At the end of 2014, the Romanian parliament passed a law whose main purpose is to dissolve the Rasdaq market and unlisted securities markets. These measures must be implemented by 27 October 2015. Considering the potential significant disruptions that may occur in the activity of the companies it targets, this law is important for its addressees, but also for their suppliers, sponsors, and contractual partners.
Rasdaq is neither a regulated market nor an alternative trading system, but rather a market presently operated by the Bucharest Stock Exchange under precarious and variously interpretable rules. Rasdaq market has also stirred up numerous controversies, resulting eventually in the European Union Court of Justice issuing a decision establishing that Rasdaq market is not a regulated market.
The law and its application regulation, which was issued by Romania’s Financial Supervisory Authority, require the board of directors or the management board of issuers listed either on the Rasdaq or on the unlisted securities market to convene and hold an extraordinary shareholders meeting by 26 February 2015. That meeting must have on its agenda the adoption of a resolution to carry out all necessary measures to list the company’s shares on a regulated market (e.g. the regulated market operated by the Bucharest Stock Exchange or by Sibex) or on an alternative trading system (e.g. AERO – the alternative trading system operated by the Bucharest Stock Exchange). With respect to companies listed on the Rasdaq market, in those cases in which no resolution for listing on a regulated market or on an alternative trading system is adopted at an extraordinary shareholders meeting, all shareholders have the right to withdraw from the company and request the company to purchase the shares at a price determined by an independent authorised expert appointed by the trade registry. Shareholders are entitled to withdraw from the company in the event that:
- the management board/board of directors fails to convene the extraordinary shareholders meeting within the prescribed period (i.e. the convening notice was not published by 26 January 2015);
- even if convened within the prescribed period, the shareholders meeting does not take place within the foreseen 120 day-period (i.e. by 26 February 2015), due to failure to meet the legal quorum requirements to pass valid resolutions;
- even if convened and assembled within the prescribed period, the shareholders meeting does not pass any resolution due to failure to meet the legal majority requirements;
- even if convened and assembled within the legal period, the shareholders meeting validly passes a resolution not to take measures to apply for admission to trading on a regulated market or list the shares on an alternative trading system.
A large number of companies listed on the Rasdaq market are already in a situation under which they are required to grant their shareholders a right of withdrawal.
If that right of withdrawal is exercised for a large number of shares, the company may face an urgent need of liquidity in order to pay the shares for which the right of withdrawal has been exercised. This could result in a material decline of the company’s financial indicators.
Both the banks and the contractual partners of such companies should keep an eagle’s eye on the conduct of these companies. The impairment of financial indicators can lead banks to accelerate financing agreements in order to limit, as much as possible, the risk of a potential insolvency. Due care must be paid with respect to the formalities that need to be fulfilled, if the shares that are subject to the exercise of the right of withdrawal are pledged to secure the shareholders’ obligations under various financing arrangements.
For those Rasdaq companies that choose the path of the regulated market or of the alternative trading system, the law does not raise any specific concerns with respect to their financial soundness. However, failure to adopt such a relisting decision (including the corporate inertia in relation to such decision) may raise certain issues; this is why each such case must be individually assessed by the stakeholders taking into consideration the shareholders’ goals, the potential shareholding structure after the exercise of the rights of withdrawal, as well as the arrangements to which the companies are part of.