Romania: Cross-Border Conversions: A Realistic Way To Expand Companies' Restructuring Possibilities?


In recent years, companies have consistently attempted to extend the scope of their structuring possibilities by trying to cross the borders into other member states for various reasons ranging from a more flexible legal framework to a better market environment and investment climate. However, the possibilities for cross-border restructuring measures were rather limited, as companies in the EU and EEA had essentially three possibilities to effect cross-border transformations. One option available to all member states was and still is the cross-border merger, which however presents the disadvantage that the absorbed company is dissolved and the transfer of assets into a different member state may generally trigger real estate transfer tax. Depending on the theory embraced by the member states (the incorporation theory or the real seat theory), a further possibility for those states which have adopted the incorporation state doctrine consisted in the relocation of companies administrative seats in a different member state without having to wind-up the company in the home member state, while the company continued to be governed by the law of the original country. Last but not least, a company could (and still can) be converted into a Societas Europea and have its registered office transferred within the EU, since a Societas Europea is by law allowed to relocate its seat while preserving its commercial and legal entity. This has nevertheless proved to be rather cumbersome and hence not often used in practice, as it requires several stages of transformations and, among other measures, alignment to higher capital requirements.

Hence, until recently, moving a company's registered office to another member state would have implied the winding-up of the respective company in one country and its re-incorporation in the other member state, as no EU rules enabling corporations to transfer their registered seat into another member state while preserving the companies' legal personality existed.

With its decision in the "VALE" case (and previously in "Cartesio"), the European Court of Justice (ECJ) has recognised cross-border changes of form which simultaneously preserve a company's identity, hence removing further barriers against transnational mobility of companies within the EU, premised on the freedom of establishment. As such, according to the ECJ judgement in the "VALE" case, the transfer of a company's registered seat into another member state through simultaneous conversion into a company governed by the national law of the host member state must be allowed to the extent the host member state recognises a national conversion. In other words, the aim of the "VALE" decision was to align the effects of cross-border conversion to those of changes of form performed according to the national rules of the member states, having as a consequence that the legal relations of the company as such (ownership of assets by the company, contractual relationship with third parties) remain unaffected.

Romanian approach

Romanian company law has traditionally been reluctant to advancing the international mobility of companies within EU, instead embracing -- alongside countries such as Germany, France, Belgium, and Italy -- the so-called real seat doctrine, which determines the applicable law by reference to the country in which the company has its real seat (centre of its administration). Unlike the incorporation theory dominant in the UK, the Netherlands, Switzerland, Liechtenstein and Scandinavia, the real seat theory was seen by ECJ in its Überseering decision of 2002 as incompatible with the principle of freedom of establishment, as it denied legal capacity to foreign corporations that had moved their "real seat" there. Corporate laws of the countries traditionally following the real seat theory, including Romania, did not have reincorporation provisions and even generally interpreted such decisions by shareholders as resolutions to liquidate.

In line with the above, the Romanian courts have ruled on the topic of transfer of registered seat outside Romania by reaffirming a member state's right to impose certain restrictions on a company wishing to transfer its administrative seat into a different member state with the simultaneous preservation of the national legislation. In other words, the country's courts have upheld a member state's right to deny a company regulated by its national law the right to preserve its nationality if it intends to reorganise itself in a different member state.

On the other hand, the transfer into Romania of the registered seat of a company organised and functioning under the rules of a different member state, with the corresponding preservation of the company's legal personality, has been unanimously settled by the courts to the effect of rejecting the registration with the Romanian commercial registers of the transfer of seat, in the absence of documents evidencing the winding-up of the respective company in the member state of origin. In their rationale, the courts have argued that the community law did not allow, at that stage, to give up to the jurisdiction of one member state in order to gain the nationality of a different member state, without losing its legal personality in the member state of origin (this, without considering the cross-border mergers and the incorporation of Societas Europea). The courts' further arguments in overruling the registration of the transfer of seat with the Romanian commercial register by preserving legal capacity were that, in the absence of a convention for the mutual recognition of companies and the preservation of their legal capacity in case of transfer of seat from one member state to another, the community law recognised only a secondary right of establishment within the EU, without restrictions or discriminations, by reference to the companies established according to the law of the member state where they plan to register their subsidiaries.

Following the ECJ's judgement in the "VALE" case, a first indication of the approach taken under Romanian law was given by the Tribunal of Brasov. The Tribunal ultimately rejected the registration of the general shareholders meeting resolution to transfer the registered seat of a Romanian company from Brasov into Gibraltar, without losing the company's legal capacity, due to insufficient proof evidencing the shareholders' will to effect a corporate transformation. However, the Tribunal has among other things also acknowledged that "the transfer of the registered seat of a company from one member state into another member state, with a simultaneous change in the national legislation applicable to the respective company, is possible, even in the absence of a provision in the national law, if the laws of the host member state allow such a transformation, and without the member state of origin having the ability to impose the winding up of the respective company".

Practical challenges

Although the Romanian court's acknowledgement of a primary community right of establishment, namely a company's right to freely relocate its activities from one member state to another and continue its business in a legal form recognised in the host member state without this affecting its existence and legal relations, is salutary, the reincorporation into another law is still paved with difficulties, as no uniform procedural provisions for the effective implementation of a cross-border conversion were laid down in the ECJ decision.

In the "VALE" decision, the ECJ has held that a host member state may also apply its national laws governing the conversion of companies to cross-border conversions. Therefore, until the enactment of a uniform European regulation under the form of a European Directive on cross-border conversions, practical issues remain unsolved as to how two legal systems with non-harmonised legal provisions have to be taken into consideration in implementing a cross-border transformation.

Also, questions as how to ensure an adequate protection of a company's stakeholders, not only existing shareholders, but also minority shareholders, creditors, and employees who cannot directly influence the choice of law decision, have currently received no answer.

Until then, in practice, although not in numerous cases, cross-border mergers seem to have become the favourite practical vehicle for a transfer of seat within the EU, mostly due a harmonised legislation framework across the member states.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions