The reorganization of legal entities is regulated by the new Romanian Civil Code in the wording of Articles 232 – 243. However, the reorganization of legal entities regulated by the New Civil Code is different from the judicial reorganization regulated by the Romanian Law no. 85/2014 on insolvency prevention procedures and insolvency. In most cases, the decision to proceed to the reorganization of a company is taken for socio-economic considerations.
According to the Romanian Civil Code, the reorganization of the legal person is a legal operation involving the participation of one or more legal entities that result in the establishment, modification or termination of a legal entity thereof.
The law on insolvency defines the judicial reorganization as a procedure applicable to an insolvent debtor - legal person -, with the purpose of paying its debts according to a receivables payment schedule. This procedure involves several steps, namely: the preparation, the approval, the confirmation, the implementation and the compliance with a reorganization plan that may provide, inexhaustibly:
▪ operational and / or financial restructuring of the debtor;
▪ restriction of the activity by partial or total liquidation of the debtor's assets;
▪ corporate restructuring by changing the capital structure.
Therefore, judicial reorganization implies that the company would be insolvent and is distinct from the reorganization of legal entities stipulated by the Romanian Civil Code which does not require the insolvency and which states that this is carried out through merger, division or transformation.
Merger or division of a company is done in two stages. In the first stage, the general assembly of each company taking part in these procedures decide the start of the procedures and charge the directors with drafting the merger or division project. Romanian Law no. 31/1990 on companies establishes certain elements that must be provided in the merger or division project. The second step, namely the merger or division itself, implies that the supreme governing bodies of the companies involved in the operation approve the merger or division in accordance to the draft drawn up by the directors.
The merger or division will be signed by the representatives of the participating companies and will be filed at the commercial registry where each company is registered.
As can be seen from the above definitions offered by the Romanian legislation in the field, the effects that reorganization can produce are creating effects, modifying or extinguishing, according to the forms the reorganization takes.
The merger is the acquisition of one company by another company or merging several such entities in order to give rise to a new legal person.
Merger by absorption involves the transfer of rights and obligations from the absorbed legal entity to the patrimony of the company that absorbs.
Merger through fusion has the effect of transferring the legal rights and obligations from the fused legal entities to the patrimony of the newly created company.
Therefore, the merger can only exist given that this process is attended by at least two legal entities. Also, a merger between different types of legal entities is not possible, for example between a legal entity of private law and that of public law or between a legal entity with patrimonial purpose and one with non-patrimonial purpose etc.
The division is a legal transaction through which:
▪ the entire patrimony of a legal person is divided between two or more existing legal persons or which are established through the division, in which case we are talking about a total division;
The patrimony thus submitted will be divided equally between the receiving companies, unless the act through which the division has been ordered did not set otherwise.
▪ the detachment of part of the patrimony of a legal entity which will continue to exist and the transfer of this part to one or more existing legal persons or which are established in this manner, in which case we talk about a partial division.
The decrease of the divided legal entity’s patrimony will be proportional to the transferred part in the situation where the fraction of the patrimony was transmitted to a single existing legal person or which was created in this way. However, if the detached fraction will be transferred to several legal entities, the distribution of the patrimony between the entity to which the division is made and the acquiring legal entities will be made the same way as in the case of the transfer to a single legal entity, whereas the division of patrimony between the acquiring legal entities will be done equally.
Legal persons who acquire the fraction of the divided patrimony shall be liable for the obligations regarding the assets which form the object of acquired or fully retained rights, as well as for other obligations of the divided entity proportional to the value of the retained rights acquired or established after subtracting the liabilities mentioned above.
The transformation of a legal person may be held in the cases determined by law, in case such a person ceases to exist at the same time as the foundation of another entity in its place.
The rights and obligations of the legal entity that ceased to exist will be transferred to the newly established legal entity’s patrimony, unless ordered otherwise by the act that appointed the transformation.
The transfer of rights and obligations of legal entities subject to registration in case of reorganization will be achieved, between the parties and against third parties, by registration and at the date of the operation.
Darie, Manea & associates has vast experience in commercial law, experience often confirmed by the successful work experience of its lawyers in this area of expertise. If you require more information regarding this process, please contact our legal firm anytime through one of our lawyers for specialized and professional legal advice.