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;
- The Ministry of Economy, Energy and Business Environment shall issue “emergency certificates” to operators whose activity has been affected by COVID-19;
- beneficiaries of EU funds affected by the emergency measures may decide – jointly with the management authorities – to suspend the relevant financing agreements, and
- 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:
- 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)
- 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);
- 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:
- cutting the monetary policy rate by 0.50%, from 2.5% to 2.0% starting from 23 March 2020
- 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.
- 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.