On 10 July 2018 the Romanian legislature passed Law no 163/2018 on the amendment and completion of Accounting Law no. 82/1991, of Companies Law no. 31/1990, as well as of Law no. 1/2005 on the organisation and operation of cooperation (“Law 163/2018”), allowing legal entities registered in Romania to distribute dividends quarterly. Law no 163/2018 was published in the Romanian Official Gazette on 12 July 2018 and entered into force on 15 July 2018.
After Law no 163/2018 entered into force, legal entities are able to distribute dividends to shareholders either: (i) quarterly, on an optional basis in proportion to participation in the share capital, based on interim financial statements; or (ii) annually, after adjustments made by way of annual financial statements, unless the articles of association provide otherwise. In principle, in addition to Romanian companies, autonomous administrations (in Romanian, “regii autonome”) and cooperative societies will also be able to distribute dividends quarterly.
Quarterly dividends may be paid on a deadline set by the General Meeting of Shareholders or by special laws.
Interim financial statements will be key for companies wishing to distribute quarterly dividends:
- Distribution amounts will be based on the interim financial statements approved by the General Meeting of Shareholders. Dividends can be made for up to 100% of the net profit registered during the respective quarter, plus potential reported profits and any amounts withdrawn for this purpose from existing reserves, less any reported losses and statutory reserves.
- The interim financial statements must be audited by (i) auditors, if the legal entity has a legal obligation/opts to have its annual financial statements audited, or (ii) censors, if required by law.
Quarterly dividends must be adjusted upon approval of the annual financial statements. Any differences must be adjusted within 60 days from the approval date of the annual financial statements for the year ended. Failure to make required adjustments will result in penalising interest accrual.
In order to reflect the above amendments, the Companies Law provision on unlawful distribution of dividends was also modified; this provision now states that a representative of the company who receives or pays dividends from fictitious profits or pays dividends that are not supported by the interim financial statements or the annual financial statements shall be sanctioned by imprisonment of one to five years.
The Law also includes the right of the cooperation’s members to receive dividends from the quarterly realised profit.
Prior to the changes brought by Law no 163/2018, the distribution of dividends was solely possible pursuant to the approval of the annual financial statements, for the year ended.