Skip to content

New insolvency regime for local governments

15 July 2013

In May 2013, the Romanian Government passed an emergency law regulating, for the first time in Romania, the position of local governments in financial difficulties.

A financial crisis in local government (such as severe cash shortfalls) would trigger an internal procedure (creditors/courts are not involved) during which a crisis management plan will be implemented, preventing local governments from taking decisions which increase their financial obligations.

A new insolvency procedure broadly resembles the judicial restructuring procedures applicable to ordinary corporates, however, the role of the creditors in this insolvency procedure is significantly diminished.

Measures against late payments

In April 2013, the Romanian Parliament approved a new law designed to combat late payments in certain business contracts (the Law)5. The Law regulates maximum deadlines for payments, periods during which default interest will accrue (unless agreed otherwise) and an increased default interest rate that is applied to late payments.

A noteworthy provision is that abusive clauses (ie clauses clearly unfair to the creditors) will be deemed null and void, irrespective of whether or not the agreement was concluded before or after the entry into force of the Law.

New requirements for notarisation – in rem rights

In April 2013 there was an important amendment to real estate legislation concerning immovable assets and in rem rights related thereto. By this amendment, certain dealings within rem rights must be concluded in notarised form, otherwise they will be considered null and void.

Footnotes

5 The Law implementing Directive No 2011/7/EU on combating late payments in commercial transactions.

Contributed by Andreea Burtoiu and Bianca Nastase