Verification of a Romanian Company

There are quite a few reasons why a foreign investor would find necessary it necessary to conduct verification of a Romanian company; the most important being:

• The imminent entering into a contractual relationship with the respective company. In this case the foreign party would prefer to gain insight into some background information about the respective Romanian party;
• A pre-verification before purchasing shares or entering into any kind of joint venture with the Romanian company. This could include a wide array of verifications, legal as well as financial.
• A verification of a certain shareholder to better understand the value of shares the person (or other legal entity) holds. This might be required for different kinds of procedures abroad (such as personal background checks).

In the opinion of our law firm the verifications of a Romanian company will have to be treated separately as there are 2 different types of verifications:

1) The regular verification of a company. This includes:
– obtaining a trade register extract (company information is public in Romania) which can show the following information: company name, address, date of registration, shareholders and directors as well as some additional information;
– obtaining the last official copy of the company’s Articles of Association (stamped by the Romanian Trade Register);
– obtaining the last filed accounts of the company, filed with tax authorities and which can be obtained through the Romanian Ministry of Finance. These records show the income of the company, profit etc. There is a very important note here: the last filed accounts can only be provided if the respective Romanian company has actually filed any accounts. Although these filings are compulsory, many companies do not file on time. Even so this is a good indication on the good standing of the respective company.

An important matter to be taken into consideration when performing a verification of a Romanian company or its shareholders:

• Romania does not have a database to verify the assets and/or real estate properties of a person or company. One can find out the owner of a certain property for instance however in the order for this to happen he will have to have the full details of the property in question. A simple search on the properties owned by a company is not possible.

2) A complete due diligence procedure performed on the Romanian company. This is usually done before a merger/acquisition, purchase of shares etc. and can include:

• All the verifications performed at par. 1 above;
• Legal due diligence. This can apply to: all past contracts, business relationships, and payments related to the contracts with business partners, investors etc. as well as real estate purchases for instance. This verification can be rather straightforward or can take an important amount of time depending on the volume of work: number of contracts signed, transactions, and general company activity.
• Financial verification (audit). This implies verification of all the financial transactions, good standing with the Romanian tax authorities, general financial situation, lawful issuance of all financial documents (invoices, payments etc.). Basically this kind of verification insures that a respective Romanian company has a all accounting and financial records and tax payments up-to-date and per the legislation in effect.

MHC Law Firm offers full assistance for all legal verification and due diligence procedures. As for financial audit and related verifications our law firm would be able to recommend our collaboration accounting specialists. Please contact us for any information in this regard.