Romania: Recent corporate changes
Following the entry into force of the Fourth Anti-money Laundering (AML) Directive (2015/849) in 2015, Ireland, Greece, the Netherlands and Romania are still in the process of passing appropriate implementation measures into national law.
On 31 May 2018, the Romanian government approved draft legislation transposing the directive and introducing important changes for private companies regarding their reporting duties and transparency of ownership. Uncertainty remains about enforcement timing, as Romania’s parliament must still debate the bill before it becomes fully enforceable law.
Some of the new requirements for non-listed companies are particularly significant for combating money laundering and terrorism financing. Specifically, non-listed companies will have to convert all existing bearer shares into registered shares and keep records of their ultimate beneficial owners, disclosing them to reporting entities or government authorities.
BAN ON BEARER SHARES
Pursuant to the Companies Law (31/1990), joint stock companies may issue registered or bearer shares. “In the case of registered shares, the shareholder’s name appears on the share certificate; in the company’s records (its share register and articles of incorporation); and in the Trade Registry.”
Bearer shares offer investor anonymity and make determining exact company ownership difficult, raising concerns regarding money laundering and terrorism financing. The draft legislation requires “all companies that have issued bearer shares must convert them into registered shares and record such share” ownership within 18 months of the law’s entry into force.
Failure to comply attracts severe penalties including winding up at the request of an interested party or the Trade Registry.
ULTIMATE BENEFICIAL OWNERS
A central register of beneficial owners of private companies—excluding those listed on regulated stock markets—will be introduced. A “beneficial owner” encompasses any natural person who ultimately owns or controls, directly or indirectly, the customer or entity conducting transactions.
A legal presumption of ownership applies to shareholdings of “25% plus one share or an ownership interest of more than 25% in the customer held by a natural person within a company.” If no person meeting these criteria is identified, senior managing officials will be presumed to be beneficial owners.
Companies must disclose shareholders and investors meeting these criteria to the centralised shareholders’ register.
STRICTER REPORTING
Non-listed companies must obtain and record the names of owners and economic beneficiaries, providing such information to local government regulators and reporting entities. “A company’s beneficial owners must be identified not only when it is incorporated, but also on a continuous basis following any shareholder changes.”
Disclosure must be made by self-declaration form to the Trade Registry within 15 days from annual financial statements approval or beneficial owner identification data changes. The disclosure must contain “each beneficial owner’s full name, date of birth, personal identification number, national identification series and number, nationality and country of domicile or residence.”
Private companies have 12 months from the law’s entry into force to disclose beneficial owners.
NEW EU LEGISLATION, NEW ENHANCEMENT OF TRANSPARENCY
On 14 May 2018, the European Council adopted the Fifth AML Directive, which will enter into force on the 20th day following its publication in the Official Journal of the European Union. EU member states have 18 months to transpose the directive, expected by year-end 2019.
Key changes include making beneficial ownership registers public to enhance scrutiny, interconnecting national registers across EU member states, and granting competent authorities and reporting entities access to trust beneficial owner data.
THOUGHTS
Non-listed companies should adapt quickly to these new regulatory parameters to avoid risks. Although enforcement timing remains uncertain, the changes are inevitable. Private companies must invest time in verifying beneficial owners, tracking ownership changes, and converting bearer shares into registered shares.
In M&A transactions, confidentiality provisions should be reassessed to allow parties to supply information necessary for reporting entities’ legal disclosure duties.