Romania: Squeeze-outs of minority shareholders
Overview
The removal of minority shareholders in closely held companies represents one of the most contentious issues in Romanian corporate law. Historically, Romania’s privatization efforts from 1991 to 1996 relied heavily on management-employee buyouts, resulting in millions of Romanians potentially retaining stakes in former state enterprises. Many of these shareholders hold positions below 1% and may be unaware of their participation.
Existing Legal Framework
“The concept of squeeze-out exists in Romanian only with respect to publicly listed companies.” Protection mirrors EU Takeover Directive standards under Law 24/2017.
Closely held private companies offer more limited protections. Recognized minority shareholder rights include:
- Information rights
- Authority to request shareholder meetings (for stakes above 5%)
- Ability to request management activity reviews (for stakes above 10%)
Shareholders may exit in limited circumstances for fair compensation. Despite these restrictions, Romanian courts frequently support minority shareholders when majorities abuse their positions, issuing damages awards or canceling shareholder resolutions that disregard minority interests.
Available Alternatives
Absent contractual provisions like buy-back arrangements, majority shareholders can pursue several restructuring methods:
- Share capital increases (diluting non-participating minorities)
- Share annulment through capital reduction
- Squeeze-out mergers
- Reverse stock splits consolidating shares without affecting aggregate capital value