More than 11,000 joint stock companies in Romania will have to increase their share capital to at least 25,000 euros by July 1 2006, according to a draft law by the Ministry of Justice in compliance with European Union directives.
The current minimum level of share capital for a joint stock company is 650 euros (25 million ROL), some 40 times lower than the new level.
Romania currently has 19,627 joint stock trading companies (called SAs, or SCAs in Romanian). Of these, only 8,226 have share capital of or in excess of 25,000 euros. According to a report by the National Trade Registry Office (ONRC) at the end of March, 58% of SAs in Romania will fall below the threshold imposed by the new law. The situation for some 85% of these will become uncertain upon endorsement of the draft law, as their share capital is less than 10,000 euros.
The solution for companies that do not have the necessary financial resources could be to turn themselves into limited liability companies, the most common type of company in Romania. For all joint stock companies currently not meeting the new requirement to increase their share capital to at least 25,000 euros would require 150-200 million euros.
"Dissolution or liquidation of these companies is out of the question if no derogation is obtained from the European Commission. Companies will most likely choose a new form of organisation in which the amount of share capital is not important and it is the type of liability that matters," said Florian Nitu, a partner with law firm Popovici & Asociatii.
According to the draft from the Ministry of Justice to modify Law 31/1990 on the operation of trading companies, all joint stock companies will have until July 1 2006 to increase their share capital to at least the equivalent in ROL of 25,000 euros, using the exchange rate set by the National Bank of Romania on the date of subscription.
"The provision for increasing share capital for joint stock companies to the equivalent of 25,000 euros is included in the Directive 77/1991/EEC and was introduced by Law 161/2003 which contained measures for ensuring transparency in the conducting of public dignities and positions and the business environment, as well for the prevention and punishment of acts of corruption," Eugen Ghiulea, general manager of the National Trade Registry Office, told Ziarul Financiar.
One of the prerequisites of Romania''s joining the European Union is the adoption and application of European legislation. According to Article 6 of the same directive mentioned above, "for joint stock companies to be established or for business permits to be issued allowing company operations to begin, EU member state legislation must establish a minimum level of share capital of 25,000 euros."
According to European legislation, member states must ensure and observe the application of these principles that guarantee the equal treatment of shareholders in the same circumstances. dana.ciriperu@zf.ro
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