ROMANIA Law and Practice Contributed by: Ileana Glodeanu, Andreea Cărare, George Ghitu and Delia Dumitrescu, Wolf Theiss
• safeguarding the privatisation of state-owned com - panies or their management teams. Under the Romanian FDI Law, any investor – whether from the EU (including Romania) or from a non-EU country – must undergo the FDI screening process prior to making an investment in Romania, provided that the proposed investment meets the notification criteria established by the Romanian FDI Law. This also applies to new or greenfield investments in assets related to the start-up of a new undertaking, capacity expansion of an existing undertaking, diversification of an undertaking’s product portfolio or a fundamental change in the overall production process of an exist - ing undertaking. A filing is required if the value of the investment is above the EUR2 million threshold. By way of exception, the FDI Screening Commission may review investments below EUR2 million if they pose potential risks to national security or public order. Depending on the type of industries in which the tar - gets are active, certain regulators and specific legal frameworks (prior notifications, obtaining consents, etc) may need to be considered. For example, cer - tain procedures will have to be undertaken with the National Bank of Romania for transactions involving banks and financial institutions, the National Audio- visual Council of Romania for transactions involving radio and television, and the Financial Supervisory Authority (FSA) for transactions involving listed com - panies and entities operating in the insurance and private pensions sector, etc. Non-EU nationals or entities may acquire real estate in Romania only in accordance with international trea - ties, based on reciprocity.
The scope and depth of the due diligence exercise is generally tailored to the structure of the transaction and the target’s industry. For larger or more complex targets, and for those in regulated sectors, the review will be more extensive. The degree of focus on legal due diligence depends significantly on whether the transaction is structured as a share deal or an asset deal. Share deals are gen - erally more common in Romania due to tax consid - erations. For share deals, a legal due diligence process will typi -
cally investigate: • title to shares; • related parties’ agreements; • employment matters; • material contracts; • financial arrangements; • real estate; • intellectual property rights; • litigation; and
• compliance and data protection issues, which have been emphasised since the implementation of the General Data Protection Regulation (GDPR). For asset deals, due diligence will focus mostly on aspects that are strictly related to the asset, such as: • title over assets; • employment and transfer of undertakings protec - tion of employment (TUPE) in case of a business transfer; • material contracts pertaining to the assets; • litigation; Depending on the amount of information made avail - able in typically structured virtual data rooms, or on the industry concerned (which may involve massive amounts of legal documentation, such as customer, lease or employee contracts), private equity investors frequently employ materiality thresholds or a sam - pling approach for streamlining the review process. For example, only contracts exceeding a certain value may be subject to detailed review. • financing related to the assets; and • compliance and data protection.
4. Due Diligence 4.1 General Information
Private equity investors typically prioritise uncovering red-flag issues as part of due diligence investigations (legal, financial, tax, technical, environmental, IT, etc), rather than commissioning exhaustive, descriptive reports.
532 CHAMBERS.COM
Powered by FlippingBook