Last updated: 4 May 2017
The legal regime of agricultural companies in Romania was relaxed as of the 1st of April 2017 following the recent adoption of Law no. 31/2017. This law allows agricultural companies to take the form of companies governed by Law no. 31/1990 and thus benefit from the tax and legal regime applicable to the latter.
AGRICULTURAL COMPANY/TRADING COMPANY – GENERAL FRAMEWORK
In accordance with Law no. 36/1991 on agricultural companies, owners of agricultural land may exploit their land in several forms of association, namely (i) through a partnership agreement, (ii) through a company - formerly referred to as "trading company" - governed by the Law no. 31/1990 on companies, and (iii) through agricultural companies.
In fact, agricultural companies rather flexible structures; they do not have a commercial character, but they allow easier exploitation of land, tools, animals and other assets brought into the company.
The former regulations did not grant agricultural companies the possibility to directly take the form of companies operating under the law of "classical" companies. The "transformation" of an agricultural company into a "trading" company involved, in fact, the dissolution and liquidation of the agricultural company and the creation of a new structure under Law no. 31/1990.
SCOPE OF THE LEGAL CHANGE
In accordance with Law no. 31/2017, the direct transformation of an agricultural company into a "classical" company - operating under Law no. 31/1990 - requires the submission of an application with the court. This application must be accompanied by the proof of reservation of the new company name. The procedure to be followed by agricultural companies will be detailed in the implementing regulations, to be drawn up within 45 days after the publication of Law no. 31/2017 in Official Journal no. 214 of 29.03.2017.
As we are not able to assess to what extent the legal regime of agricultural companies will become more flexible (especially in the absence of the law’s implementing regulations), we can only cite the argument invoked by the initiators in support of this legislative change: to encourage farmers to abandon subsistence agriculture in favor of "trading" agriculture.
In fact, this change should make it easier for farmers to benefit from the advantages of a "classical" company (commercial purpose, development and financing possibilities, easier movement of shares etc.).