by Vlad Cuc
It is possible under the Romanian Law to establish branches (or subsidiaries) of an existing foreign company starting its business activities in Romania. A branch office or a subsidiary in Romania defines a place of business where a company establishes its secondary quarters. Our team of Romanian lawyers can provide an extensive presentation on the characteristics of these two structures and can also assist investors in registering a branch office or a subsidiary in Romania.
The difference between the two types of entities resides in the rights granted by the parent company to these structures; thus, a branch office has limited powers, being a sub-division of the parent company, while the subsidiary is a separate legal entity, with its set of management rights. For a better understanding of these types of entities, please find below some of the basic characteristics of each one.
According to the provisions of the Law No. 105/1992, a sub-division of a Romanian legal entity that is registered in a foreign country has a different nationality from the one of the parent company located in Romania. The Romanian sub-company is conceived as an entity with legal personality in the sense that it is constituted in the same manner as a company and depends economically on the mother-company.
The sub-company owns its patrimony, distinct to 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, which can be detailed by our team of lawyers in Romania.
The branch office represents another way of expanding a business activity; this can be done at a national level, but it can also be set up on foreign markets. 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 offices in Romania, Law No. 105/1992 stipulates that their activity statute is under the rule of the national law of the parent company (which can be identified by its social headquarter). 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:
This external structure is substantially different from both the Romanian branch and the sub-company, as a representative office in Romania cannot be an enterprise producing goods or any type of service provider. Our law firm in Romania can provide more information on the main legal requirements necessary for starting a local representative office.
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 on 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. We remind our clients that Enescu & Cuc is a law firm with international affiliates. In this respect, we are happy to present our affiliates in Singapore, company formation specialists DM Advisory.