Security interest law in Romania

Guarantees

In Romania, there are two types of independent guarantees: (1) Letter of Guarantee – by which the Issuer is under the obligation to pay a certain amount of money, and (2) Letter of Comfort – by which the Issuer is under the obligation to perform a certain action.

1. Can an intercompany guarantee be granted?

1.1 Upstream?

Yes, subject to 3 below.

1.2 Downstream?

Yes, subject to 3 below.

1.3 Lateral?

Yes, subject to 3 below.

2. Can a guarantee be given under foreign law (e.g. English law)?

Yes, the parties can choose the law applicable to an agreement.

3. Any special arrangements (e.g. to deal with transfer pricing/corporate benefit)?

Commercial benefit. 
Financial Assistance. 
Transfer pricing (based on an “arm’s length principle”).

Security

4. Can a security interest be granted in the following type of asset?

4.1 Real property

Yes

4.2 Shares (privately held)

Yes

4.3 Shares (marketable securities)

Yes

4.4 Receivables

Yes

4.5 Bank account

Yes

4.6 IP/Trademark

Yes

4.7 Equipment/Plant/Machinery

Yes

4.8 Inventory

Yes, but individualization of the inventory might be problematic. Depending on the type of asset, restrictions might be applicable.

4.9 Insurance

Yes

4.10 Rights under a contract

Market practice is not decided on this type of instrument (certain enforcement issues might arise) and therefore we prefer to use, where possible, an assignment of rights under English law.

5. Can security interests be granted to a foreign lender?

Yes

6. Can multiple security interests be granted over the same asset?

Yes, but the issue of rank would arise.

7. Can a security interest be granted to secure liabilities of a holding company, a subsidiary or any other affiliate?

Yes, subject to e.g. financial assistance and commercial benefit (described in 3 above).

Perfection

8. In order to be enforceable against third parties, must a security interest be?

8.1 Notarised? 

No (except real estate mortgages).

8.2 Registered?

Yes (all mortgage agreements).

8.3 Other?

Notice to the debtor (mortgage over receivables). 
Three-party agreement / notice and acknowledgment between mortgagee, mortgagor and account bank regarding control of the bank accounts (mortgage over bank accounts).

9. Does registration in most cases protect the secured creditor against the debtor’s subsequent dealings with the secured asset?

In principle, the mortgage right will continue to exist with regard to the transferred asset regardless of the owner. (Exceptions)

10. Is there any stamp or similar tax or duty payable on the security document?

No, except (i) in the case of real estate mortgages (where notary fees and land book taxes are payable upon execution); and (ii) registration taxes.

Enforcement

11. For a security interest to be legally enforceable which items must be filed as part of the registration or notarisation process?

11.1 Entire security agreement?

No (except real estate mortgages)

11.2 Names of pledgor and pledgee?

Yes

11.3 Description of secured asset in general terms?

Yes, subject to 11.4 below

11.4 Description of each individual secured asset?

Yes in general.

11.5 Documents concerning ownership of secured asset?

Only in case of real estate mortgages (notary verifies ownership title)

11.6 Documents concerning debt in respect of which the asset is being secured?

No

12. Can a right to enforce security arise:

12.1 When the secured debt is unpaid and due?

Yes, but the amount must be certain or ascertainable.

12.2 When there is some other breach of the pledge/security agreement?

Yes, if it is provided in the pledge/security agreement as an enforcement event.

12.3 When the debtor becomes insolvent?

Insolvency proceedings stay all enforcement proceedings. (Exceptions)

13. Can the creditor enforce its security interest by taking possession of the asset and selling it without court assistance?

No court ruling is required to take possession of or to appropriate the asset, but it is required to sell the asset.

14. Is an instrument for direct enforcement necessary/available/market practice?

No separate instrument is needed, credit facilities and mortgages are directly enforceable.

15. Are powers of attorney to the secured party used to facilitate a sale of secured assets in an enforcement situation?

Sometimes, but efficacy is doubtful because any power of attorney can be revoked by the person who granted it at any time and powers of attorney granted for an unspecified term are subject to a three-year statutory expiry period.

16. If a sale is permitted without court assistance does it have to be made by public auction?

A sale of movable assets may be made either by public auction or directly, on commercially reasonable terms. 
A sale is not permitted without court assistance in the case of real estate assets.

17. Can a transfer of all or part of the debt be made without affecting the security over the assets?

Yes (assignment of receivables/agreement). The creditor assigns its secured liabilities and the security follows the debt. 
No (a novation). This represents a transformation of the initial obligation. The security package will not be valid with regards to the new obligation (but the parties may expressly agree otherwise in the original debt instrument).

18. Is there anything else of which a lender should be aware as unusual or particularly difficult?

For multi-lender facilities, it is not advisable to take security for a group of lenders based on a “parallel debt” or equivalent concepts, and each bank and hedge provider must be a party to each security document. 
When taking security over future movable assets, the secured parties must take care to update the security registrations as soon as the future assets are acquired in order to keep their priority rank over such assets (unless registered as a universality).