruments be cashed in exclusively on the basis

and according to the rights written down on them. Each owner of the instrument receives
with the instrument an own, original right and not a right ceded by the instrument issuer.
13.7. The bill of exchange
It is one of the oldest negotiable instruments, dating back to more than 1000 years. It
was first used as payment instrument, resulting from the concern to avoid the risks
generated by the uncertainty of the roads, the difficulty to transport, the inconvertibility of
certain currencies with restricted circulation, etc. In this context, in order to avoid that
cash be transported and the risks of such an exploit, people used to make payments
through a document, meaning that the payer would deposit the money with a banker
who would issue a payment commitment in return. The payer (trader) would submit the
payment commitment with the correspondent of the banker from the place where the
payment was to be made, who would take the commitment and make the payment,
even in a different currency. Subsequently, the bill of exchange also received the
function of a credit instrument, as the payment function has been currently massively
taken over by another instrument the cheque. It is also known as draft or bill, the
Romanian name of cambie being inspired from the Italian version "cambio.
Currently, the bill of exchange is mainly used as credit instrument in international trade
relations and not as payment instrument, which function is fulfilled by cheques. Its
applicability in international trade relations generated the need for uniform regulations,
which were completed through adoption of the Geneva Convention from 1930 providing
a Uniform Law for the Bills of Exchange and the Promissory Notes. This law was not
ratified by Romania, which opted for adopting its own rules in the field, i.e. Law no
58/1934 on the bill of exchange and the promissory note (as modified), whose approach
is however very similar to the reference law. The modifications made in time to the
Romanian regulation were mainly intended to update the use methods of the two credit
instruments, including to the electronic method, through the so-called truncation
procedure.

13.7.1. Definition. It is a perfectly autonomous, literal, formal credit instrument

containing in its content the order given by the issuer (drawer or creditor) to another
person, called drawee (or debtor), to pay a certain amount of money to a beneficiary or
to the beneficiarys order, at the maturity date and at the place mentioned on the
instrument (bill); (it is a document by which a person, called drawer or issuer, orders
another person, called drawee, to pay a certain amount of money at maturity to or to the
order of a third person, called beneficiary or payee.30)
13.7.2. Parties to a bill of exchange
The definition of the bill of exchange mentions the number of participants involved in the
legal relationship generated by this instrument, namely:
ff) The Drawer, i.e. the issuer (creditor), is the person that orders the drawee to pay
the sum of money mentioned on the bill of exchange in favour or at the disposal
of the beneficiary. By signing the bill of exchange, the drawer assumes its
obligation to order the drawee to make the payment. The concept of drawer
wants to suggest the issuers operation of drawing the instrument on the debtor
who has the obligation to make the payment. In theory, the debt of the drawer
against the drawee is called provision or bill of exchange cover;
gg)

The Drawee (debtor) the person who has the obligation to execute the

payment order given by the drawer, as it is its debtor in another legal relationship
than the one generated by the bill of exchange or it is the sponsor, the creditor of
the drawer.
hh)

The Beneficiary/Payee the person to whom or to the order of whom the

drawee makes the payment. The beneficiary could be the creditor of the drawer in
the fundamental legal relationship that led to the bill of exchange issue or the
beneficiary of a credit offered by the drawer. The debt of the beneficiary against
the drawer is called in theory supplied value.
13.7.3. Legal mechanism of the bill of exchange
30

Stanciu D. Carpenaru, Drept comercial romn, Ed a II-a, revzut i adugit, Ed. Universul Juridic, 2011, pag.
511

The issue of the bill of exchange is determined by the existence of a fundamental legal
relationship. For instance, it can become the solution for extinguishing a debt obligation
generated for the buyer of goods against the goods seller. By issuing the bill of
exchange, the drawer (in this case the buyer of the goods) orders the drawee (which
can be a debtor of or resulting from another contractual relationship, or a bank accepting
to be creditor) to make the payment written down in the content of the instrument in
favour or to the order of the beneficiary, in this case the seller of the goods. If, in his turn,
the beneficiary of the bill of exchange is the debtor of a payment obligation resulted from
another legal relationship (for instance, from a loan contract), it will be able to extinguish
the obligation to return the loan by sending the bill of exchange by endorsement to his
creditor. From here, by a new endorsement, the bill of exchange can continue its circuit
in favour of another acquirer.
13.7.3.1. Acceptance of the bill of exchange
In the circuit described above, the procedure of the bill of exchange acceptance by the
drawee can occur when such an obligation is introduced in the content of the bill of
exchange or when its maturity occurs at a certain deadline since sight, i.e. presentation
(not later than one year since issue). In the situations mentioned, the payment obligation
of the drawee is not generated automatically by the order of the drawer, but as effect of
the drawee's own acceptance. As a consequence, the drawee becomes an acceptor, i.e.
main bill of exchange debtor, having the obligation to make the payment at maturity. The
reason for which the drawee accepts to pay is not relevant for the beneficiary, as this
obligation is independent of the obligational relationship between the drawee and the
drawer.
If the drawee refuses to accept the bill of exchange, the statement of refusal must be
acknowledged in a notarial certificate called non-acceptance protest, and the payment is
to be made by the drawee in case of need, namely the person mentioned by the
drawer, endorser or acceptor for honour, or by an intervenient the person who
committed to pay for the bill of exchange.
13.7.3.2. Presentation for payment and payment of the bill of exchange

For payment purposes, the bill of exchange is presented to the drawee at maturity or in
one of the two days following the maturity date, at the place mentioned on the bill of
exchange. In the case of accepted bills of exchange, it can be opted for its effective
presentation, in original version, or in electronic form - operation called truncation. By
payment of the drawee, the obligation generated by the bill of exchange is extinguished.
13.7.3.3. Remedies in case of payment refusal
The refusal to pay a bill of exchange allows the bearer of the instrument to keep the right
to payment following at discretion one of the two specific procedures provided for in the
law. Because the former, i.e. the legal action, is extremely little used in practice, we will
just present the latter one, simpler, more operative, less expensive, and thus preferred,
i.e. the enforcement. This latter remedy allows the bearer of the bill of exchange refused
for payment to ask for it to be vested with an executory clause according to law, as it
represents a writ of execution by law.
13.7.4. Transfer of the bill of exchange (the endorsement)
It is the operation by which the bill of exchange and, thus, the patrimonial rights written
down on it circulate, namely are transmitted from one bearer to another, thus
accomplishing its function of negotiable instrument.
The procedure consists of the bill of exchange being transferred by endorsement,
which is the order given to the drawee by the bearer of the bill of exchange, called
endorser, to pay the sum recorded on the bill to a certain person, called endorsee.
The discounting of the bill of exchange is a version of the endorsement, which the
bearer of the bill of exchange can use in case he/she needs money before its maturity.
By transferring the bill of exchange to a banking institution, the bearer will obtain a part
of the amount mentioned on it, the remaining after deduction of the discount, which are
the bank's profit margin and the commission for covering potential expenditures
generated by the discounting and execution of the bill.

13.7.5. The aval

It is the specific guarantee in the bill of exchange law, consisting in the obligation
assumed by a person called guarantor/acceptor for honour to pay the bill of
exchange, totally or partially, in the name of one or more of the bill creditors, called
guarantee applicant/s. The obligation of the guarantor is materialized in an
endorsement on the bill using the words per aval or for guarantee, accompanied by
the signature of the guarantor. On the basis of this endorsement, the bill bearer can
keep the guarantor liable as if it were the guarantee applicant.
Important to remember is the fact that the drawer, the acceptor, the endorser and the
guarantor of the bill of exchange are severally liable in front of the bill bearer, who is thus
entitled to pursue each of them.
13.8. The promissory note
Similar to the bill of exchange, although less complex, the promissory note is regulated
by the same legal document, i.e. Law no 58/1934 on the bill of exchange and the
promissory note as modified. Even if the legal provisions applicable to the promissory
note are more summarily presented than the provisions dedicated to the bill of
exchange, this instrument, similarly to the cheque, is more widely used in practice than
the bill of exchange.
13.8.1. Definition: it is the negotiable instrument by which the issuer, debtor (also
called subscriber) commits to pay at maturity a fixed amount of money to or to the order
of a payee (creditor).
12.8.2. Unlike the bill of exchange, the promissory note implies only two participants, i.e.
the issuer, who commits to pay, and the payee, who is the beneficiary or who orders the
payment to the issuer. There is no drawee, whose role is taken over by the issuer.
Practically, the issue of the note is equivalent to an acknowledgement of the issuers
obligation to pay as debtor.

13.8.3. Similarly to the bill of exchange, it is an abstract, autonomous, formal credit

instrument. Its formal character imposes that this private deed contain the elements
expressly provided by the law [presented as example under Section 12.6.a) from this
chapter] in order to be valid.
13.8.4. The rules concerning the transfer, availing and payment of the bill of exchange
are also applicable to the promissory note, so we do not return to them.
Moreover, if the note bearer cannot cash it in at maturity because the issuer had not
made a provision (does not have the sum mentioned on the instrument), the former has
the right to use the legal actions specific to the bill of exchange or to enforce the note
after preliminary vesting with an executory clause. Similarly to the bill of exchange, the
latter remedy is the most widely used in practice, as it is more operative, simpler and
less expensive. Its quality of writ of execution eliminates the need for, the costs and the
time corresponding to a trial, and allows the beneficiary bearer to use directly the
enforcement of the note against the issuer, the enforcer or the guarantor.
13.9. The cheque
This payment instrument is regulated by Law no 59/1934 as modified, which takes over
principles of the European Convention adopted in the field in 1931, to which Romania
did not join.
This is a real payment instrument, and not a credit instrument, because at the date of its
issue, the issuer has the sum mentioned on the cheque in a bank account, and he uses
the cheque to order the bank to make the payment in favour of the beneficiary. Since the
cheque is payable by the drawee (the bank) at the date of its presentation to the bank,
its issuer is not the beneficiary of a credit, as it is the case for the bill of exchange and
the promissory note for the period between the instrument issue date and the maturity
date. The usefulness of the cheque as payment instrument consists in sparing the issuer
of uncomfortable payments in cash.

13.9.1. Definition: it is the document containing an unconditional order of the issuer

(called drawer) to a bank (called drawee), where the issuer has available funds, to pay
upon presentation the sum recorded on the cheque in favour of the beneficiary.
13.9.2. Similarly to the bill of exchange, the cheque implies three participants:
a) The Drawer, who orders the payment on the basis of the available funds he has with
the drawee;
b) The Drawee, who is always a bank, will pay the sum recorded on the cheque to or to
the order of the beneficiary; the drawee only has the function of payer for the drawer,
which eliminates the need for acceptance of the payment by the drawee;
c) The Beneficiary the creditor of the drawer, bearer of the document, to whom the
drawee pays upon presentation of the instrument.
13.9.2. Cheque validity conditions: the formal character of the cheque is provided by
law, which stipulates that it shall be issued on writing, on a standard form containing the
mandatory elements that ensure its validity. The form shall bear the handwritten
signature of the drawer. Analysing the mandatory elements of the cheque (the name of
"cheque, the unconditional order to pay a sum of money, the name of the drawee, the
place of the payment, the date and place of issue of the cheque, the signature of the
drawer), it can be noticed that it is not necessary to mention in writing the name of the
beneficiary (bearer cheque), or the maturity, as the payment is made at sight (on
presentation).
13.9.3. Transfer of the cheque
The cheque can be paid:
u) To the bearer, when the name of the beneficiary is not mentioned on the
document;
v) To the endorser or beneficiary, when the name of the beneficiary is mentioned on
the document, in both cases.
13.9.4. The cheque aval

The cheque payment can be guaranteed through aval, which can be given for the whole
amount recorded on it or only for a part of it. The aval, consisting in mentioning "per
aval on the cheque, will be signed by the guarantor, who can be a signatory of the
cheque (except for the drawee) or a third person. The guarantor, whose name will be
mentioned on the cheque, has the same obligation to pay as the guarantee applicant.
13.9.5. Payment of the cheque
Contrary to the bill of exchange, the cheque is not submitted to the drawees
acceptance. Such a mention is considered to be unwritten. Its payment by the drawee
shall be made at the date of presentation, which should occur within 8 days since issue
for the cheque payable in the place where it was issued, and within 15 days when the
drawee is situated in another place than the place of issue. The cheque issued in a
different country is payable in Romania if it was presented for payment within 30 days
since its issue in a European country, and within 70 days since its issue in a nonEuropean country.
The late presentation for payment does not result in losing the right of the beneficiary to
ask the drawee to pay the sum of money, but only in losing the right to recourse action
against the endorsers and guarantors. If the drawee pays the cheque, he has the right to
be submitted the document with the mention paid. By payment, all the signatories of
the cheque are released from the payment obligation.
13.9.6. Effects of failure to pay the cheque
If because of lack of funds in the account of the drawer, the bank cannot pay the
cheque, its bearer can use the recourse action against the drawer, the guarantors and
the endorsers, who are severally liable and can be pursued in any order.
Similarly to the negotiable instruments, the cheque is a writ of execution, so it can be
enforced, which is preferable to the other specific remedy procedures.
13.9.7. Currently, in order to meet the need for modernization and adaptation of the
mechanisms concerning the use of the analysed negotiable and payment instruments,
the regulations applicable in the field have introduced the solution of payment through

truncation. This is a digital procedure that allows the instrument bearer to put it in
electronic format by taking over the relevant information it contains and reproducing its
image electronically, respecting all the conditions and technical elements provided for in
the regulations, instead of submitting the document in original form at the drawee's office
(a banking institution). This procedure can be used only for total payment of the
document and only between banking institutions that have previously signed an
agreement concerning the use of this technique or the adhesion to a payment system.