Romania
Lending
Professional lending is a regulated activity, which may exclusively be undertaken by regulated entities. Depending on the type of loans being granted, various specific requirements or limitations should be considered.
By way of example, mortgage loans for real estate investments (credite ipotecare pentru investitii imobiliare) can be granted only by certain regulated entities (eg universal banks or mortgage loan banks). Moreover, the credit agreement for such type of loans must include certain information expressly required by law. There are also particular requirements on how to deal with borrowers that fall behind with their payments.
Specific rules are also provided under the law on consumer loans.
Borrowing
While borrowers are generally not regulated, it is advisable for borrowers to consider whether either the mortgage or consumer-lending regimes apply to their activities, in which case they will benefit from the protections mentioned above.
Are there any restrictions on giving and taking guarantees and security?
Some of the key areas affecting the giving of guarantees and security are as follows.
Corporate benefit and misuse of corporate assets
Upstream or cross-stream guarantees or security usually raise corporate benefit issues under Romanian law. Each guarantor or security provider must receive a real and adequate corporate benefit from assuming such guarantee obligations. Additionally, the absence of any corporate benefit may be construed as a lack of cause for the guarantee or security, with the risk of the respective guarantee or security agreement being invalidated on these grounds. Corporate benefit is, however, a matter of fact assessed on a case-by-case basis by the courts.
Furthermore, the directors or officers and the (founding) shareholders of a Romanian company are criminally liable if they intentionally misuse the assets (including moneys or loans) of the company for a purpose contrary to the company's interest or in its own interest or in order to favor another company in which such persons have a direct or indirect interest. As a consequence, if there is a misuse of corporate assets, the related transactions may also be invalidated.
Prohibition from securing loans granted to directors
Romanian law prohibits a (joint-stock) company to conduct credit activities to the benefit of its directors through various operations, including through the creation of security aimed at securing, totally or partially, any loans granted to the respective director(s). The same prohibition applies to operations in which the respective directors' spouses, certain relatives or in-laws are interested, as well as in case the security is granted to another company with which it shares one (or more) directors (or the directors which are relatives) or to any companies in which such a person is director or manager, or holds 20% or more of the share capital. Transactions may be invalidated for this reason and there may be also criminal sanctions. There are certain exemptions from this prohibition provided by Law No 31/1990 on companies.
Insolvency
Insolvency proceedings may have various impacts on receivables which are preferred by law and rank above any other receivables (eg privileges, mortgages, pledge over assets of the insolvent debtor) and the creditors which have such type of receivables. By way of example, following the commencement of insolvency proceedings, all court and out-of-court actions or enforcement measures for the settlement of claims over the debtor are suspended by operation of law. Also, security created for a prior, existing, but unsecured receivable, within the six month period prior to the opening of insolvency proceedings may be invalidated. Similarly, fraudulent acts committed by a debtor during the two years preceding the commencement of insolvency proceedings may also be invalidated.
Financial assistance
According to Law No 31/1990 on companies, a (joint-stock) company cannot create any security in favor of another party in order for such other party to acquire that company's own shares. Breach of this rule renders the guarantee null. Such prohibition is not applicable to transactions carried out in the ordinary course of business of credit institutions or any other financial institutions or to transactions carried out with a view to acquiring shares by or for that company's employees, provided that such transactions do not trigger the reduction of the net assets of the company below the aggregated value of the subscribed share capital and the reserves that cannot be distributed according to law or constitutive act.
Corporate approvals
The borrower should ensure that it has in place all necessary corporate approvals taken at the approval level required by its articles of association and other applicable corporate decisions setting forth the competences of its corporate bodies. In practice, these are either a shareholders' resolution or a board decision. In case of a joint-stock company, a shareholders' resolution is mandatory if the facility exceeds 50% of the book value of the assets of the respective joint-stock company.
What are common types of guarantees and security?
Romanian law regulates two main types of guarantees/security: personal guarantees and in rem security.
Personal guarantees
The most common ones are:
- suretyship (fideiusiune); and
- autonomous guarantees (which, in their turn, may take the form of:
- letters of guarantee; and
- letters of comfort).
In rem security
The most commonly available in rem security are (conventional) mortgages, which do not entail the dispossession of the security provider. Depending on the type of assets taken as security, mortgages can be either:
- movable mortgages – covering various tangible or intangible, present and future movable assets (by way of example, a movable mortgage may be created over bank accounts, shares, receivables, intellectual property rights, insurance policies rights, machinery, inventory, universalities of movable assets which are assigned to the activity of an enterprise etc); or
- immovable mortgages – covering immovable assets together with their accessories, superficies rights etc (the Romanian Civil Code expressly recognizes the possibility to create an immovable mortgage over future buildings).
Romanian law also regulates privileges, which are claims preferred by law and which have in principle the highest rank. Privileges can be either general (over all movable and immovable assets of the debtor) or special (eg the privilege of the seller's claim for the unpaid price of a movable asset sold to a natural person, save for the case when the buyer acquires the asset for the service or exploitation of an enterprise). There are special priority rules provided by the law with respect to privileges and mortgages.
Furthermore, quasi-security may also be used in practice, such as assignment of receivables for security purposes (cesiune de creanta in scop de garantie), retention of title (clauzele de rezerva a proprietatii). They are subject to the same priority and enforcement rules as those provided by law for mortgages.
Are there any other notable risks or issues around giving and taking guarantees and security?
Giving or taking personal guarantees
Suretyship is fairly common in lending transactions in Romania. It is an agreement whereby the guarantor undertakes to the creditor to fulfil the obligations of the debtor (either on a free-of-charge basis or against a consideration) in case the latter fails to comply with such obligations. The suretyship cannot be presumed, it must be specifically undertaken by way of a written agreement concluded either as an authentic deed (in front of a notary public) or as a private deed or, in certain cases, even included in the facility agreements. There are specific legal conditions that need to be observed by the guarantor (eg to have and maintain sufficient assets in Romania to cover the secured liabilities, to be domiciled in Romania), however, these rules do not apply in case a certain provider of the suretyship was specifically requested by the creditor.
There are no registration formalities provided by the law for suretyships.
Giving or taking in rem security
Immovable mortgages are subject to certain formal requirements which render them valid and enforceable against third parties. Specifically, immovable mortgages can only be created through an agreement authenticated by a notary public, subject to payment of notarial fees. Immovable mortgages must be registered with the land book where the mortgaged real estate is registered, subject to payment of registration fees.
As concerns movable mortgages, they are validly created through movable mortgage agreements concluded either as private deeds or as authenticated deeds. The ranking of a movable mortgage is generally given by the registration with the so-called Electronic Archive for Movable Security (Arhiva Electronica de Garantii Reale Mobiliare). Such registration is valid for a five-year period and may be renewed before its expiry. Depending on the specific type of mortgaged assets, other registration formalities may apply (eg registration with the shareholders' registry in case of mortgages over shares, the creation of ‘control’ over the mortgaged bank accounts etc).
As a general requirement, a mortgage agreement (either movable or immovable) is not valid unless the amount for which the mortgage is created can reasonably be determined on the basis of the mortgage agreement. Also, under the sanction of nullity, the mortgage agreement must include a sufficiently precise description of the mortgaged asset, reasonably allowing its identification. The mortgaged assets may be described by drafting a list of the mortgaged movable assets, by determining the category to which they belong, by indicating their quantity, by providing a formula for their determination or by any other method which reasonably allows their identification. In the particular case of mortgages over bank accounts, for validity purposes the respective bank accounts must be expressly set out under the movable mortgage agreement.

Ioan Chiper
Counsel
DLA Piper Dinu SCA
[email protected]
T +40372155875