In Romania, the legal and institutional framework for the implementation of Regulation (EU) 2019/452 on the screening of foreign direct investments in the European Union was established under the Government Emergency Ordinance No. 46/2022 regarding the implementation measures of Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019, establishing a framework for the screening of foreign direct investments in the Union, as well as for the amendment and completion of Competition Law No. 21/1996, hereinafter referred to as “GEO 46/2022”.
As a rule, according to GEO 46/2022, as subsequently amended, foreign, EU direct investments and new investments are subject to examination and approval by the Commission for the Examination of Foreign Direct Investments (CEISD), if they are to be made in one of the following areas: security of citizens and communities; border security; energy security; transport security; security of vital resource supply systems; security of critical infrastructure; security of information and communication systems; security of financial, fiscal, banking and insurance activities; security of the production and movement of arms, munitions, explosives and toxic substances; industrial security; protection against disasters; protection of agriculture and environment; protection of privatization operations of state-owned enterprises or their management (as provided for in art. 2 of the Decision of the Supreme Council for National Defense No. 73/2012) and the value of the investment exceeds the threshold of EUR 2,000,000. The provisions of GEO 46/2022 are not applicable to portfolio investments.
According to the form submitted for public consultation, the guidelines would regulate the criteria and method for calculating the value of an investment, as well as issues related to the submission of the notification and the definition of control. In the following paragraphs we will tackle the investment assessment criteria.
Investment value
The Draft Order defines investment as the totality of funds made available by the investor, regardless of their form. This includes cash payments, instruments of payment, tangible and intangible assets, shares, transfers of ownership, remittance of debt (remiterile de datorie), offsets, services or other in-kind consideration.
The authorities are considering all relevant economic components of the transaction to assess whether the EUR 2 million threshold has been exceeded.
Practical example
When a foreign company acquires 25% of the shares of a Romanian legal entity for EUR 1,500,000 euro and grants a loan convertible into shares of 700.000 euro, the total value of the investment is EUR 2,200,000. Therefore, the investment shall be notified to the CEISD in order to obtain the authorization of the Competition Council (or, in exceptional cases, the Romanian Government).
Assessment
For the acquisition of shares (acțiuni, părți sociale): the price paid and/or the capital invested shall be considered;
For share capital increases: the nominal value of the shares subscribed and the share premium shall be considered;
For transfers without price: shares and other securities or assets are assessed at market value;
For any combination of the above: sum of the amounts involved in each operation.
In-kind consideration shall be valued at the market value at the date the authorization has been applied for.
Particular Investment Assumptions
Loans or financing agreements: the total amount of the principal and interest;
Conversions of existing participations include the initial amounts and the conversion consideration;
Traded securities: use the closing price on the relevant stock exchange the day before the application is submitted;
Multiple steps: all amounts in each step shall be cumulated to avoid fragmentation of the transaction;
Conditional Equity Benefits: are included if they are established for the
purpose of investment making.
For international transactions, if the price for assets in Romania is not provided for, the value estimated by the parties shall be considered. If there is no such value, the total value of the transaction shall be considered.
The notification to CEISD must be submitted as soon as the essential elements of the investment have been agreed, prior to its implementation. Authorization shall be obtained by the investor before the investment is made.
Should the draft legislation be adopted in its proposed form, Romania would consolidate a consistent mechanism adapted to the current economic context for the control of foreign and EU direct investments and new investments.