Academic journal article Contemporary Readings in Law and Social Justice

Mergers of Companies in Romania - Short Legal, Tax and Accounting Approach Including the Recent Changes in Legislation

Academic journal article Contemporary Readings in Law and Social Justice

Mergers of Companies in Romania - Short Legal, Tax and Accounting Approach Including the Recent Changes in Legislation

Article excerpt


The complexity of the merger is reflected not only in its legal regime but also in its tax and accounting implications that must be taken into account before two or more companies decide to merge, in order to restructure their business. For this it is important to know the legal frame of the merger and the procedure of the merger that implies preliminary accounting operations, drafting and publicity of the merger report, approval of the merger by the shareholders and its registration based on a court decision within the register of commerce. Nullity of the merger is possible but only under certain limits and there still needs to be regulated as the merger from an accounting and tax point of view. The merger is neutral from a tax of view and one of its recent benefic consequences is that the financial losses can be recovered.

Keywords: merger, companies, tax, losses recovery, Romania

1. Introduction to the Legal Frame Work on Mergers in Romania

According to Romanian law the merger is an operation where one or more companies are wound-up without going into liquidation and transfer all their assets and liabilities to another company, in exchange of shares in already existing companies or in newly established companies and of cash payment (if the case), not exceeding 10% of the nominal value of the shares so allocated.

The Law on Companies no. 31/1990 and the Civil Code represent the general legal framework of mergers of companies in Romania. Beside them there are other legal documents regulating mergers and acquisitions from an accountancy and tax perspective, as follows:

* Accounting Law no. 82/1991 ;

* Order of the Ministry of the Finances no. 1376/2004 regarding the approval of the Methodological Norms regarding the Reflection in Accounting of the Main Operations of Merger, Spilt-up, Wind-up and Liquidation of Companies, as well as the Withdrawal and Exclusion of Shareholders from Companies and the Applicable Tax Treatment;

* Order No. 3055/2010 of the Ministry of Public Finances on the Approval of the Accounting Regulations in compliance with the European Directives;

* Fiscal Code.

In case of the mergers between credit institutions, banks, insurance companies are being applicable, in addition to the general provisions, different special regulations. As in other countries, companies involved in a merger may be subject to certain restrictions, most frequently from a competition perspective. Thus, in case of a merger should be analyzed whether, by meeting certain material thresholds (for establishing of which financial figures of the merging companies are necessary), the respective merger falls under the provisions of Competition Law 21/1996, or even of Council Regulation (EC) no. 139/2004 on the control of concentrations between undertakings.

The Romanian legislation had a major change in 2011, when a new Civil Code entered into force. Such Code contains specific information about the merger of legal entities that apply also to the companies. The merger was explicit recognized as a reorganization mean of the legal entity.

The New Civil Code provides just some general rules concerning the merger - most of them already set forth by the Company Law, but there are also some specific rules. From this category we referring to the provisions related to the termination of the contracts on the occasion of merger. In fact in case of intuitu personae contracts (contracts that were closed in taking into account the quality of the contracting party) they shall not be terminated due to the merger unless it is stipulated expressly in their content the contrary or that the continuation of the contract is based on the prior approval of the contracting party. This provision is important as must be taken into account when drafting such contract and thinking in perspective. It is then to decide if the contract should continue also in a case of a merger or not. It is a long shot decision. …

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