Following the appearance of the new corona virus (SARS-CoV-2) and its spread from China to numerous states, the President of Romania has instated the state of emergency through the Decree no. 195/2020 for instating the state of emergency on the territory of Romania. Consequently, numerous measures that restrict or even suspend several economic activities were instated.

Thus, along the measures for protecting human health, the Romania state noted the necessity to address the problem of protecting and supporting the business environment, which is more and more affected by the pandemics. When performing the opportunity assessment, the Romanian Government has observed that, among the most affected economic operators, as well as the most numerous, there are the small and medium-sized enterprises (“SMEs”).

Within the legislative package adopted by the Romanian authorities aimed to support the business environment there is also the Emergency Government Ordinance no. 29/2020 regarding certain economical, fiscal and financial measures (“EGO no. 29/2020”), which has instated a series of measures generally applicable for the business environment, as well as a series of specific measures directed at supporting the activity of SMEs.

EGO no. 29/2020 is aimed to support the economic activity in various ways:

i) Facilities in obtaining funding for SMEs;

(ii) Regulation of certain contracts concluded by SMEs;

(iii) Regulation of certain contracts concluded by other professionals;  additional obligations for the professions of public interest;

(iv) Fiscal facilities;

(v) Measures regarding the real beneficial owner declaration;

(vi) Measures regarding the loans granted by Eximbank in the name and account of the state;

(vii) Measures regarding the loans granted by the Ministry of Public Finances

(viii) Public budget measures;

EGO no. 29/2020 modifies and completes the Emergency Governement Ordinance no. 110/2017 regarding the Programme for supporting small and medium-sized enterprises – IMM INVEST ROMANIA (“EGO no. 110/2017”), which has instated the programme IMM INVEST ROMANIA, consisting in providing state guarantees for bank loans needed by the beneficiaries that participate to the programme.

Enterprises (companies, authorised person, individual or family enterprises, micro enterprises) which fulfils the criteria to be considered SME, respectively:

(i) have an annual average number of employees smaller that 250;

(ii) have an annual net turnover of maximum 50 million EUR, in RON, or holds total assets that do not exceed the RON equivalent of 43 million EUR, as per the last approved financial statement.

SMEs must also meet all the eligibility criteria provided by EGO no. 110/2017, among others:

(i) are not in financial difficulty;

(ii) are not in a litigation, as defendant, with the Ministry of Public Finances and/or the partner financial institution;

(iii) do not have outstanding debts in the last 6 months previous to the request for state guarantees;

(iv) are not prohibited from issuing checks at the date the credit is approved and did not have any major incidents with promissory notes in the last 6 months;

(v) the insolvency proceeding was not open in their respect;

(vi) provides collateral guarantees to the financial institution;

(vii) do not have outstanding fiscal obligations or other state budget obligations managed by the fiscal central body;

(a) Granting a state guarantee for one of the following credit types:

(i) one or more credit for investments;

(ii) and/or one or more credits/credit lines for working capital;

Important note: the value of the guarantee is limited, based on the type of enterprise, the type of credit as well as on the financial status of the beneficiary.

The guarantee granted by the state may represent maximum 80% of the value of the loan, and the loans granted to microenterprises and small enterprises it may represent up to 90%.

(b) The Ministry of Public Finances subsidies 100% of the interest corresponding with the credits, starting with the moment the credit/line of credit is granted – if it is concluded after 31.03.2020 – and, possibly, until the date of 31.03.2021.

Important notes:

– there are certain uncertainties/risks associated with the subsidise of the interest by the state, having in mind that:

– the subsidy of the interest must be approved annually through a normative act with the power of law;

– the subsidy of the interest will be granted for the next two years only in case the economic growth estimated is under the level of the economic growth registered in 2020;

– the subsidy of the interest must be performed in accordance with the legislation regarding state aid.

(c) The administration commission owed to the National Fund for Guaranteeing Credits for SMEs is supported, with several limitations, by the state budget.

(d) SMEs that have outstanding fiscal obligations or other state budget obligations managed by the fiscal central body may benefit from this measure, on condition that the beneficiary agrees to pay these obligation form the credit/line of credit for working capital granted within the programme.

The financing period is of maximum 120 months for investment credits and of maximum 36 months for working capital, and they may be prolonged with a maximum of 36 months.

Important note: all the other provision of EGO no. 110/2017, which instate obligations or represent risks for the beneficiaries of the loans remain applicable.

For instante, EGO no. 110/2017 establishes a series of legal mortgages that are constituted over certain assets of the beneficiary.

SME that:

(i) have totally or partially interrupted their activity based on the decisions issued by the public authorities during the state of emergency;

(ii) hold a certificate for emergency situation issued by the Ministry of Economics, Energy and Business Environment;

(a) The possibility to benefit from a postponement to the payment of utilities – electricity, natural gas, running water, phone and internet services;

(b) The possibility to benefit from a postponement to the payment of rent with respect to the building that is the main headquarters or secondary headquarters of the SME;

Important note: SMEs have the possibility to invoke the provision of EGO no. 29/2020 in case they are advantageous; in case the SMEs benefit from contractual or legal provisions that are more favourable, they can invoke the latter.

With respect to the other pending contracts, force majeure may be pleaded against SMEs only after the attempt, proven with documents, to renegotiate the contract, in order to adapt their clauses with considering the exceptional conditions generated by the state of emergency;

EGO no. 29/2020 established that a circumstance represents force majeure if

(i) it is unpredictable, absolutely invincible and unavoidable;

(ii) it results from an action of the authorities of enforcing the measures required by the prevention and tackling the pandemics generated by the infection with the COVID-19 corona virus;

(iii) the circumstance has affected the activity of the SME;

(iv) the affecting of the activity is ascertained by the certificate of emergency situation, but this presumption may be overturned by the interested party by any other type of evidence;

(v) the unpredictable character of the circumstance is analysed with respect to the moment when the legal relationship was established and the measures undertaken by the authorities in accordance with the decree of instating the state of emergency will not be considered unpredictable.

During the state of emergency, SMEs do not owe liquidated damages for delay in the performance of obligations provided within the contracts concluded with public authorities.

(i) the forms of practicing the public notary profession, the lawyer profession, and the public bailiff profession,

(ii) the family physician practice and dental practice where at the most 20 people perform their activity,

(iii) the national sports federations and sports clubs which hold a sports identity certificate

Provided that:

(a) their activity is directly affected by the measures of the public authorities;

(b) they meet the other criteria that are to be established by Government decision.

(a) The possibility to benefit from a postponement to the payment of utilities – electricity, natural gas, running water, phone and internet services;

(b) The possibility to benefit from a postponement to the payment of rent with respect to the building that is the main headquarters or secondary headquarters.

Important note: Invoking the provision of EGO no. 29/2020 is merely a faculty and it should be analysed whether these provisions profit to the beneficiaries of the provision; in case that there are contractual provisions or other favourable legal provisions, the affected entities may invoke them.

Important note: The other measures instated in favour of the SMEs are not provided in favour of these professionals.

– they are under the obligation to undertake all necessary measure in order to ensure the continuity of the activity, observing the rules of sanitary discipline and other measures of protection and prevention, and the failure to observe this obligation constitutes a disciplinary offense that may be sanctioned with the exclusion from the profession;

– the employees of the forms of practicing the profession that refuse to fulfil their work tasks as provided by the individual employment contract and thus impede the conduct of the activity will not have access to the benefits of social assistance or other facilities to be granted during the state of emergency;

– the managing bodies of the professions will undertake the necessary measures in order to coordinate the activity of the members of the profession during the state of emergency and will verify the compliance with the obligations and will order the measures provided by the law.

– the fiscal obligations due staring with 21.03.2020 that are not paid for 30 days from the cease of the state of emergency will not generate interest or delay penalties, and this fiscal obligations will not be considered due past due;

– the force enforcement proceedings with respect to state budget obligations conducted by garnishment are suspended, with the exception of forced enforcement conducted for the recovery of state budget obligations established by court judgements rendered in criminal cases;

– measures regarding the profit tax:

(i) the tax payers that apply the system of declaring and paying the tax profit annually, with anticipated payments effected each trimester, may perform the anticipated quarterly payments for 2020, at the level of the sum resulted from the calculus of the current quarter profit. This method of calculus will be maintained for each quarter of the fiscal year 2020.

(ii) the measure presented above is applicable to the tax payers that have opted for a different financial exercise than the calendar year with respect to the anticipated payments due for the quarters remained from the modified year 2020, as well as for the calculation of the payments corresponding to the quarters of the modified fiscal year that begins in 2020 and are comprised within the calendar year 2020;

– the term for paying the building tax and vehicle tax is postponed until June 30 inclusively, and the term for the anticipated payment of the building tax and vehicle tax, for obtaining the bonus established by the local council is postponed until June 30 inclusively.

– the terms provided by EGO no. 6/2019 regarding instating several fiscal facilities are extended, as follows:

(i) a new period when debtors may notify their intention to restructure their state budget obligation is instated, respectively the period 01.02.2020-31.07.2020;

(ii) the term for the debtors to submit their request for restructuring is extended until 30.10.2020;

Important note: the fiscal facilities are applicable to all tax payers that owe the correspondent fiscal obligation, whether they are legal or natural persons and irrespective of having the quality of SME.

In 2019, one of the most important legal update in the field of fighting and preventing money laundering was represented by instating the obligation to submit the declaration regarding the real beneficial owner by companies, as well as associations and foundations.

The term to submit the declaration is hereby extended with 3 months from the end of the state of emergency, and during the state of emergency the submission of this declaration is suspended.

Approving the operations granted by Eximbank – S.A. in the name and account of the state which lead to a cumulated exposure with respect to the same debtor or group of debtors that exceeds over 50 mil. EUR may be performed also by the means of the following mechansism:

– in case Eximbank offers the economic operator funds from the loans granted in the name and account of the state before the approval by the Government through a Memorandum, Eximbank transmits to the Ministry of Public Finances, for the analysis and approval of the government, the Memorandum of approving these operations within 15 days from offering the funds;

– in case the operation presented above is not approved within the established term, Eximbank is under the obligation to reconstruct the funds of the state diminished by the sums provided to the economic operators from the own funds of Eximbank.

The payment of the rates and interests corresponding with the loans granted by the Ministry of Public Finances to territorial administrative unities/sub-divisions may be postponed, upon the debtor’s request, for a period of three months starting with 21.03.2020.

The Ministry of Public Finances may grant, upon the request of the national company UNIFARM – S.A., limited to the amount of 1.150.000.000 RON, for a period of 6 months.

The loan will be used for repaying the first part of the loan granted by Eximbank in the name and account of the state, and the difference will be used for the urgent acquisition of sanitary materials and equipment in the context of the corona virus epidemics in Romania.

During 2020, there are allowed budget corrections during the first semester of the year;

Starting with 21.03.2020, during the state of emergency instated in Romania, the main credit release officers are authorised to effect transfers of budget credits and unused engagement credits, as applicable, as well as to ensure the necessary funds for enforcing the measures for fighting and preventing the spread of the corona virus, as long as they comply with the approved yearly budget provisions.

Based on the communications transmitted by the main credit release officers regarding the transfers described above, The Ministry of Public Finances is authorised to approve the repartition on quarters of the transfers of budget credits and engagement credits.

Conclusions

The measures for economic support undertaken by the state in the context of the pandemics caused by the new corona virus are mainly focused on SMEs.

The specific measures instated with respect to SMEs comprise, on one hand, the expansion of the financing programme IMM INVEST ROMANIA and instating additional facilities to the SMEs in this respect and, on the other hand, regulating certain contractual relationships essential for SMEs. However, the instated measures are far from perfect, and the SMEs must effectively asses the manner in which they should reach to them:

(i) SMEs should have in mind that accessing the programme IMM INVEST ROMANIA, even under the current conditions, represents a form of financing the activity which must be reimbursed and which entails a series of significant obligations and risks;

(ii) Enforcing the provisions of EGO no. 29/2020 with respect to the contracts concluded by the SMEs is not absolutely favourable to the SMEs and it implies inclusively the risk generated from the conduct of the other party of the contract and potential disagreements could easily generate litigation;

The main measures with general applicability over the business environment are represented by fiscal facilities, which mainly encompass the suspension or postponement of the obligation to pay certain taxes.

Altogether, EGO no. 29/2020 was concerned on facilitating the access to funding for territorial administrative unities and other entities in the field of public health, in order to ensure the financial necessities for the sanitary system and other public authorities or institutions with having attributions in the fight against the pandemic.