Bondoc si Asociatii SCA

1. Overview of the Romanian market Romania continues to be one of the most attractive destinations for doing business in Central and Eastern Europe (CEE). There are strong arguments supporting this claim, including: its Strategic Location & EU Market Access - positioned at the crossroads of Europe, Asia, and the Middle East:   Member of the EU, NATO; Gateway to a 450+ million consumer market in the EU; Access to major transportation hubs (access to the Black Sea via Constanța port, major highways, and rail links); Recent Schengen membership (as of 2025). Competitive Labor Force (highly skilled workforce, especially in IT, engineering, and manufacturing, with many professionals speaking English, German, and French); Strong IT & Tech Sector (notably, all large US companies in the technology sector are also present in Romania) Competitive Tax System & Business Incentives (a flat 16% corporate tax rate , among the lowest in the EU) Well-Developed and stable Banking & Financial Sector, with major EU banks operating in Romania (BCR, part of Erste group, ING, Raiffeisen, UniCredit) as well as local banks (e.g., Banca Transilvania has gained traction following multiple M&A deals which have enlarged its market share). As the market remains fragmented, there seems to still be potential for further banking M&A deals. Strong e-commerce growth – which has been booming in recent years, with increasingly fast digital adoption and strong logistics support and promotion of an increased number of digital financial products (including buy-now-pay-later and other types of digital consumer credit which have been thriving recently). According to 2023 reports of the World Bank, Romania ranks 12th in the European Union by total nominal GDP1 and 7th largest for GDP adjusted by purchase power (PPP).2 Despite the proximity to the war in Ukraine, Romania remains a top destination for foreign investment, tech startups, and industrial expansion. With Schengen integration effective as of 1st of January 2025, and ongoing infrastructure development, Romania is an increasingly attractive business hub in the CEE region. As Romania navigates its economic landscape, the stability of the political environment remains an important factor influencing market opportunities. The current Government coalition looks quite solid and the redo of the presidential elections set to occur in May 2025 is unlikely to affect Romania’s overall policies and the economic environment will continue to support a stronger EU and NATO membership. Anticipated fiscal reforms and ongoing negotiations around government policy will likely impact economic growth and inflation rates. 2. Business environment Generally, Romania offers a friendly business environment, including a simplified business registration procedure, further enhanced by Law 265/2022 on the Trade Registry. Romania has made efforts to simplify the process of registering a business, reducing the time and paperwork required for starting a company. As such, the registration formalities may be fulfilled either through the dedicated Trade Registry online portal, by email, or in person, with processing times typically ranging between 2 to 5 business days. The ease of doing business in Romania has also been heavily impacted by its adherence to harmonized EU legislation since its EU accession in 2007, the Romanian legislation being generally in line with relevant EU norms. Legislative Changes in 2025 versus 2024 - What has changed in the last year that has impacted the way business is conducted? While it is widely acknowledged that legislation has been enacted both in Romania and, more generally in the EU, at an unprecedented pace and level of complexity, making businesses face a higher risk of compliance due to increased legislative burden, efforts are being made both at national level (e.g., the National Capital Markets Strategy for 2023-26) 3and at EU level, via the EU Commission Competitiveness Compass4 to address this issue. In this context and until the objective simplification and codification to increase overall competitiveness is reached, it is likely that business in Romania will continue to face the above-mentioned risk, which is generally mitigated to the extent that proper legal advice is sought at an early stage of structuring the business. It is to be expected that business will continue to be impacted by EU legislation in 2025 as well, in all relevant business areas (e.g., banking and financial services, energy, IT, data privacy and cybersecurity). Some of the most important general legislative changes last year that will likely impact business in general more heavily are: Full Schengen access. Starting January 1, 2025[5], Romania, alongside Bulgaria, became a full member of the Schengen Area. By eliminating land border controls between Schengen countries (previously in 2024 air controls were eliminated), free movement of people and goods were facilitated. The decision is expected to reduce border wait times, lower logistics costs, and make Romania more attractive for foreign investments. Amendments to Company Law No. 31/1990 brought under Law no. 299/2004 which aim to modernize corporate legislation, by enhancing digital engagement, regulating digital participation in shareholder meetings and simplifying administrative processes for businesses (e.g., removal of UBO details in the articles of incorporation, granting more flexibility to delegation of powers to the board of directors). Adoption of NACE Rev.3 Classification System: The adoption of the NACE Rev.3 Classification System, which amends and updates the previous system, was formalized under Order No. 2938/C of 20 December 2024 on the measures and procedures for the implementation of the Classification of Activities in the National Economy - NACE Rev. 3. The Order establishes the legislative framework for the implementation of the new classification, which is designed to meet the demands of a market-oriented economy and align it with European standards. Starting from 2025, companies are required to update their scope of activity to comply with this new classification, with the implementation to be carried out through the National Trade Register Office. Amendment to the Cybersecurity legal framework following transposition of Directive 2022/2555 (“NIS2 DIRECTIVE”) - Government Emergency Ordinance no. 155/2024 on the establishment of a framework for the cybersecurity of networks and information systems in the national civil cyberspace (“NIS2 GEO”) was published and entered into force on December 31, 2024. In line with NIS2 Directive, NIS2 GEO no longer distinguishes between “operators of essential services” and “digital service providers”, defining instead new categories of “essential entities” and “important entities” mainly based on sector and size. In terms of sectors/ industries, the scope has also been broadened compared to the previous regulatory framework. Important changes to the Foreign Direct Investment Regime (FDI) - In 2024, Romania introduced notable amendments to its FDI regime under Law No. 231/2024, aiming to enhance clarity and consistency in FDI screening procedures, particularly concerning EU-investments, including by expanding sanctionable conduct to cover EU-investments. Additionally, Law No. 231/2024 provides clarifications on nullification of non-compliant investments and of the agreements implementing such investments. Furthermore, recent amendments to FDI legislation introduced at the end of 2024 under Government Emergency Ordinance no. 152/2024 specify that investments made by Romanian citizens will also be subject to FDI security screening. What are the main business structures in Romania? Generally, the following types of companies may be set up in Romania: Limited Liability Company (SRL) (in Romanian, “Societate cu Răspundere Limitată”), Joint Stock Company (SA) (in Romanian, “Societate pe Acțiuni”), Limited Partnership by Shares (SCA) (in Romanian, “Societate în Comandită pe Acțiuni”), Limited Partnership (SCS) (in Romanian, “Societate în Comandită Simplă”), and General Partnership (SNC) (in Romanian, “Societate în Numele Colectiv”), as per Company Law no. 31/1990. However, in practice, in Romania, the Limited Liability Company (SRL) is the predominant business structure, significantly outnumbering Joint-Stock Companies (SA). The main reason for the investors’ preference for the SRL structure is related to lower capital requirements, a more flexible and simpler management structure, fewer legal requirements and administrative costs. The SA structure is generally chosen by more sophisticated and larger investors, often operating in regulated sectors (e.g., certain sector specific requirements impose the SA to obtain a business license, for example, in the case of non-banking financial institutions and credit institutions). All companies must be registered with the Romanian Trade Register Office following the registration procedure set out under Law no. 265/2022 on the Trade Registry and for amending and supplementing other regulatory acts on Trade Registry registration. A limited liability company (LLC, or SRL in Romanian) may be established with up to 50 shareholders, although the Company Law also allows for the creation of a company with a sole shareholder. On the other hand, a joint stock company (JSC, or SA in Romanian) requires a minimum of two shareholders in order to be set up. As an alternative to the incorporation of a legal entity in Romania with legal personality, investors have the possibility to incorporate a branch or representative office of the foreign company in Romania. Such legal structures will act in the name and on behalf of the parent company and will be subject to registration formalities (the representative office is subject to an authorization and registration procedure with the Ministry of economy, digitalization, entrepreneurship and tourism instead of the Trade Registry). Business Structure Min. Capital Liability   Common Use SRL (Limited Liability) No minimum provided by law (cannot be null) Limited to share capital Small to medium-sized businesses SA (Joint-Stock) 90.000 RON (18.000 EUR) Limited to share capital Large businesses, public companies Sole Proprietorship None Unlimited (owner's personal liability) Freelancers, consultants Branch of Foreign Company None Parent company liability Foreign companies entering the market Representative Office None Parent company liability Market research, promotion Economy Currency strength In 2024, the Romanian leu (RON) demonstrated resilience despite global economic fluctuations. Throughout the year, the EUR/RON exchange rate remained quite stable, with a medium exchange rate of 4.9750 RON per EUR6, reflecting a favourable and trustworthy environment for investments and market confidence. This stability was primarily driven by the National Bank of Romania’s (NBR) prudent monetary policies. These efforts helped to moderate excessive volatility and foster a steady economic scene. Looking ahead to 2025, the NBR’s decision to lower the monetary policy rate to 6.50% signals a continued focus on maintaining stability in the currency market [7]. While some short-term fluctuations may occur due to external risks, the NBR’s steady approach, alongside Romania’s fiscal discipline and ongoing structural reforms, is expected to support the leu's strength. The outlook remains cautiously positive, with efforts focused on promoting the gradual appreciation of the currency, in line with broader economic objectives, such as anchoring medium-term inflation expectations and contributing to sustainable economic growth. While geopolitical conflicts and the budget consolidation may negatively affect the economy, a stronger and more efficient absorption of EU funds, especially those under the Next Generation EU programme, are expected to counterbalance such negative effects and strengthen the resilience of the Romanian economy. Inflation rates Romania’s inflation rate experienced fluctuations in 2024, but the recent landscape points to a positive trajectory. In January 2025, the annual inflation rate dropped to 4.95%, down from 5.14% in December 2024, according to the official report released by INSSE on 14 February 2025, this decline reflecting the gradual easing of inflationary pressures, particularly from food prices and wage growth.8 While the National Bank of Romania (NBR) had initially revised the inflation forecast for 2024 upwards to 4.9%, driven by adverse weather conditions and higher wages, the outlook remains optimistic. The NBR currently projects that inflation will gradually decline, reaching 3.5% by the end of 2025 and returning to within the target range by mid-2026. These projections indicate a steady return to price stability, supported by sound monetary policies and favourable economic conditions.[9] Main trade sectors In 2024, Romania's economy continued to showcase its industrial diversification, positioning it as a resilient player in the region. Romania benefits from a well-balanced economy with significant contributions from agriculture, services, and the rapidly growing IT sector. This diversification has helped Romania maintain a competitive edge in a challenging European economic landscape.10 Romania is characterized by a highly trained labor force, abundant natural resources in key areas, and geographical conditions that facilitate the transportation of goods. These factors, along with one of the largest markets in Central and Eastern Europe, make the country an increasingly attractive destination for investment. With a solid foundation and growing opportunities in various sectors, Romania continues to offer numerous prospects for investors looking to capitalize into its dynamic market. 5. Current opportunities & future prospects What opportunities exist for clients looking to invest in your jurisdiction? The reforms and investments in Romania’ are likely to be supported by Romania’s commitments under the National recovery and resilience plan (PNRR) agreed with the EU Commission11. The PNRR is a comprehensive plan that targets sustainable development, economic modernization, and social resilience. The main investment areas favored by the PNRR include green energy, digital transformation, health system modernization, education, infrastructure, and social inclusion. These investments aim to align Romania with the EU’s broader goals for post-pandemic recovery, digitalization, and sustainability, creating a more competitive and inclusive economy for the future. In this context, digitalization will continue to provide interesting investment and growth opportunities across many sectors (e.g., e-commerce, digital banking, digital investment and financial services etc.). As such, Romania's retail and e-commerce sectors are projected to experience significant expansion in the near future. This growth is largely attributed to increased internet access and evolving consumer habits, which have driven an increased demand for online easy to access solutions. Investors that focus on innovative online commerce strategies, such as rapid delivery platforms and personalization tools, are well positioned to capitalize on this trend and growth potential in the marketplace. As regards capital markets opportunities, despite the volatile and high market uncertainty also triggered by the Presidential elections set to take place in May 2025, investors should consider Romania’s commitments assumed under the National Resilience and Recovery Plan, which refer to the obligation to list three of the State-owned companies (most likely in the energy and transportation sectors). However, this decision is yet to be taken by the Romanian Government. Another area of interest is the public private partnership projects (PPP) sector, especially relevant in the context of the Romanian high budget deficit (8.6% in 2024). In spite of the absence of successful precedents for PPPs under the current PPP legislation, projects to be developed under PPP are awaited in the following period - the main opportunities being in infrastructure such as hospitals, roads, railways, metro lines, power plants and airports. In the banking sector, the consolidation trend that we have seen in the past years is expected to continue (we have been actively supporting our clients in major banking M&A deals (including the recent acquisition of Alpha Bank by Unicredit12); additional opportunities may arise in connection with innovative digital finance products (we have assisted in the implementation of some first-on the-market digital products including digital retail loans / buy-now-pay-later products). The recent Schengen membership should also offer significant additional efficiency and synergies to numerous sectors. 6. Legal system How does the legal system operate? What should clients be mindful of when doing business in your jurisdiction? Romania is a civil law system, which means that the primary source of law are written statutes and codes (e.g., Civil Code, Civil procedure Code, Administrative Code etc.) and court decisions generally do not have the same precedential value as in common law systems. While being part of the EU strongly facilitates doing business in Romania, given that the domestic law is generally aligned with EU law and EU regulations are directly applicable (e.g., GDPR), the areas which are not harmonized at EU level or for which gold plating is permitted, should be carefully factored in by investors in their business plan prior to investing (e.g., real estate13, tax law regime, FDI regime). Foreign investment restrictions Regulatory environment, Direct investment In Romania, the FDI regime is mainly regulated by Government Emergency Ordinance no. 46/2022 for the implementation of EU Regulation 2019/452 (GEO 46/2022), which, among other things, defines the relevant concepts, sets out the types of deals reviewed, procedural aspects and potential sanctions[14]. Pursuant to GEO 46/2022, filing is mandatory for a FDI, an EU investment or a new investment, as defined under GEO 46/2022, made by a foreign investor or an EU investor  (which also includes Romanian citizens), that: (i) covers the activities relevant to national security according to Decision no. 73/2012 of the National Council for Country's Defence, in conjunction with the criteria set out in article 4 of Regulation 2019/452; and (ii) whose value exceeds a threshold of €2 million (by exception, FDIs not exceeding €2 million may also be subject to scrutiny if they are likely to have an impact on security or public order or pose a risk to them). Foreign investors or EU investors can protect themselves by ensuring that any transaction carried out in Romania is internally pre-assessed from an FDI perspective (in other words, verifying whether the transaction falls under the criteria set out in GEO 46/2022), followed by formal filing if they conclude that the transaction meets the relevant criteria, in addition to other regulatory clearances that may be required, such as the merger clearance by the Romanian Competition Council. Foreign exchange controls In Romania, foreign exchange controls are primarily regulated by the National Bank of Romania (NBR) under Regulation No. 4/2005 on the foreign exchange regime. This regulation establishes the framework for foreign exchange operations, including the rights and obligations of residents and non-residents, the conduct of foreign currency transactions, and the roles of financial institutions in monitoring compliance. Both residents and non-residents are permitted to acquire, hold, and use financial assets denominated in both foreign and domestic currencies. They may also open and maintain accounts in these currencies with authorized institutions. Transactions between residents involving the sale of goods and services must be conducted in the national currency (leu), unless specific exceptions outlined in the NBR Regulation No. 4/2005 apply. Other transactions between residents, such as financial operations, can be conducted in either national or foreign currency, depending on mutual agreement. Restrictions on foreign capital In exceptional cases laid down under NBR Regulation No. 4/2005, the National Bank of Romania may impose restrictions to foreign exchange transactions. However, to the best of our knowledge, such restrictions have not been yet imposed in practice in recent times. If such an exceptional event occurred, the National Bank of Romania could impose various FX restrictions on short term FX operations (e.g., notifications /limits on FX transactions between residents and non-residents). Under the applicable norms, FX operations that could theoretically be affected are broadly defined, including payments, transfers, loans and offsets, as well as any other means of payment, depending on the nature of the relevant operation. 8. Top 5 tips to know before Investing Investing in Romania can prove to be a fruitful endeavor, but from a legal perspective, it is key to consider the following main general aspects: Carefully choose the most appropriate legal structure for your business Be mindful of the applicable FDI regime, as pecuniary and civil sanctions are severe and might affect business prospects Strictly observe AML and anti-corruption laws Understand sector- specific regulations that may apply (banking, financial services, healthcare, energy, environment etc.) and local specificities In case you are a non-EU investor, consider that in many cases Romania has concluded trade agreements (bilateral investment treaties) with other countries outside the EU, offering favourable trade terms. It is highly recommended to consult the local legal experts to navigate Romania's intricate legal framework, understand expectations of various competent authorities to ensure compliance with local laws and maximize your chances of success in the Romanian market. Interested in Doing Business in Romania? Bondoc și Asociații SCA is a leading Romanian law firm (and top 10 in size in the country), involved in many of the most complex projects in the country, offering full-range of business law legal assistance. In recent years we have worked on many of the largest and most complex transactions in the Romanian market. For more details about our firm and partners please see: https://bondoc-asociatii.ro/ https://www.legal500.com/firms/17801-bondoc-si-asociatii-sca/c-romania/rankings Authors: Lucian Bondoc, Managing Partner Diana Ispas, Partner 1 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=RO&most_recent_value_desc=true 2 https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?locations=RO&most_recent_value_desc=true 3 https://asfromania.ro/uploads/articole/attachments/659e5a3d502c9507465771.pdf 4 Around €37.5 billion potential annual savings are expected for EU companies if EU achieves its simplification goals – see https://commission.europa.eu/topics/eu-competitiveness_en. 5https://ec.europa.eu/commission/presscorner/detail/pl/statement_24_6401 6 Romanian leu (RON) 7 Banca Naţională a României - Minutes of the monetary policy meeting of the National Bank of Romania Board on 14 February 2025 8 Template press release 9 National Bank of Romania (Banca Naţională a României) - Inflation Report 10 EBRD, Romanian officials debate industrial policy with entrepreneurs at BVB event in Bucharest | Romania Insider 11 https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-resilience-facility/country-pages/romanias-recovery-and-resilience-plan_en. 12 https://bondoc-asociatii.ro/bondoc-si-asociatii-sca-advised-unicredit-spa-in-connection-with-the-acquisition-of-alpha-bank-romania-s-a/ . 13  Please see our relevant Legal 500 Guides - https://www.legal500.com/guides/chapter/romania-real-estate/ and https://www.legal500.com/guides/chapter/romania-data-protection-cybersecurity/. 14 Please see also FDI comments in Chapter 6 above.