Wholesale, retail tiers, and support services - such as packaging, warehousing, and merchandising - are fully developed in Romania and like other European countries.
Romania’s range of retail outlets is likewise European and includes specialty shops, supermarkets, hypermarkets, cash and carry, department stores, gas station convenience stores, do-it yourself shops, kiosks, street vendors, open-air markets, and wholesale centers. For several years the local market has been dominated by Carrefour, Cora, Kaufland, Lidl, and Mega Image on the hypermarket (or Big Box) segment, while Metro and Selgros have competed on the cash-and-carry market.
Using an Agent to Sell U.S. Products and Services
While not legally required in Romania, local agents, distributors, and joint venture (JV) partners can contribute significantly to the success of an American company. Selecting a distributor is a serious strategic decision with business and legal implications. When establishing a contract with a distributor or JV partner, American companies are advised to seek legal advice for compliance with Romanian and/or EU regulations, business practices, and legislation.
The U.S. Commercial Service Romania (CS Romania) advises against relying on Internet searches for a partner. Through its matchmaking services, CS Romania helps U.S. companies find qualified prospective agents, distributors, or representatives, with completed background checks on Romanian companies.
Companies’ agents and distributors can take advantage of the European Ombudsman. Complaints can be made to the EU Ombudsman only by businesses and other bodies based in the EU. The Ombudsman can investigate cases of failure to act in accordance with the law, failure to respect the principles of good administration, or violation of fundamental rights. In addition, SOLVIT offers online assistance to citizens and businesses who encounter problems with transactions within the borders of the EU single market.
Solving problems accessing rights in other EU Member States
Establishing an Office
Opening a local office in Romania involves several steps:
1. Choose the type of company
General Partnership (SNC): A general partnership can be set up by at least two shareholders. The partnership relationship is based upon a contract. Like with the other four types of companies (briefly described below), the shareholders must register their partnership with the National Trade Register Office of the Ministry of Justice. The shareholders in a general partnership have unlimited and joint liability towards the company’s debts and obligations.
Limited Partnership (SCS): A limited partnership consists of one or more general shareholders who manage the company’s business, as well as one or more limited shareholders who contribute capital (money or other property) to the partnership but do not participate in its management. Limited shareholders are not liable for the debts and obligations of the partnership beyond their contribution to the registered capital, while the other shareholders (who also manage the company) have unlimited and joint liability towards the company’s debts and obligations.
Joint-Stock Company (SA): A joint stock company is a limited liability corporation with at least two shareholders and a registered share capital of at least RON 119,000 ($27.83) - (Council Directive 77/91/EEC of 1976, replaced by Directive 2017/1132/EU). Shares, with a nominal value of at least RON 0.1 ($0.02) each, can be nominative shares or bearer shares, and can be freely traded or pledged. A joint stock company may be set up privately or by public subscription. Each shareholder must pay at least 30% of his/her portion of the subscribed share capital, with the remaining 70% to be paid within a maximum of 12 months or 2 years.
Limited Partnership by Shares (SCA): This type of company has the same legal regime as a Limited Partnership, other than the fact that the capital is divided into shares. Thus, the company’s obligations are guaranteed by the share capital and by the general partners’ unlimited and joint liability. The limited partners are liable only within the limit of the subscribed share capital. Like the joint stock company, the SCA’s share capital cannot be less than RON 119,000 ($27.83)
Limited Liability Company (SRL): A limited liability company is a company set up by at least one shareholder that cannot have more than 50 shareholders. An individual or a legal entity can act as sole shareholder in only one SRL. Additionally, an SRL’s sole shareholder cannot be another company that itself is owned by a sole shareholder. The subscribed share capital of an SRL is at least RON 200 ($50), divided into shares with a nominal value of at least RON 10 ($2.34) each. The transfer of shares to third parties must be approved by the shareholders holding at least ¾ of the company’s capital.
Representative Offices: Foreign companies may open representative offices in Romania following registration with the Department of Foreign Trade in the Ministry of Economy. Representative offices cannot carry out commercial activities on their own behalf, but they are entitled to promote the business of their parent organizations.
Branches: Foreign companies have no legal capacity and can only carry out activities within the parent company’s obligations. They must be registered with the relevant trade registry office.
2. Determine location of headquarters
Foreign companies are required to have a physical location (not necessarily a postal address) as their headquarters and must demonstrate that the premises are fully operational - i.e., the company fulfills all conditions required to carry out the activities authorized at that given location (necessary equipment, computer(s), personnel allocated at the company’s premises, etc.). In order to approve the company’s fiscal registration with the relevant local authority, such conditions are strictly verified by the fiscal administration upon control on site. As an exception, upon initial registration, a newly set up Romanian legal entity may choose to establish its registered office with an attorney at law/law firm for a maximum period of one year.
3. Register the name of the company
The company’s name is registered with the Trade Registry Office in the jurisdiction where the company is to be located.
4. Create bylaws and binding documents
General partnerships and limited partnerships are usually set up by their founders through by-laws. Joint-stock companies, limited partnerships by shares, and limited liability companies are set up through by-laws and articles of incorporation. By-laws and articles of incorporation may be concluded under a single document - the Constitutive Deed.
5. Open a company account
A company account is opened in the registered name of the company prior to the company’s official registration. The shareholders (or their designees) deposit the share capital in the company account. The amount in the account depends on the form of business organization, but as an example, a limited liability company has a minimum starting capital of RON 200 ($50).
6. File other required legal documents
Other documents are required to be filed with the local Trade Registry Office under the setting-up file. Such documents include the decision of the competent body of the company’s shareholders (in case such shareholders are legal entities), statement(s) of the company’s director(s), statements from the company’s shareholders that they fulfill the legal requirements to be shareholders in a Romanian company, powers of attorney fiscal records, bank letter, etc.
7. Submit the complete dossier to the One-Stop Office
Once the application, or dossier, is complete, it is submitted to the One-Stop Office in the proper jurisdiction. This office falls under the National Trade Registry Office of the Ministry of Justice.
For the latest Investment Climate Statement (ICS) which includes information on investment and business environments in foreign economies pertinent to establishing and operating an office and to hiring employees, visit the U.S. Department of Department of State’s Investment Climate Statements website.
Franchising
Franchising regulations are the same as in other countries, basically granting the franchisee the right to operate or develop a business, product, technology, or service. The contract – that is, the Franchising Agreement - reflects the interests of the franchise network’s members and protects the franchiser’s industrial or intellectual property rights by upholding the network’s common identity and reputation. A franchiser must be the holder of the relevant intellectual or industrial property rights and must register it with the Romanian State Office for Inventions and Trademarks. In 2019, the Romanian Government approved several provisions to the Franchise Law (Government Ordinance No. 52/1997) including:
- the franchisor must have some elements registered by intellectual or industrial property - brand / logo, know-how etc.
- introducing the concept of “pilot unit” (1 year period for testing purpose)
- Introducing the “information disclosure document” by all franchisors, to standardize the procedure for informing potential franchisees
- establishment of the National Franchise Registry held by the non-governmental Romanian Franchise Association
Franchising statute in Romania is almost equal to other countries. In the main, it allows the franchisee the freedom to manage or evolve a business, technology, service, or product. This means that the country has huge opportunities in the creation of a successful business. The largest cities of the country such as Bucharest (1.84 mln), Iasi (318,871), Timisoara (306,462), Cluj-Napoca (303,047), Constanta (297,503), and Craiova (293,567) provide the most attractive business opportunities for franchise companies. The segments in highest demand for franchise businesses are food & beverage, coffee shops and services, and, especially, fitness centers. More and more franchises are being developed for segments such as programs for children, beauty services, medical clinics, and tourism.
450 concepts are currently running in Romania, 64% of them being international franchises. Most foreign concepts are from the United States, France, and Italy.
Romanian customers and investors are highly interested in U.S. franchises due to their strong reputation and high degree of competitiveness, as well as the fact that they are based on U.S. franchise law, which imposes quality standards and requirements on franchisees.
The interest of entrepreneurs to franchise their business is very high. The specialists thus see a growing appetite on the part of entrepreneurs to franchise their own business. They also estimate that more new franchise models will be launched on the Romanian market in 2021. Also, the confidence of investors in franchises will recover faster than the economy, being driven by the desire to rebuild and take their businesses to the next level, but also by the new sources of financing available to entrepreneurs.
The most important areas of activity with franchising potential in the context of the pandemic are services, construction, and home & deco, specialized retail, and certain sectors of Hotel Recreation Travel (HoReCa).
Resources:
Romanian Franchise Association
Direct Marketing
The direct marketing industry has been growing in Romania. The Romanian Direct Marketing Association (ARMAD) is a member of the Federation of European Direct Marketing (FEDMA) and the European E-commerce and Mail Order Trade Association (EMOTA). Romania does not have a national “do-not-call list,” but in 2007, ARMAD implemented a “do-not-mail” list. There is a wide range of EU legislation that impacts the direct marketing sector. Compliance requirements are stiffest for marketing and sales to private consumers. The following gives a brief overview of the most important EU-wide provisions on distance-selling and on-line commerce.
The EU General Data Protection Regulation (GDPR) replaced the Data Protection Directive 95/46/EC and was designed to harmonize data privacy laws across Europe, to protect and empower all EU citizens’ data privacy, and to reshape the way organizations across the region approach data privacy.
Processing Customer Data
The EU has strict laws governing the protection of personal data, including the use of such data in the context of direct marketing activities. It is recommended to discuss this topic with advisors prior to engaging in any activities that may involve the collection of consumer data.
Distance Selling Rules
In 2011, the EU overhauled its consumer protection legislation and merged several existing rules into a single rulebook - “the Consumer Rights Directive.” On April 11th, 2018, the E.C. proposed to revise existing EU consumer law directives, including the Consumer Rights Directive.
Alternative Dispute Resolution
In 2013, the EU adopted rules on Alternative Dispute Resolution, which provide consumers the right to turn to quality alternative dispute resolution entities for all types of contractual disputes, including purchases made online, offline, domestically, or across borders.
Online Dispute Resolution Platform
New Legislation
In November 2017, the European Commission adopted a package of two Directives on “contracts for the supply of digital content” and on “contracts for the online and other distance sales of goods.” This package addresses the legal fragmentation and lack of clear contractual rights for faulty digital content and distance selling across the EU. The package is currently under scrutiny at both the European Parliament and Council.
Consumer Affairs Homepage
Distance Selling of Financial Services
Financial services are the subject of a separate Directive that came into force in June 2002 (2002/65/EC). This piece of legislation is designed to ensure that consumers are appropriately protected with respect to financial transactions taking place where the consumer and the provider are not face-to-face. The Directive was transposed into Romanian legislation by Government Ordinance no. 85/2004 on consumer protection upon the conclusion and execution of distance contracts concerning financial services, as republished on May 13th, 2008, and further amended.
Direct Marketing over the Internet
The e-commerce Directive (2000/31/EC) imposes specific requirements connected to the direct marketing business. The Directive stipulates that marketing e-mails must be identified as such to the recipient and requires that companies targeting customers online must regularly consult national opt-out registers where they exist. Vendors of electronically supplied services (such as software, which the EU considers a service and not a good) must also collect value added tax (see eCommerce section below). The Directive was transposed into Romanian legislation by Law no. 365/2002 on electronic commerce, as republished on November 29th, 2006, and further amended.
Joint Ventures/Licensing
U.S. companies may enter the Romanian market as partners or may operate 100% foreign-owned companies. Joint ventures offer quick market access through the knowledge, relationships, and existing capacities of the local partner. They may be in the form of an incorporated limited liability company (SRL) or unincorporated (contractual) relationship between partners (being exempt from registration formalities with local authorities, such as Trade Registry, Registry of Associations etc.)
Joint Ventures in Romania: Overview | Practical Law
Joint Ventures – A word of Caution
Cross-Border Joint Venture and Strategic Alliance Guide
Express Delivery
All major express delivery companies are present locally: FedEx, TNT, DHL, UPS. While envelope delivery from the U.S. to Romania takes two to four days, packages & freight might take four to seven days. Companies handle customs clearance and offer door-to-door delivery.
The most inexpensive international service (and the slowest) is the Romanian National Post, which connects with USPS. Local courier services have been reported to be reliable, fast, and affordable, especially for in-country delivery.
Due Diligence
Romania offers attractive opportunities for investment, acquisition, and business partnerships ranging from joint ventures and licensing agreements to distributorships and franchises. There are few activities more important in Romania than conducting thorough due diligence on potential investments or business partners.
CS Romania advises American firms to engage reputable legal counsel. Legal advisers are retained for incorporation, obtaining permits, IPR registration, contract preparation, collection, and commercial disputes. Additionally, counsel can also be an excellent resource for identifying potential problems based on their experience in the market.
It is very important for American firms to know with whom they are doing business, whether selecting a consultant or distributor or deciding to extend credit terms. In addition to introductions to local legal counsel, CS Romania offers a service for investigating the background, financial status, and references of Romanian firms. This service, the International Company Profile (ICP), includes findings from interviews with the target company and supplier, customer references, and a recommendation regarding the subject’s reliability as a business partner.