Use the Lexology Navigator tool to compare the answers in this article with those from other jurisdictions.
Asset classes used as collateral for security
Can security be granted over real estate? If so, what are the most common forms of security granted over real estate and what is the procedure?
Security interests may be created in relation to real estate by means of immoveable mortgage agreements authenticated by a notary public. The mortgage should be registered with the land book where the real estate is registered and, in the case of moveable assets attached to the real estate, with the Electronic Archive.
An immoveable mortgage is generally created by signing the mortgage agreement. However, with regard to real estate registered in land books for plots of land in locations where all cadastral works are finalised, registration of the mortgage agreement in the relevant land book actually creates the mortgage over the real estate (in practice, this scenario is uncommon).
From a practical perspective, the attorney-in-fact signing an immovable mortgage agreement on behalf of a secured lender should be appointed by means of a special power of attorney signed as a notarial deed (ie, the most solemn form of document in the jurisdiction where that power of attorney is signed).
Machinery and equipment
Can security be granted over machinery and equipment? If so, what are the most common forms of security granted over this kind of property and what is the procedure?
The moveable mortgage is the most common form of security over moveable assets such as machinery and equipment.
A moveable mortgage is validly created by means of a moveable mortgage agreement signed as a private deed (no notarisation is necessary). The mortgaged assets should be described precisely enough under the mortgage agreement to enable reasonable identification of the actual assets. This description can be made by:
- setting out lists of assets;
- stipulating specific classes of asset; or
- indicating criteria such as quantity or other specific formulas to this end.
In the case of universalities, the description should include the content and nature of the assets therein. A generic description of the mortgaged assets, such as "all moveable property" or "all present and future moveable property of the mortgagor", is no longer sufficient under the new security interests regime in force since 2011.
The enforcement of a moveable mortgage is subject to its perfection – that is, when:
- the mortgage becomes effective (ie, once the secured obligation is born and the mortgagor owns the mortgaged assets); and
- all publicity formalities are completed. For moveable mortgages in relation to machinery and equipment, such publicity is completed on registration with the Electronic Archive.
The ranking of a moveable mortgage is generally determined by reference to the time that the publicity formalities are performed (ie, registration with the Electronic Archive), irrespective of the time that the secured obligations are born. The registration with the Electronic Archive maintains its priority for five years and should be renewed before expiry of this period, if needed.
Can security be granted over receivables? If so, what are the most common forms of security granted over this kind of property and what is the procedure?
Receivables may be subject to security under Romanian law, the most common type being a moveable mortgage. In practice, assignments for security purposes are also made (albeit increasingly less commonly) as an alternative to mortgages (such assignments are in any case assimilated to the legal regime governing moveable mortgages for most of their elements and characteristics).
Mortgages over receivables may be subject to additional perfection formalities, such as registration with the land book for real estate if they relate to relevant rent or insurance or notification to the mortgaged/assigned debtors if collection is transferred to the secured lender.
Financial instruments and cash
Can security be granted over financial instruments? If so, what are the most common forms of security granted over this kind of property and what is the procedure?
In general, security may be created in relation to shares in a Romanian company by means of a moveable mortgage. Mortgages over shares should be registered with the company shareholders’ register, which is maintained by the company’s directors or, in the case of listed companies, the Romanian Central Securities Depository.
For securities and collateral takers and creators that meet the eligibility criteria under the EU Financial Collateral Directive, as implemented in Romania, security over such securities (including shares in listed companies) may be taken in the form of financial collateral; however, this is rarely used in practice.
Can security be granted over cash deposits? If so, what are the most common forms of security granted over this kind of property and what is the procedure?
The most common form of security over cash is the moveable mortgage over bank accounts. For validity purposes, the bank account should be specifically set out under the moveable mortgage agreement. With regard to perfection of a mortgage over a bank account, the secured lender should hold control over the mortgaged bank account to ensure priority – such control is deemed to be held if:
- the secured lender is the account bank;
- the borrower, the account bank and the secured lender agree that the account bank will comply with the instructions of the secured lender regarding any amounts in the mortgaged bank accounts without the consent of the borrower; or
- the secured lender becomes the bank account holder or co-holder.
Can security be granted over intellectual property? If so, what are the most common forms of security granted over this kind of property and what is the procedure?
IP rights may be subject to moveable mortgages. Mortgages over registered IP rights (eg, patents, trademarks and designs) should be registered with the Romanian State Office for Inventions and Trademarks.
Click here to view the full article.