In Romania, the restructuring of companies by means of merger, acquisition or demerger has, again and again, proved to be challenging for companies that own real estate. A new regulation in this field manages to make things even more unclear.
Restructuring processes usually involve transfer of property. For many years there has been a debate between legal practitioners about whether a merger/ demerger plan – or the shareholders’ approval of such plan – must be concluded in authentic form in case of the aforesaid companies, so as to enable the registration of the ownership transfer at the land registry. Furthermore, public notaries were not reaching agreement on whether a fixed or value-related fee was demanded to authenticate said plan or shareholders’ decision.
To make the already confusing legal situation even more complicated, the Law on real estate publicity (Real Estate Law) was changed in July 2018 to require notaries to issue a ‘reorganisation certificate’ at the end of any merger/ acquisition process, based on which the transfer of ownership is registered in the land register. These legislative changes contradict the existing practice and the legal provisions of the Regulation concerning registration in the land register and thus only lead to more uncertainty.
Article 170 of the Regulation on registrations in the land register was last changed at the beginning of 2016. Before the change, the merger/ demerger plan was supposed to be signed in authentic form. The new article states that registration of the transfer of ownership in the land register as a result of the merger/ demerger should be done, among others, based on the court decision ascertaining the legality of the merger/ demerger procedure and the shareholders’ decision; the shareholders’ decision must identify – by land register number and cadastral number – the property to be transferred, and must be adopted in authentic form.
In practice, there is still disagreement between notaries over the way in which fees for the authentication of such shareholder’s decision should be calculated: some notaries ask for (relatively lower) fixed fees, while others charge fees according to the value of the deal – which can be extremely expensive.
New contradictory legislative changes
In clear contradiction of the above, as a result of the latest changes, article 24 of the Real Estate Law provides for the transfer of the property ownership to be registered in the land registry on the basis of a reorganisation certificate. This certificate is issued by a notary, whose jurisdiction comprises the company headquarters, based on the aforesaid decisions by the court and the shareholders.
The meaning and purpose of this certificate are unclear, especially since the court decision already determines the legality of the merger/ demerger procedure and the transferred properties are clearly identified through the land register number and cadastral number mentioned in the shareholders’ decision adopted in authentic form. At the moment, there are no application norms and no sample certificate, so it is unclear whether the new legislative changes are at all applicable, or whether the (in the meantime contradictory) terms of the Regulation will continue to be implemented.
We expect that the legislator will adapt and complete the Regulation in order to clarify this matter. We hope he will also take the opportunity to clarify the means of calculating notaries’ fees for issuing the certificate, and for authenticating the shareholders’ decision (if this is still needed).
Registering transfer of real estate ownership in the land registry following a restructuring deal raises numerous legal questions in practice about the authentication of documents and the calculation of notaries’ fees.
The legislative changes that came into force at the end of July provide an extra formality, ie. a reorganisation certificate issued by a notary public. The meaning and the purpose of this certificate, its content, and the fees charged, remain unclear.
At first sight, this certificate seems to bring no additional legal certainty, but only make land registry procedures more complicated.