To Incorporate or Buy a Readymade Company in Romania
One of the issues that as Romanian lawyers are often asked is “Are there any readymade companies for sale in Romania and which can be bought”. We have noted in the past few months an increase in this type of request but not only in relation to new companies but also in relation existing companies.
When the request in analysed it is clear that there are varied reasons for this approach.
Our advice in the past has been that because of the rules relating to Administrators and their liabilities there are very few newly incorporated companies to be purchased off the peg. The reason in the past that you would have requested this would have been to speed up the registration and ownership of the company, but with the advent of electronic filings it is now just as quick to register a new company as it is to take a transfer of shares from a currently registered Romanian company. By incorporating a new company the shareholder can be assured that there are no liabilities and that the company is “clean;” the object of the company is as the client wants and that there are no other liabilities or issues. Thus our advice is that unless there are special reasons then it is better to incorporate a new company as it is just as quick and the company is tailor made.
Regarding and analysing the special reasons for the purchase of an already existing company we note that these reasons now are what is driving the market for companies already in existence. Whilst a purchase of an existing company appears to be straightforward there are also inherent risks. The majority of companies in existence and that can be bought and that currently are available will often be a special purpose vehicle which are now no longer needed. These companies will however often have a valid tax registration as well as a valid VAT registration. These company will have a history of trading and doing business in Romania or elsewhere and these are the drivers for the request for the purchase of this type of company.
Companies with these attributes are available. They, maybe a property company where a property has been purchased and sold, at a profit. The owner of the company has kept the company in existence for no other reason that they do not want to incur the cost of liquidation. Such companies we know from experience are available.
Further the purchaser of such a company may want to continue to use the existing bank account facilities especially if there are no loans in the company. Whilst this was in the past possible with the tightening up of Anti Money Laundering regulations in the EU and Romania there is now no guarantee that the bank will allow the company to keep its bank account. On a change of ownership the banks will require the company to go through the procedure to open an account as though the company was a new client and they will therefore look to the new buyer in respect of the regulations.
For a purchaser, the question of outstanding tax liabilities can now be clarified and identified but there is still a risk that the authorities may try and open enquiries again, although this is a remote possibility it will need to be covered on a case by case basis. Any purchaser will have to look carefully also at the VAT position to ensure that again there is no inherent liability and the company has dealt with all VAT liabilities correctly.
The reasons to purchase can be many and complex and the purchase of any such company needs to be carefully analysed. We are aware that in certain jurisdictions EU registered companies enjoy privileges if they have been trading for a minimum period of time and been a profit taxpayer in Romania. Again this is another reason to buy an already functioning dormant Romanian company.
So what is the conclusion? The conclusion which we have been able to draw from our current activity is that whilst the market for incorporating a new company is and will continue to be buoyant that there is a market for companies already in existence for certain specialised clients. As lawyers in Romania we must continue to consider our clients requirements and serve their needs as a service industry and be aware of this potential.