Stabilisation and restructuring law in Romania

1. Which financial (not tax or labour) short-term compensation schemes for immediate losses due to social distancing measures have been implemented? For which industries/sizes of business?

On 16 March 2020, the Romanian President issued a decree declaring a state of emergency on the Romanian territory for the next 30 days to limit the spread of COVID-19 and manage its effects (the “Presidential Decree”). The Presidential Decree sets out certain emergency measures that became immediately applicable, as well as certain gradual/progressive measures, which may be taken in the future, depending on the developments.  From an economic standpoint, the measures that can be taken are, inter alia, the following: the government may adopt measures to support operators in the most affected fields;

  1. The Ministry of Economy, Energy and Business Environment shall issue “emergency certificates” to operators whose activity has been affected by COVID-19;
  2. beneficiaries of EU funds affected by the emergency measures may decide – jointly with the management authorities – to suspend the relevant financing agreements, and
  3. authorisations/licenses/other documents issued by public authorities which expire during the state of emergency shall continue to be valid for such period.

Considering the Presidential Decree, the Romanian government has implemented several economic and financial measures in order to help Romanian legal persons and natural persons in the context of the COVID-19 pandemic.  The main set of measures for legal persons are provided by the Government Emergency Ordinance No. 29/2020 on certain economic and fiscal-budgetary measures (the "GEO No. 29/2020"), which entered into force on 21 March 2020.  GEO No. 29/2020 focuses on small and medium-sized enterprises (SMEs) as it is especially the SMEs that need to be protected in this context because, according to the ordinance’s wording, SMEs could be confronted with a sudden lack of liquidity or even with a total absence of liquidity.  

According to Art. I of GEO No. 29/2020, several provisions of the Emergency Government Ordinance No. 110/2017 on the Programme for supporting small and medium sizes companies – IMM Invest Romania have been amended and now provide, inter alia, that: 

  1. The Romanian Ministry of Public Finance (the “MPF”) will provide guarantees covering 80% of the value of a financing (excluding interest, fees and banking fees) granted to SMEs for investment or working capital purposes, when the maximum value of the working capital financing agreement is RON 5m (around EUR 1m), and RON 10m (around EUR 2m) for investment loans, the maximum cumulated amount that could be covered for an SME being RON 10m (compared to only 50% of coverage)
  2. The MPF will provide guarantees covering 90% of the financings (excluding interest, fees and banking fees) granted to SMEs for working capital purposes, when the maximum value of the financing agreement is RON 500,000 (around EUR 100,000) for micro-enterprises, respectively RON 1m (around EUR 200,000) for small enterprises (compared to 50% granted for SMEs, in general, for financings granted either for working capital – maximum amount RON 5m, or for investments – maximum amount RON 10m);
  3. The MPF will also subsidise 100% of the interest for the loans to be guaranteed, both for micro, SMEs and those under state aid or a de minimis scheme associated with this programmeThe maximum duration of the financings mentioned above is 120 months for investment loans, and 36 months for working-capital loans. The credit lines may be extended by a maximum of 36 months, following which, in the last year of extension, they will be reimbursed.

Pursuant to Art. X para. (1) of GEO No. 29/2020, during the state of emergency, SMEs that have interrupted their activity, either fully or partially, based on the decisions issued by the Romanian competent public authorities, pursuant to the law, during the state of emergency, and that have the certificate of state of emergency issued by the Ministry of Economy, Energy and Business Sector, shall benefit from a deferral of payment for utilities services – electricity, natural gas, water, phone services and internet services, as well as from a deferral of payment with respect to the lease related to the immovable asset used as registered office or secondary office.

In addition, according to para. (2), with respect to the ongoing contracts concluded by SMEs, other than those mentioned under para. (1), force majeure could be invoked in respect of such ongoing contracts, but only after having tried to renegotiate such contracts, proven by way of documents circulated between the parties through any means, including electronic means, in order to adapt its clauses by taking into account the exceptional conditions generated by the state of emergency.      

Para. (3) of Art. X of GEO No. 29/2020 defines force majeure in accordance with the provisions of the Romanian Civil Code as being the situation that is unpredictable, absolutely invincible and inevitable, resulting from an action of the authorities in order to apply the measures necessary for the prevention and fighting against the pandemics determined by COVID-19, which has affected the activity of the SMEs, such affectation being attested by the certificate of state of emergency. 

Furthermore, in accordance with Art. X para. (4) of GEO No. 29/2020, SMEs shall not have to pay default interest rates during the state of emergency with respect to the obligations pertaining to agreements concluded with public authorities. 

In addition, the Board of the National Bank of Romania convened on 20 March 2020 for an emergency meeting and adopted a package of measures aimed at mitigating the impact of the situation generated by the coronavirus outbreak on households and Romanian companies.  Some of the measures include:

  1. cutting the monetary policy rate by 0.50%, from 2.5% to 2.0% starting from 23 March 2020
  2. starting from 23 March 2020, the deposit facility rate is kept at 1.50%, while the lending (Lombard) facility rate is lowered to 2.50% from 3.50%. As a result of measures (i) and (ii), the interest rates on loans (ROBOR) are expected to witness a significant downward adjustment.
  3. providing liquidity to credit institutions via repo transactions (repurchase transactions in government securities) with a view to ensuring the smooth functioning of money market and of other financial market segments.

There are talks in respect to a possible law on moratorium for ongoing loan agreements, but there is nothing official yet.

2. Which medium-to long-term stabilisation measures are in place in your jurisdiction?

Please see above.  The Romanian government promised to continue consultations with the business sector in order to take any further necessary measures for those categories, enterprises and professional activities that have fully or partially interrupted their activity due to the measures taken in the context of the state of emergency. 

3. Which measures (Guarantees, Loans, Equity Injections, etc.) are available?

As mentioned above, at this stage, the measures taken by the government concern guarantees and deferral of payments for ongoing contracts for utilities services.  The National Bank of Romania has also taken measures aiming to lower the interest rate on loans. Furthermore, as already mentioned, there are talks in respect of a possible law on moratorium for ongoing loan agreements.  It is likely that the Romanian government will take other relevant economic measures in the near future. 

4. Have these mid- to long-term stabilisation measures already been notified with EU or other antitrust bodies?

Other.

Comments

The European Commission has yet to approve the measures provided by Art. I of GEO No. 29/2020.

5. Which prerequisites are necessary to qualify for a programme?

Please see above. 

6. Are there any major reasons that may inhibit an applicant from successfully applying for a stabilisation measure?

Other.

Comments

The MPF guarantees and the deferral of payments described above apply only to SMEs.  By interpreting the definitions of SMEs, as provided in the Romanian legislation referred to in GEO No. 29/2020, it would seem that the measures provided by GEO No. 29/2020 apply to the legal entities that are regulated by the Romanian Law No. 31/1990 on companies (the “Companies Law”).   

Foreign companies’ subsidiaries, which are registered in Romania, are considered Romanian law legal entities and are fully governed by the provisions of the Companies Law.  Consequently, the measures provided by GEO No. 29/2020 shall apply to them.

7. In an international context, are subsidiaries and branches of foreign parent/holding companies eligible to apply? For EU-States: Also for non-EU-third countries?

Other.

Comments

As mentioned above, the measures provided by GEO No. 29/2020 apply to the legal entities that are regulated by the Companies Law.  Foreign companies’ subsidiaries, which are registered in Romania, are considered Romanian law legal entities and are fully governed by the provisions of the Companies Law.  Consequently, the measures provided by GEO No. 29/2020 shall apply to them.

8. Do your country’s stabilisation schemes foresee restrictions on use of cash/other restrictions?

No.

Comments

Not at this stage.  Nevertheless, any pre-existing provisions of Romanian law regulating any such restrictions should be kept in mind. 

9. How are insolvency application deadlines handled in times of Corona?

To date, the general Romanian insolvency law rules (including deadlines question) have not been amended.  However, measures could be taken by the Romanian Government in this respect in the future.

Pursuant to the applicable Romanian insolvency procedures, any entitled creditor or debtor could register with the competent Romanian court a request for opening the insolvency procedure of a company.  
Nevertheless, during the state of significant emergency, judicial activity is suspended except for urgent cases, with the list of such cases being provided by the leading bodies of each Romanian court.  When determining if a certain case is urgent, the courts will take into account whether the suspension could cause the claimant a sizable and imminent loss, which could not be compensated or for which compensation would be difficult to get in the future.  At this point in time it is hard to determine whether the Romanian courts would consider that postponing the opening of insolvency procedures could be deemed as creating irreversible losses.

Finally, in accordance to the Presidential Decree, statutes of limitations and peremptive terms shall not start to run (and if they have started to run, shall be suspended) for the entire duration of the state of emergency.

10. How far have local insolvency/restructuring laws been changed/eased which might have an impact on international businesses?

At this point in time, the general Romanian insolvency law rules have not been amended.  However, measures could be taken by the Romanian Government in this respect in the future.

No.

Comments

At present, the general Romanian insolvency law rules have not been amended.  However, measures could be taken by the Romanian Government in this respect in the future.

At this point in time, the general Romanian insolvency law rules have not been amended.  However, measures could be taken by the Romanian Government in this respect in the future.

Anna Radnev
Ana Radnev
Partner
Bucharest