Last month, on 29th April 2015 the Deputy Chamber has adopted a draft law, regarding the encouragement for business investors called “angel investors”. There are envisaged fiscal measures for investors, called business-angels, who want to invest in small companies as defined by Law no. 346/2004 regarding the establishment and development for small and medium enterprises, with subsequent amendments. Business angels are individuals, usually with business experience, who provide capital for start-up companies.
Firstly, in order to benefit of fiscal facilities, the Romanian company that will receive the investment, must fulfill cumulative the following conditions:
- The company must have the legal form as “limited liability”, in accordance to article 2 of the Law no. 31/1990 regarding the companies;
- The investment must be made in an autonomous company; According to the Law no. 346/2004 regarding the formation of small and middle companies, a legal entity is autonomous if it holds less than 25% of the share capital in one or several other companies or if one or more companies do not hold more than 25% of its share capital.
- The company is not facing the insolvency procedure, bankruptcy or an arrangement plan concluded with the creditors.
The legislator has the intention to help and encourage the investment in small companies, but not all companies can enjoy these legal provisions. Activities like, insurance and reinsurance, financial service, any other financial activities, gambling; steel manufacturing or steel trading; coal manufacturing or trading; maritime and fluvial shipbuilding; production or trading of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, narcotic and psychotropic substances or any kind of consultancy services.
Secondly, the investor must satisfy also several conditions, and the most important one is to be an individual outside the company who do not have crimes or facts registered in the fiscal record. The investor has not been declared incapable or has not been convicted for offenses such as: corruption, dilapidation, tax offenses under the Law no. 656/2002 on preventing and sanctioning money laundering, or under the Law no. 31/1990 regarding the companies.
Regarding the investment, the draft of law has had different thresholds but the final version, proposed and approved by Deputy Chamber, establishes a mandatory investment between 3,000 Euros and 200,000 Euros. The equivalent in lei (RON) of the investment is calculated at the exchange rate provided by the National Bank of Romania from the date of the capital increase.
The investment is carried out strictly in order to fulfill the main activity of the company and the business plan.
An interesting condition is that as a result of the increase capital, the investor must not hold more than 49 % of the share capital. It will be interesting to see how such condition will be respected, because most companies have a share capital of 200 (two hundred) lei, approximately 44 Euros.
In order to fulfill this condition, requested by the law, the share-capital of the company must have a value of approximately 28.000 lei.
The investor will benefit of fiscal facilities consisting in the exemption from tax on dividends for three years after the investment was made. The facility is granted for the dividends corresponding to the shares obtained as a result of the capital increase. The exemption is applicable only if the investor does not alienate the shares before the expiry of three years from the date of their acquisition. Besides this condition, there are also other provisions that must be respected in order to benefit of the fiscal facilities. Thus, the Article of Incorporation must contain several clauses, such as: (i) the participation to profits and losses proportional to the percentage of shares held by each associate; ii) the decisions regarding the business plan and the renouncement to share the profit obtained as a result of the investment, must be taken unanimously by all associates; iii) the investment is not distributed to the shareholders three years after the business angel investor registration at Trade Register; iv) the company has no debts to the general budget on the date of shares sale to the individual investor.