Establishing Branch in Romania

by Attorney-at-Law Ramona Cazacu

It is possible under Romanian Law to establish branches of an existing foreign company starting its business activities in Romania. The general term of a Romanian “branch” refers to the location where companies create secondary quarters, locations where the company sets up entities which are either only empowered to administer the Romanian company’s business or only empowered to represent.

For better understanding these exterior entities, please find below some of the basic characteristics of each one:

Characteristics of a Sub-Company in Romania

- per the Law No. 105/1992, the Romanian sub-company established overseas has a distinct nationality from the mother-company;
- the Romanian sub-company is conceived as an entity with legal personality in the sense that it is constituted by in the same manner as a company and depends economically on the mother-company;
- The sub-company owns its own patrimony, distinct in the entire patrimony of the company and is able to sign contracts with third parties in its own name, also owning one or more bank accounts;
- The sub-company can be legally viewed as an entity organized under the form of a separate company having its own legal personality per the stipulations of Law No. 31/1990 and Law 26/1990.

Characteristics of a Branch in Romania

Similar to the sub-company, the branch constitutes a way of expanding the mother-company for national or international objectives.
 

- Unlike the sub-company, the Romanian branch does not become a distinct legal entity, being part of the structure of the mother-company;

- Referring to the branch, Law No. 105/1992 stipulates that their activity statute is under the rule of the national law of the
 

foreign company which has established the branch in Romania, identifiable by the social headquarters of the latter.
Taking into account this information it must be noted that a Romanian branch must be viewed from a legal point of view as a simple “representative”, territorial exogenous from the mother-company.

The differences between a branch and a sub-company are:
- the branch has no distinct existence, nor its own patrimony different to the mother-company while the sub-company possesses all these characteristics;
- assets belonging to the branch belong to the mother-company;
- the branch can enter contractual relationships with third parties, either in the name of the mother-company or in their own name, but on the expense of the founder thus a branch cannot have neither creditors nor debtors;

Characteristics of a Romanian Representative Office – “Reprezentanta”

This external structure is substantially different from both a Romanian branch and a Romanian sub-company as a Representative Office in Romania cannot be an enterprise producing goods or any type of service provider;

A Representative Office in Romania is simply an intermediary between the mother-company and its current contractual partners thus exercising either mandatary or commission functions. As a mandatary it is able to enter contractual relationships with third parties in behalf of the mother-company. In this way the Representative Office lacks the legal personality belonging to the mother-company.
There is also a different registration procedure of a Representative Office in Romania and it is done through The Ministry of Economy and Commerce.

E&C Law Firm is able to provide help when establishing any kind of branches in Romania and provide a complete list of requirements for this purpose.