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What does the report contract imply and what’s the law governing its effects in Romania?
The report contract has been governed in the past by the provisions of the Commercial Code, while presently finding itself under the provisions of art. 1772 – 1776 of the New Civil Code. According to these provisions, the report agreement is the contract through which a person, usually a banker, buys from the reported, with immediate payment, credit instruments and securities circulating in trade, obligating himself to resell to the reported credit instruments or securities of the same species, at a certain date, for a determined price. Investors who need particular assistance with this step can rely on our Romanian lawyers.
More specifically, through the report agreement, the owner of debt securities (the reported) sells these titles for the money, and will afterwords buy them back after a certain period of time. As we can see, the contract involves a double purchase, namely the purchase that takes place on the spot, when concluding the contract, and the purchase that will occur in the future, at the date stipulated in the contract. The team at our law firm in Romania can assist during both of these purchases.
How is the report contract concluded? Can your team of lawyers in Romania help me?
According to the New Civil Code, the report contract in concluded by the remittance of the securities or by conducting the necessary formalities for their transmission in case they are nominative securities. Our team can help with more information on how this contract is drawn up.
What are the rights and obligations that arise from the report contract?
Since it is a mutually binding contract, the report agreement gives rise to effects for both parties.
Thus, the person buying the securities has the obligation to exercise the option on the account of the reported during the report contract, where the securities provide fir such rights. Also, the reported must make available for the person buying the securities the necessary funds, 3 days prior to the due date. If the reported doesn’t fulfill this obligation, the person buying the securities must sell the option rights on behalf of the reported.
Since it is possible that during the time of the holding of securities, they generate the execution of certain payments on the securities, the reported has the obligation to provide the person who bought the securities the necessary amounts for making the payments on the securities, if their execution is due during the report contract, with at least 3 days before the payments are due. In case of failure of fulfilling this obligation, the buyer can proceed with the forced liquidation of the contract.
Our Romanian lawyers can provide more details on the rights and obligations.
What happens to the accessory rights attached to the securities?
According to the Civil Code, the accesory rights conferred by the securities during the report contract, namely dividends or interest which became due during the execution of the report contract, will belong to the buyer. Since according to the report contract, the buyer obtains ownership of the securities, he also obtains the right to collect the fruits thereof, i.e. interest, dividends or other accesory rights during the report contract. The team at our Romanian law firm can ptovide more details on these rights.
How does the report contract liquidation take place?
Regarding the term, art. 1776 par. (1) of the New Civil Code provides that the liquidation of the report is done inside the second business day following the due date.
In case that at the due date of the report, the parties liquidate the differences, make payments and renew the report in respect of securities that are different qualitatively, by their species or are set for a different price, then it is considered that the parties have signed a new contract.
The team of lawyers in Romania at the Darie, Manea & Associates law firm has extensive experience in commercial contracts. Do not hesitate to contact one of our attorneys for more information and specialized legal advice regarding the contract of report in Romania and its effects.