Business Law PDF

BUSINESS LAW Chapter I Brief introductive considerations. Definition. Object. Brief history 1.1. In order to position ourselves in the field of a specialized subject addressed to persons with as...

BUSINESS LAW Chapter I Brief introductive considerations. Definition. Object. Brief history 1.1. In order to position ourselves in the field of a specialized subject addressed to persons with aspirations in becoming trade professionals – holders of companies performing activities directed towards making a profit, therefore a field of present and then, at same time, of future expectations, we think we ought to “position” the subject in the curriculum of the law subjects, generally speaking and, then, define it, in order to allow ourselves understand it beyond the profane, easy accessible significance of the collocation. Generally, the notion of “law” may receive a multitude of senses. Taking only those with juridical significance, we may distinguish amongst: a) The law, as an ensemble of regulations, rules, juridical norms applicable to the population of a certain state. From this point of view, we may differentiate the Romanian law from the law of other states, French, German, etc. From another perspective, this ensemble of regulations constitutes the objective, positive law, so the law seen as the entirety of juridical norms applicable within the territorial limits of a state; b) Then, law may be understood as an aptitude (meaning possibility) which the objective law (i.e. the ensemble of juridical norms applicable on the territory of a state) recognizes to a person to adopt a certain conduct or, to put it in another way, the possibility to adopt a certain attitude, to commit a certain act, to claim from another person the acknowledgement of a right, the performance of a certain obligation on the basis of a law, of a certain regulation. For example, the right of every citizen to work, of every individual to have a name, the right to ownership, etc, are, each of them, subjective rights, reported to the individual as a subject of law. c) Finally, when we say „law” we may have in view the science of law as a branch of education or scientific research having as its object exactly the study of the ensemble of regulations, therefore both of the objective and subjective rights. From this point of view we can make the distinction between the general science of law and other branches of the 1  human knowledge, or, in a more limited variant, between the various branches of law (civil, penal, constitutional, etc) 1.2. Seen as an ensemble of juridical norms which regulate the social relationships, traditionally, law is divided into two branches; public and private law. This is not the only classification but it is the one considered fundamental, basic. The distinction between the two branches is given by the nature of the social relationships between the subjects participating in those relationships. Thus; a) Subordination relationships are specific to the Public law1, between the participants, relationships between the governors and the governed or, to put it differently, between the state and the private, within which it is the state that imposes the rules, governs and the private is the one obliged to observe them; branches like constitutional law, financial law, international public law, penal law, etc, belong to this great division. b) The Private Law2 is characterized by the position of equality between the participants; it studies the social relationships created between private individuals or entities, aiming therefore at the private juridical order. Civil law is representative for this category as it includes the most important share of the private law regulations. The assertion is supplementary and substantially argued by the adoption of the present Civil Code which came into force on the 1st of October 2011 and which becomes the fundamental law, the common law in the matter of the relations of private law, applicable both to private persons as individuals and to professionals exploiting companies in various fields of interest and, therefore, belonging also to other branches of the private law. The new regulation revolutionizes by its monist vision in the matter of private law relations, consisting in the claim that it offers a unique and regulatory basis to all the categories of relations between the private persons, civilian and professionals altogether. Obviously, though it is the fundamental law for this branch of the law, it is not the only one. It is completed by special regulations, applicable to certain fields and/or professionals and who, in their turn, define sub – branches of the private law, like, business law, labor law, family law. 1 Mircea Muresan, Civil Law, The General Part, Cordial SRL Publishing, Cluj-Napoca, 1992, pag.7; Ioan Schiau, Course of commercial law, Rosetti Publishing, 2004, pag.5; 2 Idem 2 Hence, branch of the private law, business law has its own identity, its own autonomy. In relationship with it, civil law remains the common law whose rules complete the special regulations of the business law. As compared to it, though, business law has its own special dynamics, superior to any other sub- branch of the private law and justified by the nature, complexity and specificity of the professionals’ activity and of the field they exploit, i.e. the profit oriented economic one. 1.3. Business law definition; In order to define the subject it becomes a priority to define the business notion; in its most comprising sense, it includes any economic activity, therefore, subordinated to a profitable aim and, subsequently, subjected to risk, assumed by each of the participants as a chance to win or possibility to lose3. The evolution and complexity acquired by the economic activity in an epoch acutely marked by the globalization tendency assign to the notion of business, and that happens in a natural manner, new, supplementary valences as compared to the traditional variant of what we used to identify, under the rigors of the old Commercial Code (valid between 1887 – 2011) as “commercial activity”. The issues which are specific to the business field are complex and diverse, with incidence in the field of taxation, labor, competition, consumers’ protection, transport, banking, industrial copyright, etc. it is the argument for which, amongst the sciences of law, business law is qualified as a multidisciplinary subject composed of all the juridical norms which regulate the status and the legal regimen applicable to professionals specialized in the exploitation of a company, to the sense of activities organized with a view to the production, administration or alienation of goods or provision of services in the pursuit of lucrative, profitable aims. 1.4. Business law object of study The definition of the discipline offers the landmarks to determine the object of business law as: legal norms applicable to professionals (traders) which exploit organized companies in order to develop economic activities (production, trade, services provision) understood under their 3 See Gheorghe Piperea, Introduction to professional contracts law, C.H.Beck Publishers, Bucharest, 2011, pag.8 and the following 3 complex, modern sense, that of business. The course duration though, limited to a semester, will not allow us an exhaustive approach but, quite on the contrary, imposes on us a rigorous selection and synthesis of the analyzed entities. A landmark in such an approach becomes the utility of the information reported to the professional profile of the future graduates 1.5. Brief history Before becoming a discipline of study or a distinct branch of law, the analyzed teaching line may be identified as segment of the life of the pragmatic individual well oriented towards activities bringing benefits, profits. Analyzed from the historic perspective, until they became profitable, those activities responded to the individual’s existence needs. Thus: 1.5.1 During ancient times; In order to make ends meet, people started to exchange between them the products they had, achieved either through their work or obtained from the environment. Therefore, the exchange, in its primitive variant called barter, was the result of the awareness of the idea of property, of the right to dispose freely of certain goods. Later, as people needs increased and the relationship between them developed, became more intense, markets appeared as meeting places organized periodically with a view to host the exchange of products. It is the period in the history of mankind when we cannot speak yet about the need for certain regulations of a commercial matter, first of all due to the importance of the agricultural and pastoral component of life. The need for certain regulations of the matter appeared by and by, as commerce developed. Significant contributions to that sense (the development of commerce) brought the Phoenicians, the Egyptians and the Greeks, the last being the ones who established the first rules applicable to the commercial activity, especially to the maritime one. During the period of glory of the Roman Empire, to which belong important regulations of civilian nature, commerce did not enjoy much success, the main source of earnings being agriculture and the wars led for territorial expansion. Moreover, the Romans considered the commercial activity as degrading, adequate only for slaves and for the people they subjected. Therefore, they considered that their regulations of civil matters were sufficient for the field of commerce 4 1.5.2. During the Middle Age; The fall of the Roman Empire resulted in the disintegration of the political power as well as in dismemberment of the unitary law system. The Italian citadel states appeared (Milan, Bologna, Genoa, Florence, Pisa) and along with them, the traders’ interests to organize themselves in corporations in order to represent their own interests. The corporation, including traders and craftsmen belonging to a certain branch, started to configure their own rules which practically became the first norms applicable to commerce. In time, they were coagulated in the so-called “by-laws”, each one of them representing the ensemble of a corporation own regulations. 1.5.3. The Modern Epoch. Trade development imposed the replacement of those customary norms with others which started composing the written law. The first marking this passage was France, who, after written commercial rules of a lesser scope, in 1807 marked a historical reference moment by the adoption of the first Commercial Code during Napoleon’s period of full glory. At the same time, the moment has the merit to separate the regulations of the civil matter from the commercial ones. After the French Revolution, its influence in Europe had as an effect the spreading of the French Commercial Code to various European states which adopted it as their own law of the commercial matter. Amongst such states, the French Commercial Code was taken over in Italy, offering a modern conception on commerce. In 1887, it was the basis of the adoption of the Romanian Commercial Code which is still valid. In Germany, the Commercial Code was adopted in 1897, together with the Civil Code. Both came into force in 1900. 1.5.4. In Romania, at its beginnings and for a long period of time, commerce was governed by customary rules. The first written rules were not especially related to commerce, being, by consequent, applicable both to traders and non-traders. It is the case of the Code of Andronache Donici of 1814, of the Caragea Code of 1817, in Muntenia, of the Calimah Code of 1828, in Moldova. All precede the Commercial Code adopted in 1887, the first important work concerning the commercial matter and the first which is fully dedicated the regulation of the commercial field of activity to whose development it contributed4. As it was not matching the principles of the socialist planned economy, it ceased to be applied to domestic economic 4 The Code was structured in four parts called Books: Book I, On trade generally, Book II, On maritime Trade, Book III, On Bankruptcy, (presently abrogated), Book IV, On the exercise of commercial actions and on their duration. 5 relationships being considered obsolete for the full duration of the nationalized economy. Still, it was not formally abrogated, preserving a limited area of applicability to the foreign trade juridical relationships. It was only after 1989, at the same time with the passage to the market economy, that the Code came back offering the first regulation of a general character to the commercial activity characteristic to the market economy. Obviously, part of its dispositions did not match the historical moment, the evolution of the modern commercial life justifying new legislative approaches which will shape, in time, the legal framework necessary to the field of economics and, correlatively, the matter of study of the business law as a curricula subject5. It imposed the basic principles in the field of business but only until 2011 when it was abrogated by the New Civil Code which came into force on the 1st of October 2011. CHAPTER II Categories of professionals in the field of business 2.1. The traditional denomination of trader, established by the Commercial Code of 1887 (abrogated at present, as specified above) was assigned, under its incidence, to: a) natural persons who qualified as such by the activity they developed (trade acts, commercial operations done on their own responsibility and with the continuity of common occupation) and who are entered in the Trade Register; b) legal persons who, by being entered in the Trade Register acquired the quality of trader; trading companies, autonomous organizations, cooperative organizations, groups of economic interest. The common feature of all these traders, natural and legal persons equally, was represented by the commercial nature, economic hence speculative, profit oriented of their activity. Under the old regulation, this was the objective criterion which imposed the distinction between the commercial and non – commercial field, between the traders and non – traders and, as an effect, circumscribed the legal norms which were applicable to them from those incident to other domains or professional categories. 5 The regulations on commercial matters adopted after 1990 allow for the systematization by disciplines such as: legislation on trading companies (ex. Law no.31/1990 on trading companies), legislation on the Trade Register (ex. Law no.26/1990); legislation concerning insolvency (ex.Law no.85/2006), legislation on the capital market (ex. Law no.297/2004), banking legislation, insurance legislation (ex. Law no.136/1995),etc. They make what the juridical doctrine calls the „springs” of the business law 6 2.2. By the new Civil Code, as the duality commercial – civil was given up, under the pretext of the union of the basic rules applicable to the matter of the private law, generally, therefore implicitly to economic, business law, the traditional term of trader is integrated to the more comprising category of professionals. According to art.3, line 2 of the Code, professionals are all those who “exploit a company”, i.e. systematically exercise an organized activity “which consists of the production, administration or alienation of goods, or of the provision of services irrespective if such activity has a lucrative scope or not” (art.3, line 3 of the Code). The definition includes the professionals in general and, hence, those who perform in the field of business, traditionally called traders. Under such terms, it becomes necessary the establishment of the distinction elements, of delimitation between the various categories of professionals and, obviously, of those who activate in the field of business. The Code does not offer such landmarks in terminis. They are rather inferential than explicitly formulated. In the determination of the private law regulations applicable to a domain or other, the accent is laid on the subject, respectively on the quality of professional of the holder of such activity. But, what makes the difference between the various categories of professionals? In other words, what distinguishes the business professionals from other categories of professionals? The unique criterion will still have to stay the developed activity, respectively, in the case of the professionals traders, “the lucrative scope” of that activity, in the sense of economic activities (production, trade or service rendering done in order to make a profit). 2.3. The delimitation of the professionals in the field of business from other professional categories brings in an uncontested practical importance. Their distinct status is defined by: a) An ensemble of specific professional obligations, such as: a.1) the obligation of being entered in the Trade Register as of the start of the commercial activity as well as of the subsequent filing of the acts and facts they perform and for which the law imposes such a registration and, obviously, the registration of the activity cessation6: a.2) the obligation to keep certain commercial registers in which they will show the developed activity or, 6 The Trade Register is the collocation which defines the records register of all the categories of professionals who develop economic activities, of their documents for which the law imposes the performance of publicity and it is kept by a public entity called the National Office of teh Trade Register, organized under Law no.26/1990 related to the Trade Register 7  a.3) to observe the rules of an honest, loyal competition. b) the submission of their commercial activity to certain legal dispositions of their own, dispositions which are specific and distinct, ones from those applicable to non-professionals, others, related to those applicable to other categories of professionals; c) the insolvency procedure is usually and overwhelmingly applicable to traders; 2.4. Categories of professionals in the field of business (traders) Traditionally, professionals in the field of business are classified in two categories: a) natural persons; b) legal persons The present legislation, shaped as of 1989, preserves the distinction but harmonizes and connects it to the evolution of society and, within such a context, to the economic activities. Thus, art.1 of Law no.26/1990 concerning the Trade Register, enumerates the following categories of professionals who, being active in the field of economy, are bound to be entered in the Trade Register: a) licensed natural persons b) individual companies c) family companies d) trading companies e) national companies and national enterprises f) autonomous organizations g) groups of economic interest h) cooperative companies i) cooperative organizations j) European companies k) European cooperative companies l) European groups of economic interest with their main headquarters in Romania m) Other natural and legal persons provisioned by law 8 The enumeration offers a formal criterion for the distinction of professionals in the field of economy. The traders counted under lines ‘d’ – ‘l’ are part of the category of professionals (traders) legal persons. The most important part, in the said category is represented by the trading companies. For a correct determination of their own juridical regime, in what follows we will analyze the main categories, but, in such a discourse, we will allocate them the adequate space, directly proportional with the representativity and importance they own within the economic reality. 2.5. The natural person Unlike the trading company which is „born” a trader, to the sense that it is set up with the aim of performing the economic operations determined by its deed of estalishment, a natural person acquires this quality if it meets, cumulatively, the following terms: a) perfoms economic activities in a professional manner, with a character of continuity, on its own behalf and risk b) applies for and obtains the registration in the Trade Register and the license to run the activity. At present, the registration and licensing procedure is regulated by the Government Emergency Ordinance no.44 of 20087. According to the said bill, natural persons may apply for the authorization necessary to develop their economic activity as follows: a) individually and independently, as licensed natural persons, (identified with the abbreviation PFA (LNP)) b) as entrepreneurs holders of an individual company c) as members of a family enterprise Prior to the start of the activity, the natural person will apply for : a) the registration in the Trade Register b) the award of the authorization of functioning. In all the three cases mentioned above, the competence to solve his application comes to the office of the Trade Register by the court of law of the county where the natural person to be licensed declares his headquarters. 7 The Government Emergency Ordinance no.44 concerning the development of economic activities by licensed natural persons, individual companies and family companies was published by the Official Monitor, Part I, no.328 of 2008 April 25. 9  Economic activities may be run under one of the three shown forms the natural persons who: a) reached the age of 18, 16 years of age, respectively, in the case of the family company members; b) have not committed facts sanctioned by financial, customs laws, as well as laws related to financial-taxation discipline, of the nature of those entered in the fiscal record; c) have a professional headquarters declared in a building on which they have a title of use acquired under the terms of the law; d) declare on their own responsibility that they meet the terms of functioning provisioned by the legislation specific to health, veterinary, environment and labor protection domains. As effect of the solving the application for registration and authorization of functioning, the certificate of registration is released including the natural person’s unique registration code. This is the document which proves the its registration in the Trade Register, the authorization of functioning as well as the registration by the competent tax authority. To put it differently, it is the document which confers lawfulness to the commerce done by a natural person. 2.5.1. Legal regime of licensed natural persons (PFA=LNP); a) Such a person has the right to cooperate with other natural persons licensed as PFA, with entrepreneurs holding an individual enterprise, with representatives of a family company, with other natural or legal persons in order to fulfill the scope of the activity for which the licenmse was issued; b) may hire third persons on the basis of labor contract for the development of the activity for which it was authorized ; c) It may cumulate the quality of licensed natural person with that of employee of a third person irrespective of the fact that the activity is run in the same field or in a distinct one, but it cannot cumulate this quality with that of an entrepreneur natural person holder of an individual enterprise; 10  d) It is insured in the public system of pensions and has the right to be insured by the health care social security system and by the unemployment insurance system; e) It may be subject to the simplified procedure of insolvency, under the terms of Law no.85/2006; f) Is liable for its obligations with the affected patrimony, if such a patrimony was set up, and, to the extent in which the said patrimony is not enough, with the personal estate. 2.5.2. Legal regime of the entrepreneur natural person holder of an individual enterprise a) Such a person may hire third persons on the basis of an individual labor contract, may cooperate with other PFA (licensed natural persons), with other entrepreneurs natural persons holding an individual enterprise or with representatives of a family company, as well as with other legal persons; b) It may cumulate the quality of entrepreneur holding a an individual enterprise with that of employee of a third person irrespective of the fact that the activity is run in the same field or in a distinct one; c) It is insured in the public system of pensions and has the right to be insured by the health care social security system and by the unemployment insurance system; d) It may be subject to the simplified procedure of insolvency, under the terms of Law no.85/2006; e) Is liable for its obligations with the affected patrimony, if such a patrimony was set up, and, to the extent in which the said patrimony is not enough, with the personal estate. 2.5.3. Legal regime of the family enterprise a) It is set up of 2 or more members of a family who may simultaneously be LNP’s (PFA) or holders of an individual enterprise or may cumulate the position of employee of a third person with activity in the same domain or in one which is different from that of the family company; family members sign an establishment agreement whose written form constitutes a term of validity. In its contents, such agreement will indicate the members’ names, the name of the enterprise representative, the date, each member’s participation in the enterprise, the percentage quota according to which they will distribute the income between them, the relationship between them and the terms of withdrawal. The 11  compulsory elements of the agreement are comparable with those of the company deed of establishment, obviously in a simplified form, matching the family enterprise less complex structure which lacks legal personality. b) The members of the family enterprise are insured in the public systems of pensions and have the right to be insured by the health care social security system and by the unemployment insurance system; c) The family company may not hire third persons on the basis of a labor contract; d) It may cooperate with all types of traders (legal natural persons, entrepreneurs holding an individual enterprise, family companies, trading companies, etc) e) It does not have legal personality and, subsequently, it does not have its own patrimony; but, by the establishment agreement, its members may agree to set up a business related patrimony regulating each member’s quota in the set up of the said patrimony; f) The members are jointly and indivisibly liable with the business related patrimony, for the debts incurred by the company representative; when there is no such patrimony or as its supplement, they are liable with their full estate, according to the participation quotas agreed by the establishment agreement. 2.5.4. Business related patrimony; Government Emergency Ordinance no.44/2008 first establishes this concept with reference to the subjects of the business law. It represents the entirety of the goods, rights and obligations allocated by the natural person licensed under any of the three forms allowed by law for the development of its economic activity. It follows that, in order to recover their debts, the personal creditors of the trader LNP, of the entrepreneur holder of an individual enterprise or of the members of a family enterprise may not claim the goods included in the business related patrimony but the respective persons’ personal ones. Likewise, commercial creditors will claim first the goods composing the business related patrimony and only in a complementary manner the personal ones of their trader natural person debtor. Thus, distinction is made between two categories of creditors of the trader natural person, creditors of the commercial activity and personal creditors, respectively8 8 See Gheorghe Piperea, Commercial Law,Vol.I, C.H.Beck Publishers, Bucharest, 2008, pag.45 12 We need to specify that, subsequent to this first legal establishment of the concept of „business related patrimony” in the matter of the business law, by the dispositions of art.31 of the Civil Code, its application is generalized for all the catergories of professionals as it is affected to the exercise of their profession. Chapter III LEGAL PERSONS - SUBJECTS OF BUSINESS LAW Trading companies a) Introductory aspects If the dimensions of the natural person’s economic activity, under any of the three organization forms of activity regulated by the Government Emergency Ordinance no.44/2008 are directly reported to its person, acquiring, subsequently, the scale allowed by the energies of a single individual and therefore the said dimensions correspond to a low scale business, the trading company becomes, for a change, the adequate form of running economic operations when their ampleness imposes a concentration of human and material resources and, inherently, a corresponding organization. Hence, its appearance represented the natural consequence of the economic and social evolution of human society. The association of human and material resources became necessary from the point in which the satisfaction of needs overcame the possibilities of a single individual, the pursued convergent scope being the performance of profitable activities. From limited association formulas, reuniting just a few persons who got together their goods and skills to give efficiency to their economic activity, in time, higher scale associations appeared, of hundreds, even thousands of persons, which, inherently, imposed adequate solutions of business organization and coordination. Of course, their complexity is the direct expression of the business dimensions and of the number of persons involved in its realization. There is an indissoluble connection between the evolution of the economic activity and that of the legal structures set up for its performance. Seen therefore from the historic perspective, it becomes easy to understand why, at present, the company became a legal entity precisely configured by legal dispositions, capable of concentrating human, material, financial energies aiming to satisfy the needs of the entrepreneurs and, indirectly, those of the human society. The company itself structured its organization forms in direct correlation with the 13 interests of the economic activity in expansion. It is explicable, then, why nowadays it represents the most important share of subjects legal persons performing in the field of business. b) Brief history The beginnings of the trading company date from ancient times. At the beginning, it did not have legal personality, being inspired by the regulation of the civil society of the Roman law. Evolving, it defined its main characteristic attributes during the Middle Ages, when the limited partnership appears. During the colonial capitalism (the 17th century) we witness the appearance of the joint stock company. The French commercial code of 1807 calls it “anonymous society” and regulates its two forms, the joint stock company and the limited partnership by shares. At the end of the 19th century, out of the combination of the features of the general partnership and those of the joint stock company, the result was the limited liability company c) Definition. The trading company may be defined as being the entity with legal personality, established according to law, by the association of several persons under the terms stipulated by the deed of establishment having as its scope the performance of economic activities in order to obtain profit.9 d) The legal personality of the trading company. According to law, the trading company becomes a legal person as of the moment of its entry in the Trade Register. Therefore, it gains its own identity, distinct from that of the partners which set it up, configured by the following elements which personalize it : a) It has an organization of its own, agreed by the partners through the deed of establishment, with the observance of the terms imposed by law according to the legal form ; 9 „A group of people set up on the basis of a company contract and having legal personality, in which the partners decide to put together certain goods in order to exercise commercial facts with the aim of making and sharing the resulted profit.” – Stanciu D. Carpenaru, Drept comercial roman 6th edition, revised and completed, Universul juridic Publishing, Bucharest, 2007, pag.156; 14  b) It has its own patrimony, as an ensemble of rights and obligations with economic content,10 distinct and independent from the patrimony of any other person, including the partners and assigned to the achievement of its own commercial activity; the specific elements of the trading company patrimony are the share capital; c) It has its own elements of identification arising out of its quality of distinct law subject (denomination, headquarters) ; d) It has its own will (social will) manifested through its organs, distinct from that of the partners ; e) It has its own nationality, distinct from that of the partners and that is the nationality of the country on whose territory it established its headquarters; f) It has its own legal capacity, (legal responsibility), distinct from that of the partners and that allows it the participation on its own behalf in the legal relationships matching the performance of its objectives and scopes, (capacity of specialized use) ; The trading company is a trader, hence professional, as of the moment it gains legal personality. Unlike the natural persons who become traders (entrepreneurs, economic operators) the company is “born” a trader and keeps that quality for the full duration of its existence, irrespective of the fact that it develops such an activity or not. Subsequently, its legal acts are commercial and subject to the commercial law, even if they are performed with non-traders (art.56 Commercial Code). e) Regulation The bill which is the common law in the matter of trading companies, offering the set up, organization, functioning, reorganization, dissolution and liquidation rules is the Law no.31/1990.11 , hereinafter called LSC. By the last amendments brought to it, the law was harmonized with the European regulations of the matter. 10 „The notion of social patrimony is a composite one: it is composed of a) the assets, in which are included the real or personal goods and rights of an economic value, belonging to the company and b) the liabilities, expressing its debts to third parties and partners.” – Ioan Schiau, Titus Prescure, Companies’ Law no..31/1990, Analyses and comments by articles”, Ed. Hamangiu, 2007, pag.33 11 Law no.31/1990, republished in 2004 – Official Gazzette no.1066 of the 17th of November 2004, amended and completed by: Law no.302/2005, published in the O.G. no.953 of 27.10.2005; Law no. 85/2006 related to the insolvency procedure, published in the O.G. no.359 of the 21st of April 2005; Law no.164/2006, publicata in the O.G. no.430 of the 18th of May 2006; Law no.441/2006, published in the O.G. no.955 of the 28th of November 15 For certain economic domains, usually those of a greater impact on population and, therefore, to the aim of protecting its interests, specific bills for the respective domains were adopted and such bills, having a special character, become incidental as a priority for the regulated domain. In their 12 case, Law no.31/1990, becomes complementary applicable. The collocation “corporate law” takes its substance as a priority from the LSC and, complementary, as we have already specified, from the special regulations applicable toi certain categories of trading companies. Seen as a whole, all these configure the legal status of this category of professionals, distinct from that regulated by the norms of common law represented by the Civil Code. The idea is expressed by the text of art.192 of the code and according to which “the legal persons legally set up are subject to the dispositions applicable to the categories to which they belong as well as to those included in the present Code, if the law does not stipulate otherwise.” f) Trading companies organization forms The trading companies law regulates five legal forms under which a company may be set up and those forms are : 1. general partnership 2. limited partnership, 3. joint-stock company; 4. limited partnership by shares 5. limited liability company The enumeration preserves the order of their historic appearance. Those are, in principle, the legal forms regulated by the legislation of other states also, they are not laboratory products but the result of the long verified experience and practice in the states with market economy. The five forms are restrictedly provisioned by the law; the future partners have the freedom to opt for any of them but, as of the moment of their choice, they are bound to observe the legal 2006; Law no.516/2006, published in the O.G. no.14 of the 9th of January 2007, Emergency Ordinance no.82/2007, published in the O.G. no.446 of the 29th of June 2007; 12 Examples of such bills: the Banking Law no. 58 of the 5th of March 1998, Law no. 32/2000 related to insurance companies and insurance surveillance, etc. 16 dispositions specific to the chosen legal form; they may not imagine new legal forms, sui generis, not even taking over and combining in a selective manner features belonging to the five regulated types. On the other hand, the option right is limited by the situations in which the field of activity of the future company imposes the organization under a certain legal form, determined by special bills. It is the case of banking companies or of those of financial investments for which incidental special laws imposes their set up under the legal for of joint-stock companies. Obviously, the partners’ choice for one or another of the company forms will have the chance of being correct, corresponding to their state of fact, only to the extent in which they know the features which define every type of company so that the choice be made in full awareness. g) Trading companies classification The five legal forms of trading companies may be classified according to several criteria. In what follows, we will take a look at just two of them as we consider them essential in the understanding of their legal regime, in the exact configuration of the features which customize them. Thus ; According to the nature of the association, to the argument of this association, there are : a) Companies of persons ; the ones in which the association is a consequence of the relationship between the partners, of the reciprocal trust they grant each other; therefore, the company is set up in the consideration of the partners’ person, (« intuitu personae »). The relevance of the relationship between the partners gives the companies of this category a series of specific elements such as those related to the assignment of the denomination, the relatively small number of partners, their unlimited and joint liability, the rigid terms of interest shares transfer, so, of gaining and terminating the position of partner, the causes of the company dissolution, etc. This category includes the general partnership (the most representative one) and the limited partnership. b) Companies of assets; in which the relevance of the relationship between the partners fades away in favor of the importance of the size of the contribution to the share capital; the partners’ capital investment is determinant. Subsequently, there are companies which bring together a great number of partners who, most of the times, do not get acquainted 17  with each other. In the case of the companies of this category, the gain of the position of shareholder is not conditioned anymore by the agreement of the other shareholders and, subsequently, it does not represent an element of their deeds of establishment amendment. The prototype is represented by the joint-stock company. Part of this category is also the limited partnership by shares. c) The limited liability company is not fully integrated in any of the mentioned categories. It represents an intermediate form, a hybrid created from a combination of features specific both to the companies of persons and to those of assets. For example, just as in the case of the companies of persons, its set up is based on the relationship between the partners, a fact which justifies, as a matter of fact, the limitation of their maximum number to 50. The partners’ liability is limited, just as in the case of the shareholders in the companies of assets and the organization and functioning rules are, in their turn, similar to those of this latter category. By the partners’ will, expressed in the deed of establishment, the features characterizing the companies of assets or, quite on the contrary, those of the companies of persons may be accentuated. In fact, it is just because this type of company is the product of the influences taken from both categories of companies, that it appeared the last from the historic point of view. According to the extent of the partners’ liability: a) Companies in which the partners are liable in an unlimited and joint manner; the general partnership and the limited partnerships (simple or by shares) in what concerns the general partners. The two coordinates of the liability are defined like this: Unlimited: partners are liable for the company obligations not just within the limit of their contribution to the company patrimony but, in subsidiary, with their own one, to the extent in which that of the company is insufficient to cover in full the company social obligations. Joint: each of the partners will be liable for the full obligation of the company which was not covered by the use of its patrimony. Therefore, each partner’s liability towards the company creditors is not dimensioned to the value of such partner’s contribution to the share capital. This contribution gains relevance only in relationship with the other partners from whom the partners 18 may claim, by way of regression, the recovery of the amount corresponding to their quota of participation in the share capital after having paid the creditors the full debt of the company. Besides, the solidarity of the liability is generally characteristic to commercial obligations, unlike the civil obligations where the divisibility of the liability is the rule and the solidarity is the exception.13 b) Companies in which partners are liable in a limited manner, the joint-stock company, the limited liability company, the partnerships (general and limited by shares) in what concerns the limited (sleeping) partners. The limited liability consists of each partner’s obligation to be liable for the company obligations only to the limit of the partner’s contribution to the share capital. In order to recover their debts, creditors do not have the right to extend their pursuit to the partner’s personal patrimony. It is to be specified that the liability up to the limit of the contribution to the share capital does not identify itself with the payment of an amount matching the contribution to the share capital, made by each partner in favor of the creditors, but with the risk of not recovering at least the investment brought as contribution coming due on the date of the company liquidation. Therefore, the limited liability is the equivalent of the company liability for its social obligations. From the above examples it becomes obvious the peculiarity which is characteristic to limited partnerships and to limited partnerships by shares which, reuniting partners with limited liability (the limited partners) and the partners with unlimited and joint liability, (the general partners) are found in both categories of companies. 3.8. Company legal forms. Brief introduction. After having shown with point 6 the five forms of companies which arte regulated by the law, in what follows we will try to describe them synthetically, configuring their specific features. 13 The divisible liabilities „are divided, according to law, by full right, active and passive, each creditor having the possibility of claiming to thed debtor or debtors only the quota of the becoming debt and each debtor is exposed to the pursuit of its creditor or creditors only for the quota of the undertaken debt.”– Mircea N. Costin, Calin M. Costin , Dictionar de drept civil de la A la Z / Dictionary of civil law from A to Z, 2nd edition, Hamangiu Publishing, 2007, pag. 327; 19  The general partnership It is the oldest form of company and today it is considered slightly obsolete. Usually, it brings together a small number of people whose association is based on the relationships between them, on the reciprocal trust they grant each other. Just as we said before, it is the prototype of the company of persons. It is adequate for low scale, family businesses. Characteristics: a) The partners’ liability is unlimited and joint; subsequently, the company creditors may claim the amounts due to them from the partners also, each one of them being obliged to pay the full amount owed by the company. But, their liability is subsidiary to that of the company so that it may be engaged only after having claimed the payment to the company, as a priority, but with no result. Failure to cash the amount within 15 days from the notification of the claim gives the creditor the right to direct himself to any of the partners making him pay the full debt of the company or, according to case, of the unpaid balance. b) The company denomination includes, in an obligatory manner, the name of at least one of the partners accompanied by the phrase “general partnership” written in full, not abbreviated. The rule related to the company (denomination) assignment highlights the relevance of the partners’ person in this type of company, including third parties. Subsequently, if the denomination contains the name of a person which has nothing to do with the company, such person will be liable in an unlimited and joint manner for the company obligations, just like the partners. By such a regulation, the legislator meant to protect the interests of third parties which obtain a first information about the company right from its denomination, the trust granted to the company being prioritary reported to the persons of the partners which set it up. c) The company Articles of Association signed by all partners in an authentic form, is the company contract; 20 d) The share capital is divided into shares of interest. The law does not impose a minimal limit to the share capital. It will be deposited in full upon de date of the company establishment and it is composed of: 1. contributions in cash of a compulsory character and, eventually 2. contributions in kind, consisting of goods of an economic value, 3. debts, case in which the partner will stay liable to the company until the latter cashes the full value of the debt brought as contribution; e) the partners may undertake to bring their work as a social contribution whose value cannot be quantified as part of the share capital, but only in the distribution of the benefits and of the social asset ; f) company decisions are adopted with the vote of the partners representing the majority of the share capital, except for those related to the amendment of the deed of establishment or to the administrators’ dismissal for which the agreement of all the partners is needed. g) the company administration may be attributed to one or more administrators, exclusively partners, natural or legal persons. If there is the case of a plurality of administrators, the deed of establishment will stipulate if they are obliged to work together or separately. h) the partners are bound not to compete with the company and they are forbidden to hold the position of partner with unlimited liability in another company in another company with a similar or competitive field of activity; also, they may not perform operations in the same kind of trade or in a similar one; i) the company is dissolved if, subsequent to bankruptcy, incapacity, exclusion or withdrawal of one of the partners, their number decreased to one and the remaining one does not decide the company transformation into a limited liability company with a sole partner or, in the case of the decease, if the deed of establishment did not stipulate the possibility to continue the activity with the heirs. These are dissolution special clauses to 21  which are added those of a general character, applicable to any legal form of company. Their analysis will be done in the chapter dedicated to company dissolution and liquidation. The limited partnership The company denomination is related to the context of its appearance, during the Middle Ages, in a period when the social categories which owned assets, the clergy, the nobility, the military, did not have the possibility of capitalizing them in commercial activities, either because the law did not allow that or the trader’s activity was considered degrading for their social position. In such a context, the solution they found to capitalize the money they had became the contract of commenda, on the basis of which they entrusted traders with amounts of money with a view to their capitalization in businesses and share of the resulted profits. This type of cooperation, having as its binder the trust also generated the company liability forms; limited, corresponding to the invested assets, (the general partners), respectively unlimited and joint, in the case of those to whom the money was entrusted with a view to their capitalization in profitable business (who became limited partners). The engagement of the liability of the latter operates according to the rules which are valid in the case of the general partnerships: its subsidiary character imposes that payment be claimed, as a priority, to the company; it is only after 15 days from its fruitless notification that the creditors may claim it to the limited partners, respectively to one/some of them. Characteristics : a) The first feature is related to the presence, within the company, of the two categories of partners, the general partners and the limited partners, reuniting the two forms of liability, limited – the limited (sleeping) partners, unlimited and joint – the general partners; the support of their association is the trust, similar to the general partnership; the minimal number of partners is two; though the law does not limit the maximal number, usually the said number is small; b) the company denomination includes, in an obligatory manner, the name of at least one of the general partners, accompanied by the mention “ limited partnership” written in full. The reasons why the legislator imposes the inclusion in the denomination of at least one 22  of the names of the partners with unlimited and joint liability are similar to those of the general partnership. Subsequently, if the name of a general partner or even of a third person in relationship with the company is shown in the denomination, such persons, in their turn, become liable to the company in an unlimited and joint manner, just as the limited partners. The interests of the company creditors are protected in this case also. c) the company deed of establishment is the company contract signed in an authentic form; d) it does not have a minimal limit of the share capital and, in this case, just as in the case of the general partnership, the creditors’ guarantee being prioritary granted by the partners and not by the value of the share capital. The partners’ contributions to the share capital, provisioned by the deed of establishment, are similar to those of the general partnership; e) just as in the case of the partners in the general partnership, the general partner may undertake to provide their work as social contribution but such a value may not be quantified in the share capital and it is taken into consideration just for the distribution of the benefits and of the social assets; f) company decisions are adopted by the partners representing the absolute majority of the share capital, except for those related to the amendment of the company contract and to the administrators dismissal, decisions for which the agreement of all the partners is necessary. The vote will be exercised, as in the case of the general partnership, in a way directly proportional with the partners’ participation in the share capital. g) the right to administer the company belongs only to the general partners; in this case also, the restriction is regulated with a view to the protection of third parties’ interests; to limited partners it is recognized the right to perform only certain operations on behalf of the company, operations entrusted by the company representatives by mandate entered in the Trade Register. If a limited partner exercises administration operations without such a mandate, he becomes liable to third parties in an unlimited and joint manner, just as the general partners. 23  h) the dissolution causes are similar with those regulated for the general partnership. To remember: the partners’ unlimited and joint liability gives the companies of persons a series of common, specific features: 1) it is only in their case that the denomination will include, in a compulsory manner, the name of at least one of the partners, of one of the general partners, respectively; 2) only in their case the denomination will be accompanied by the specification of the company legal form written in full, not with initials; 3) the partners may undertake to bring their work as social contribution but, as the value of such contribution may not be quantified within the share capital, it will be in the distribution of benefits and social assets; 4) the law does not impose a minimal value of the share capital for none of the two company legal forms Arguments : the credibility of those types of companies is prioritary substantiated on the partner’s person; the share capital being insignificant and, on the other hand, the partners / part of them, having an unlimited and joint liability, third parties may report to them in order to assess the risks of signing contracts with the company. The joint-stock company It is the representative form of the company of assets; as a result, in its case, the stockholders’ contribution to the capital becomes relevant to the detriment of the relationship between the stockholders whose importance disappears. As a consequence, what is characteristic for this type of company is the great number of stockholders who, most of the times, are not acquainted with each other. The denomination which is also attributed to this type of company, that of “anonymous company” highlights in a supplementary manner this feature. It is the most complex, most evolved of the company legal forms, adequate for large scale business which absorb considerable assets. In order to respond to such a purpose, both for the company set up and for the supplementary infusion of capital, public subscription may be used (the public offer). 24  The great number of stockholders and the great value of the share capital, which are characteristic for the joint-stock company, imposed the regulation of an adequate structure, of organisms with well defined assignments and competences functioning on the basis of the powers separation principle. We will grant an adequate space to the analysis of those structures in the chapter dedicated to the trading companies organization and functioning. Characteristics : a) The stockholders are liable in a limited manner for their social obligations; b) A minimal number of two stockholders, natural and/or legal persons is necessary for the company set up; (actually, the same number is necessary in the case of each company legal form, except for the limited liability company with a sole partner). c) The company sign includes it own denomination, distinct from that of other companies and accompanied by the mention «joint-stock company » written in full or by the initials «S.A» ; d) The company deeds of establishment are the contract of association and the company by- laws which may be drawn up under the form of one document called memorandum of association under private signature or bearing a certified date; the authentic form become necessary only in the case when land was subscribed as contribution in kind to the share capital or the company was set up by public subscription; e) According to the manner of share capital provision for the future company, the latter may be set up: 1) by full and simultaneous subscription of the share capital by the signatories of the memorandum of association; the set up procedure, in this case, is not different from that followed in the case of the other company legal forms; 2) by public subscription, case in which the share capital is provided also by other persons than those who initiated the company set up. We will analyze the procedure of both set up ways in the chapter dedicated to this subject. f) According to the manner of company set up, (simultaneous, concurrent) or continued (by public subscription), the companies of assets may be classified in closed companies, the ones set up simultaneously, or open companies, the ones set up by public subscription. The companies which, though set up simultaneously, subsequent to set up, they increased 25  their share capital by public subscription will be integrated to the second category. The reciprocal is valid: the open companies may, in their turn, be transformed into closed companies. g) The minimal limit of the share capital is 90,000.00 lei. The capital will be established by contributions in cash and/or economically assessable contributions in kind and contributions in debts, the latter only in the case of the joint stock company set up simultaneously. The deposit of 30% of the share capital value is compulsory at the set up moment and it follows that the balance of 70% be deposited within 12 months, in the case of the contributions in cash and 2 years, in the case of those in kind. h) The share capital is divided into indivisible fractions equal in value of a minimum of 0,10 lei called shares or stock. The stocks can only be nominative (registered)- where they indicate the holder of the share. Starting from 21 January 2021 the bearer stocks, where the holder is not indicated by name and it is subsequently considered that the title of ownership on the share belongs to its owner are not allowed any more. The Articles of Association will stipulate, in an obligatory manner the number of shares that the company will issue. The shares are negotiable securities, (or debt securities) which incorporate into them a certain patrimonial value corresponding to the value of the patrimony of the issuing company. They have features of the debt securities but without being perfectly assimilable to them as they lack the perfectly autonomous character, the independence from the legal writ from which they issue, i.e. the issuing company Articles of Association. The ownership of a share implicitly implies the dependance to a certain company and so, the gain of the rights and obligations regulated by the Articles of Association of the respective company. The fundamental rights guaranteed to any share owner (therefore shareholder): a) the right to participate and vote in the general assemblies; b) the right to cash dividends. i) Preference shares with a right of priority dividend: they represent a special category of shares which confer on their holder the right to cash profit as a priority, from the distributable profit, prior to any withholding. It does not confer the right to vote, just to sit in the debates of the general assemblies of shareholders. Therefore, for their holder, they 26  may become efficient manners of investing financial resources, on condition that the company be profitable. j) The company organization and functioning are carried out through its bodies, with well defined competences and attributions, structured on the basis of the principle of powers separations: (1), the general assembly with its two forms of work, ordinary and extraordinary, (2), the company administrators, usually set up as the collegial body called board of administration and the directors (in the case of the one-tier administration system) or the surveillance council and the directorate (characteristic to the two tier administration system) (3) the auditors/the financial auditor; k) Has the right to issue bonds, as a typical way of capitalization of this type of company; when it needs funds and when it cannot or does not have the interest to resort to a capital increase to achieve that aim and neither the solution of contracting a banking credit is not convenient also, it may issue securities called bonds. The competence to adopt such a decision comes to the extraordinary general assembly of shareholders and it will be implemented by a public offer formulated through an issue prospectus. The total value of the issued bonds has the significance of a loan contracted by the company with the obligees (the ones who subscribed bonds). Just like the shares, bonds may be, in their turn, nominative or bearer bonds. Also, still like the shares, bonds are securities, equal and indivisible. But, they confer on their holder, the obligee, rights which are distinct from those of the company shareholders. Unlike the shareholders, the obligees have just the right to be reimbursed the owed amount, incorporated in the bond value, as well as the afferent interest, no matter if the company made profit or not. But then they may not vote in the general assemblies of the shareholders and they will not cash dividends, such rights being reserved only for the shareholders. For the representation of their interests (for example, in the situation in which bonds are not reimbursed upon maturity) the obligees may meet in a general assembly. 27  The limited partnership by shares It is part of the category of the companies of assets. There are two categories of shareholders, the general (active) partners and the limited (sleeping) partners, like in the limited partnership, but unlike it, its share capital is divided into shares, similar to the joint stock company Characteristics: a) It has two categories of shareholders, the general (active) partners and the limited (sleeping) partners; in order to set up the company, it is necessary a minimum number of two shareholders; b) The company Articles of Association are the contract of association and the by-laws which may be drawn-up under the form of a single writ, called memorandum of association; the memorandum of association in an authentic form is not necessary, with the usual exceptions, the company set up by public subscription or land brought as contribution in kind to the share capital; c) It may be set up both simultaneously and in a continuous form (by public subscription); d) The company sign contains its own denomination, different from that of other existing companies, accompanied by the specification « limited partnership by shares », written in full; e) It is subject to legal dispositions incidental to joint stock companies with reference to the share capital, to its division into shares, the kinds of shares, the issue of bonds, general assemblies, auditors; f) The company administration may be organized exclusively according to the rules of the unitary system; the administrators may be assigned only from amongst the active partners, i.e. of those with unlimited and joint liability; It is a form of company little met in practice. The disadvantages it shows for the sleeping partners who, though they provide the consistency of the share capital, they may not participate in 28 the administration of the company only if they waive their limited liability, may offer the explanation of this reality. Moreover, the fact that most of the legal dispositions which govern it belong to the joint stock company, makes easy to explain the preference for this second legal form compared to which the limited partnership by shares has only disadvantages. The limited liability company It was first regulated in Germany in 1892. It is the result of the combination of certain features of the general partnership, so, of a company which is adequate for small business and those of the joint stock company, as a legal form perfect for large scale business, so that it matches the requirements of the capitalization of average value assets. Therefore, in this type of company we witness a combination of features, which customize it, coming from both of the types of companies from which it is inspired. Characteristics: a) The partners, natural or legal persons, are animated by « afectio societatis », just as in the case of the general partnerships and have a limited liability, similar to the shareholders of the joint stock companies; it is the only company which may be set up in the atypical form of company with a single partner and the only one whose maximum number of partners is limited to 50; b) The company Articles of Association are the contract of association and the by- laws which may be drawn-up under the form of a single writ, a memorandum of association; c) The company sign is composed of its own denomination, capable of differentiating it from that of other companies, accompanied by the phrase « limited liability company » or by the initials « S.R.L.» (LLC or Ltd) d) The share capital is divided into shares of interest. The law does not impose a minimal limit to the share capital. The Articles of Association will indicate each partner’s contribution and the number of shares owned; the full deposit of the share capital is compulsory upon the company set up, just as in the case of the companies of persons; 29 e) The capital sources, upon the company set up, will be: contributions in cash which are compulsory and, eventually, in kind, consisting of goods economically assessable. Contributions in debts are not allowed. In the case of the contributions in kind, the deed of establishment will indicate the manner of their assessment, by the partners’ agreement or by survey; f) Unlike stock, the shares are not negotiable securities, cannot be freely transacted, the company keeping the features of the companies of persons. Subsequently, their transmission in favor of third parties can be done only on the basis of the agreement expressed by the partners who own at least three fourths of the share capital. Moreover, it imposes the amendment of the company deeds of establishment and the registration with the Trade Register; g) The company organization and functioning are provided by the general assembly of the partners, as body with full decision powers and by its administrator//administrators who may be partners or not. According to their will, through the Articles of Association, the partners may emphasize the company’s features of a company of persons or, quite on the contrary, those of company of assets. Thus, for example, by their will, expressed in the deed of establishment, they may stipulate that the decisions having as their object the amendment of the company memoranda of association be adopted not with the partners’ unanimous votes, just like the those of the companies of persons, but with the majority expressly regulated by the Articles of Association, just as in the case of the joint stock companies; h) The audit of the company administration is done either by the partners, in a non- differentiated manner, just like in companies of persons, or by auditor/auditors, as specialized structure, according to the model offered by the companies of assets. When the number of partners exceeds 15, the auditor/auditors’ nomination becomes compulsory; i) The company may be set up under the atypical form of limited liability company with a single partner or may be turned into such a company as effect of the amendment of the number of partners; the company Articles of Association is, in this case formed only by the by-laws. In case of a limited liability company with 30  one partner the value of the contributions in kind to the share capital is determined by survey, unlike the limited liability company with two or more partners, case in which the contributions in kind may be assessed by means of an agreement between the partners. 4.9. Legal regime of company subsidiaries, branches, other secondary headquarters The need of the company development, the interest of its position consolidation in a competitive economic environment become the arguments of the decision to expand the activity, feasible by the set up of certain exogenous structures, outside its registered headquarters. The most known of them are the company branch and subsidiary. Though frequently met in practice, they benefit of a brief regulation in Law no.31/1990. On the basis of those legal dispositions, the doctrine managed to configure exactly their legal regime. 4.9.1. The Subsidiary. It is the only one of the exogenous structures of the trading company which has legal personality being therefore an entity which is distinct from the (“parent”) company which set it up. Subsequently, it may have its legal form and even the nationality different from those of the parent company. With a view to its set up, it will observe the legal dispositions matching its legal form and will have the legal regime characteristic to the chosen form. It has its own patrimony and an independent self standing organization, adequate to the achievement of its objectives and scopes regulated through its deeds of establishment. Its dependence to the “parent company”, the “filiation” link between them is provided by the audit which “the mother” exercises in virtue of the majority participation quota in the branch share capital. Therefore, in this subsidiary, the parent – company has the behavior which is adequate to its position and role of majority shareholder/stockholder and, in just one case, that of single partner (as it may set up just one company as single partner). The “mother’s” position of majority shareholder/stockholder or single partner in the subsidiary company is the only one which defines it relationship with the subsidiary. Mother’s other possible forms of audit, feasible, for example, on the basis of business contractual relationships or by the administration of both companies by the same persons do not define the legal relationship subsidiary – “parent – company”. 31 The law does not impose an express rule concerning the assignment of the subsidiary denomination. As it is a distinct trading company, it will obviously observe the incidental legal dispositions in accordance with the legal form under which it is set up. The condition of the denomination uniqueness will not allow for its functioning under the denomination of the parent company only if the mention “Subsidiary” will be attached to it and its headquarters indicated. If we take into account the fact that, generally, the reason why a subsidiary is set up is to diversify the clientele of the parent company, to extend its area of economic influence to new geographic zones, it can be assumed that, usually, the option will be in favor of this last solution related to the assignment of the subsidiary commercial name. 4.9.2. The Branch Unlike the subsidiary, the branch is a dismemberment without legal personality of the trading company. Subsequently, it cannot act independent of the “parent company” which set it up. It acquires from it just a certain autonomy within the limits of which it develops its activity. Its activity cannot be different from that of the parent company, it will be identical or part of it. It is doubly dependant to the parent company; legally and economically. From the legal point of view, as it lacks personality, it will not have a denomination, nationality, self standing organization, its patrimony and share capital. Economically, it cannot detain its own goods, the ones it uses in its activity belonging to the parent company. It establishes legal relationships with third parties strictly on behalf of the parent company, as its proxy or consignee. The branch has the same legal regime as that applicable to other secondary headquarters of the trading company, called, according to the latter’s will, agencies, representative offices, workstations, offices, etc. The difference between them and the branch is given only by the obligation to enter the latter in the Trade Register corresponding to the location of its headquarters. Even if it will have the headquarters in the same county as the parent company, it will be entered in the Trade Register distinctly from it. Instead, the other secondary headquarters will be recorded only by the Trade Register where the parent company is registered, irrespective of the county where they are located. A foreign trading company has the right to set up in Romania, with the observance of the Romanian law, both branches and subsidiaries if the said right is acknowledged by the law of its 32 organic state. The Romanian subsidiaries of the foreign trading companies will have Romanian nationality whilst their branches will preserve the nationality of the company which set them up. CHAPTER 5 Trading companies set up The trading company set up, in any of the five legal forms regulated by law, is the result of going through a procedure precisely regulated at the end of which the company gains legal personality. 5.1. The trading company Articles of Association. The first moment of this procedural step is marked by the manifestation of the partners’ will materialized by the draw up of the future company deed/deeds of establishment. It/they will become the foundation of the future trading company, “the legal instrument by which the partners express their will to associate”.14 In the case of the companies of persons, as simpler legal form, the law stipulates the contract of association as unique deed of establishment. Instead, in the case of the companies with a higher degree of complexity, like the companies of assets, as well as the limited liability company with two or more partners, the contract of association is completed by the by-laws as the second deed of establishment. The two may be drawn up under the form of a single document reuniting the clauses characteristic to both and generically called memorandum of association. If Law no.31/1990 on trading companies expressly enumerates the compulsory stipulations of the contract of association, for each of the five types, instead, it only specifies the necessity of the by- laws, as a second deed of establishment, without deciding in any way on its contents. Considering it a deed of establishment complementary to the contract of association, the doctrine determined 14 Ioan Schiau, Titus Prescure, Law on trading companies no.31/1990, Analyses and comments by articles, Hamangiu Publishing, Bucharest, 2007, pag.42; 33 that it should include special dispositions agreed upon by the partners, related to the company organization and functioning comparable to those usually characteristic to the regulations of organization and functioning. Actually, in practice, the distinctions between the content of the two documents are most of the times insignificant. The intention to assume in the by-laws stipulations of the contract of association may frequently be ascertained. In such situations, the alternative expressly offered by the law becomes preferable, i.e. to draw up the two documents under the form of a single writ generically called memorandum of association. In the case of the single person trading company (the limited liability company with a single partner), in the absence of an association relationship, the Articles of Association is formed only by the by-laws, as the act of will of a single person, the unique partner (an uninspired syntagma attributed by the law) 5.2. The form of the Articles of Association In the chapter dedicated to the brief description of the trading companies we have already specified the form imposed by law to the deeds of establishment. Sinthetically, we remind that it is directly linked to the partners’ form of liability. Thus, in the case of the companies in which they are liable to the extent of their contribution to the share capital, as a rule, the Articles of Association signed by all the partners, will be drawn up under private signature, except for the case where land was brought as contribution to the share capital when the authentic form becomes compulsory. The Articles of Association drawn up under private signature acquire a certified date subsequent to either its attribution by an attorney-at-law or notary public as an exercise of their professional assignments or by the registration in the Trade Register. In this last case, we find ourselves in the presence of the application of a legal general disposition included in art. 1185 Civil Code, disposition according to which, the certified date of a document, therefore the date on which it becomes opposable to third parties, is acquired, amongst other ways, by presenting the document to a state entity, by its registration in a public register or by its mention in a writ drawn up by a public officer. The Contract of association of the companies of persons characterized by the partners’ unlimited and joint liability, or at least of some of them (in the case of the limited partnership), will be done 34 in an authentic form. The same form will have the deeds of establishment of the joint stock company set up by public subscription. 15 5.3. Compulsory elements of the contract of association The analysis of the legal texts which regulate the compulsory elements of the contract of association for each of the five legal forms of companies, allows for the conclusion according to which the majority of the stipulations are the same for all the company types. Of course, inherent is also the presence of the specific contractual provisions, deriving from the features specific to each of the company forms but they are complementary to the compulsory coincidental ones. The category of the coincidental contractual dispositions includes: a) Clauses concerning the partners’ identification; (name, first name, citizenship, residence, date and place of birth, partners natural persons’ numeric personal code, respectively, denomination, nationality, address of the headquarters, number or unique registration code, according to case); b) Clauses concerning the identification of the future company, namely, those which stipulate: b.1.) the company denomination, assigned under the terms imposed by law; b.2.) company headquarters, as premises where the company documents are held, where correspondence is being edited, where the company management bodies have offices. Therefore, the function accomplished by the headquarters is not indispensably related to the commercial activity of the trading company. Now, according to the law, the headquarters of several companies may be declared at the same address only if one of the following conditions is met: 1) the building structure allows for the functioning of the respective companies; 2) they have at least one common partner; 3) the building is under the ownership of at least one of the partners. b.3.) the company legal form; the option for a certain legal form must be expressed by the deed of establishment with the consequence of the assumption of the obligation to observe the legal provisions characteristic to the chosen legal form; 15 Usually, the authentic form of the documents represents an exception from that related to their validity unde the form of a writ under private signature and it is justified by the legislator’s interest, preoccupation to protect the signatories of the respective writ, in this case the partners who are liable in an unlimited and joint manner, respectively the subscribers, in the case of the joint stock company set up by public subscription. 35  c) Clauses concerning the company field of activity; the field of activity, the one which gioves the company its economic profile, is configured by the entirety of the commercial acts that the partners agreed to perform in order to make profit. Its determination is done by the use of the CAEN (NACE) classification, (classification of the activities of the national economy). We need to specify that the activities included in its content are not selected and listed on the basis of merchantability criteria. Quite on the contrary, making a record used in the the activity of statistics reports, the classification also includes non- commercial activities so that, with a view to the configuration of the trader’s field of activity it becomes necessary to select from its content those activities which may be qualified as acts of trade. Moreover, it becomes necessary the indication in the deed of establishment of the main activity as well as of the domain in which the respective activity is included as the main source of the company profit. On the other hand, the company may carry out only the commercial operations which are configured in its deed of establishment, as an expression of the principle of the speciality of its capacity of use by virtue of which it will assume its obligations and capitalize its rights acknowledged by its deed of establishment. We need to specify that the running of certain selected activities may be conditioned by the obtaining of certain supplementary administrative authorizations, some of them prior to the company set up, others subsequent to the said moment but prior to the effective initiation of the respective activities. d) clauses concerning the share capital and the partners’ contribution; the deed of establishment will specify the total value of the share capital, its structure, (cash, kind, debts, according to case), as well as the value of each partner’s contribution, according to which the becoming rights in relationship with the company will be precisely determined, (the voting right, the right to dividends, etc.). The divisions of the share capital will also be indicated, (shares, stock, according to case), as well as its distribution amongst the company partners. In the case of the trading companies for which the law imposes a certain minimal limit of the share capital, obviously, its observance becomes necessary. In the case of contributions in kind, the goods brought as such will be described as well as their way of assessment, conventional or by special survey, according to case. We need to specify that 36 for the share capital, the value of the respective goods is of interest and not the goods in their materiality, as physical existence. In the case of joint stock companies where the deposit of a quota of up to 70% of the share capital is allowed subsequent to the company set up, the deposit deadline will also be indicated, obviously, within the legal limit, (12 months for cash deposits, respectively 2 years for those in 16 kind). For the same type of companies, the indication of the number and kind of issued stock (nominative or bearer) becomes necessary. e) Clauses concerning the company administration and audit; the deed of establishment will indicate the company administrators by name as well as their identification elements. The power conferred on them will be also specified, whether they will work together or separately, to whom comes the right to represent the company in its relationship with third parties. The complexity of the companies of assets is significantly demonstrated by the rules related to the administration. Subsequently, in their case, the deed of establishment will have to determine the chosen system of administration, and, matching the said system, the distribution mode of the company administration and representation competences, the duration of the mandate, the manner of work. Their correct definition becomes a condition of those structures functionality on which it depends, in the end, the efficiency of the company activity. In the case of the companies in which the audit of the company administration is necessary to be attributed to and exercised by specialized structures, meaning auditor or financial auditor, the deed of establishment will include the identification data of the first auditors or the first financial auditors, according to case as well as the duration of their mandate. The appointment of the said audit professional structures is mandatory in the case of the companies of assets and of that with limited liability having more than fifteen partners and facultative, in the other situations. With the companies of persons and those with limited liability with less than fifteen partners this audit comes to the partners. 16 „The subscribed capital is the one established by the founders in the deed of establishment representing therefore their promise to give the company contributions up to the meeting of the said capital value. The deposited capital is the value expression of the contributions effectively deposited by the partners upon the date of the trading company set up”- Ioan Schiau, Titus Prescure, Law on trading companies no.31/1990, Analyses and comments by articles, Hamangiu Publishing 2007, pag.59-60; 37  f) Company duration; it is up to the partners’ will to determine the duration for which the company is set up and such a mention, no matter whether they opted for a limited or unlimited lapse of time, will be specified as such in the deed of establishment. If the company was established for a limited period of time, the maturity of the said deadline becomes reason for the company dissolution if, prior to that date, the partners did not decide its extension. g) The participation in benefits and losses; the gains of benefits and their distribution between the partners under the form of dividends (the association for risk share) represents, finally, the essential reason of the company set up for each of its partners. It is the basic criterion of separating the trading company from other associative structures like, for example, the associations and foundations, as non-profit organizations. Therefore, it is only natural that the contents of the deed of establishment define the rules according to which the benefits are distributed and, in a correlative manner, how are the company losses dealt with. Rules of distribution may be agreed to recognize the partners’ differentiated effort in the performance of the company activity or, on the contrary, equal distribution quotas may be agreed upon, not correlated with contributions to the capital which are not equal. There is only one limitation of the partners’ decision freedom in what concerns the matter of the participation in the profit and loss, which is the avoidance of the insertion of certain “leonine” stipulations, of clauses stipulating that one or part of the partners acquire all the company benefits without participating in its losses, respectively such a provision is considered void without attracting though the nullity of the full contract of association. In its stead, the suppletive dispositions of the law become applicable and in accordance to them, the participation in the benefits and losses will be subject to the rule of proportion with each partners’ participation quota in the company share capital. h) Clauses related to the company secondary registered offices; In the company deed of establishment the partners will indicate the postal address of the secondary registered offices they decided to set up or at least the terms under which they will be set up. 38  j) Clauses related to the company dissolution and liquidation; the purposefulness of the two operations, namely, the cessation of the company existence, justifies the neceesity of the insertion of certain stipulations to that sense within the company deed of establishment. The condition is considered done both in the case of the take over, in the contract of association, of the incidental legal dispositions or of their sheer mention. 5.4. Set up procedural formalities For the Articles of Association draw up with the observance of the above mentioned conditions of form and content, the first required priority is to check the company availability in terms of denomination, both from the point of view of its novelty (elements which distinguish it from the existing companies) and from its uniqueness, to the sense that it has never been assigned already to another existing company or to one with its establishment in progress. The operation is solved by the reservation of the company denomination at the office of the Trade Register.17 The issued document makes proof of the cover of this first lawfulness check. Within 15 days from the draw up of the Articles of Association, the founders or, according to case, their agents, will apply for the company entry in the Trade Register with jurisdiction over the area where the company headquarters will be located. The application for registration, (type form, issued by the National Office of the Trade Register), will be accompanies by the following documents : a) The Articles of Association under the form required by law; b) Proof as to the performance of the deposits consisting of the partners’ contributions, according to the deed of establishment; Following the last changes brought to Law no. 31/1990 in the last part of 2020, in case of a limited liability company it is not required to bring proofs as to the performance of the deposits consisting of the partners’ contributions 17 The Trade Register, as instrument of records and publicity of the traders and their activities is administered by the entity called Office of the Trade Register, organized by the courts of law in each county and in the city of Bucharest, on the basis of Law no.26/1990, as amended. The central Trade Register is administered by the National Office of the Trade Register, public entity with legal personality subordinated to the Ministry of Justice. The Trade Register is public and subsequently, it is obliged to issue, against a fee, certified copies of the entries carried out in the register and of the documents filed as well as information related to the registered data. The registration and the mentioned operated in the Trade Register become opposable to third parties as of the date of the registration or from their publication in the Romanian Official Gazette, Part 4 or in other publication, where the law disposes otherwise. 39  when you want to register the company; in the case of contributions in kind, documents will be filed making proof of the partner’s title of ownership on the goods brought as contribution to the capital and, should there be the case, the report of the survey by which the value of the contributed goods was assessed by the expert nominated by the judge- delegate; c) Proofs of the declared headquarters18 and of the company availability; d) The founders’, first administrators’ and, according to case, first directors’, respectively, the directorate and surveillance council first members’ statement on their own responsibility, related to the accomplishment of the legal terms to hold the respective positions; e) Eventual documents or notices imposed by special laws (it is the case of the license issued by the Board of Insurance Surveillance and which is necessary to insurance companies or of the temporary license issued by the National Bank for banking trading companies, etc.) Within 5 days from the accomplishment of all the lawfulness requirements, the application for registration is solved by th