ROMANIA Law and Practice Contributed by: Monia Dobrescu and Mădălina Trifan, Mușat & Asociații
the risk undertaken, there is a higher risk that the transaction will be void for corporate benefit grounds. Corporate compliance rules are also relevant. For instance, certain transactions can only be carried out with the approval of an extraordinary general meeting of shareholders. 3.6 Formalities When a Borrower Is in Default In order to start the foreclosure procedure, the creditor must have an enforceable title, and the debtor’s obligation must be certain, payable and due. The rank of the real estate mortgage is deter - mined by the order of applications for registra - tion in the Land Book. A recorded lender has priority over the interests of unsecured creditors and also over the interests of secured creditors whose mortgage ranks are subsequent. Romanian legislation stipulates that the enforce - ment of a real estate mortgage is led by a bailiff. The procedure is supervised by the court and mentioned in the Land Book. Moreover, the enforcement of a real estate mortgage is subject to the rules of traditional enforcement. Ideally, the procedure shall last at least 60 days from the date of registration of the request for enforce - ment with the bailiff, provided that the court approves enforcement in time, the bailiff identi - fies the assets and the debtor does not request/ obtain a suspension of enforcement. Moreover, a government emergency ordinance has provided for measures to grant facilities for loans granted by credit institutions and non- bank financial institutions to certain categories of borrowers, the guarantee by the Romanian state through the Ministry of Finance of the pay -
ment of interest on mortgage loans contracted by individual borrowers, and the enforceability of the debt title identifying the payment obligations of individuals benefiting from the facility. In recent years, loan restructurings/extensions and forbearance agreements have become more prevalent, reflecting lenders’ understanding of current market conditions, as well as their will - ingness to constructively negotiate with bor - rowers confronted with financial difficulties or circumstances beyond their control. However, lenders may end up exploring the foreclosure option as a last resort. 3.7 Subordinating Existing Debt to Newly Created Debt In certain circumstances, existing secured debts may become subordinated to newly created debt by operation of law (if a lower ranking creditor pays a superior creditor the amount of the debt, it succeeds to the rank of the superior credi - tor) or by agreement of the parties. In a debtor’s insolvency, the order of creditor debt recovery is established by law – any subordination agree - ments are no longer taken into account. 3.8 Lenders’ Liability Under Environmental Laws With regard to pollution or environmental con - tamination, Romania adopts the “polluter pays” principle, which means that the person who caused the pollution is liable for the damage it has caused. Therefore, the lender will only be lia - ble if it is proven that they caused the pollution. 3.9 Effects of a Borrower Becoming Insolvent According to the insolvency legislation, the security interests created by a borrower in favour of a lender will not become void if the borrower becomes insolvent. However, no inter -
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