Financial statements give rise to legal obligations

When the approved annual financial statements indicate that a company’s net assets have fallen below half of its subscribed share capital, this is no longer merely a financial issue. This accounting finding triggers corporate obligations and restricts certain decisions that would normally fall within the remit of the directors and shareholders.

The company must confirm this threshold before distributing dividends, repaying intra-group loans or taking decisions relating to share capital. Administrators are obliged to incorporate this check into the procedure for approving the financial statements and into the legal supervision of the company.

As soon as the approved financial statements confirm a reduction in net assets, the administrators must immediately convene an extraordinary general meeting. At the same time, they must submit a report on the company’s financial position and the available options.

The shareholders must decide whether to wind up the company or to rectify the imbalance. Should they choose to continue operations, the company must either restore its net assets or reduce its share capital by the amount of the losses that could not be absorbed from reserves.

The distribution of dividends is restricted

The company is not permitted to distribute dividends from the current financial year’s profit if its net assets fall below the statutory threshold. Distribution becomes possible only once the net assets have been restored to at least half of the subscribed share capital. Furthermore, if the company has carried-forward accounting losses, it must first set aside statutory reserves, cover the losses and form statutory reserves before distributing any profit. Dividends paid unlawfully must be recovered from the shareholder who received them.

In the case of a group of companies, this restriction may influence the policy on repatriating profits to the parent company. The group can no longer base its budget solely on anticipated distributions from its Romanian subsidiary. A resolution by the shareholders regarding dividends cannot override the legal prohibition.

Repayment of intra-group loans may be suspended

The company may not repay loans received from partners, shareholders or other affiliated parties whilst its net assets remain below the statutory threshold. This prohibition applies even if the loan has reached maturity and the company has the necessary cash available. In practice, this rule alters the effects of intra-group financing agreements. The contractual due date no longer guarantees payment.

Cash pooling mechanisms, repayment schedules, centralised financing and the group’s liquidity forecasts may also be affected. The parent company must bear in mind that the sums made available to the subsidiary may remain tied up for a longer period or may be converted into capital.

Shareholders’ claims may need to be converted into capital

If the company owes money to its shareholders and fails to rectify the situation within the time limit laid down by law, it must increase its share capital by converting these claims.

This conversion has significant corporate implications. It may increase the creditor’s stake, compared with the one previously held, in terms of shareholdings, voting rights, control and exit mechanisms.

Fines

Act No. 239/2025 introduced these obligations into the Companies Act No. 31/1990 and explicitly extended them to limited liability companies. The prohibited repayment of loans may be penalised with a fine of between 10,000 and 200,000 lei. Up to the amount repaid, the company and the beneficiary shareholder may be jointly and severally liable for outstanding tax liabilities.

Not reconstituting the net assets may be subject to a fine of between 10,000 and 200,000 lei, whilst failure to carry out the mandatory conversion may result in a fine of between 40,000 and 300,000 lei. In certain situations, an interested party may also request the dissolution of the company.

Impact on day-to-day operations

Although these rules have been in force since the start of the year, their effects are only now being felt, as the financial statements for the previous financial year constrain decisions in the current year. A company may have cash, but cannot use it to pay dividends or to repay intra-group loans. In some cases, the group must retain the funding at subsidiary level or convert the receivable into share capital.

Companies must monitor net assets in their budgeting, in their intra-group funding policy and prior to the approval of payments. These rules may affect the group’s liquidity, investments and operational flexibility.

Strategic corporate governance, beyond compliance

Viewed strictly from a legal perspective, the reform introduced by Law No. 239/2025 may seem merely an exercise in compliance: check the net assets, apply the restriction, record the penalty. However, from the perspective of strategic governance, the stakes are different: the law transforms an accounting indicator into a catalyst for managerial decisions which, until now, could be postponed or dealt with informally.

The first effect concerns the planning and reporting cycle. Group budgeting can no longer be based on the assumption that cash flows circulate freely between the subsidiary and the parent company. In practice, net assets become a governance threshold that must be included in the reporting schedule, alongside the usual financial indicators — anticipated in the annual budget planning process, not merely verified retrospectively after the financial statements have been approved.

The second effect concerns the architecture of intra-group financing. In many structures, intra-group loans have functioned as a flexible tool for allocating capital — faster, less costly and more flexible than a capital increase. The new rule reduces their predictability: the contractual maturity no longer guarantees repayment. From a managerial perspective, this means that a subsidiary’s financing structure must be designed with a buffer — either additional capital from the outset, more prudent limits on intra-group borrowing, or alternative mechanisms that do not depend on direct repayment.

The third effect is evident in corporate governance. The conversion of shareholders’ claims into capital is not merely an accounting formality — it amounts to a redistribution of power. A creditor who becomes a majority shareholder through conversion may alter the balance of power amongst shareholders, affect exit or succession plans, and influence future investment negotiations. This possibility must be treated as a strategic ownership decision and discussed before the restoration of net assets becomes mandatory, not afterwards.

Finally, there is also a signalling effect. A subsidiary that is unable to distribute dividends or repay an intra-group loan sends a message to the group, banks and potential investors, even if the reason is purely legal and liquidity is available. Managing this signal, before it is misinterpreted, is as much a matter of strategic management as it is of legal compliance.

For management teams, the conclusion is clear: net assets are no longer merely an accounting figure. They are becoming a decision-making threshold that must be integrated into strategic planning, the group’s financing structure and governance discussions — anticipated, not merely noted.

This analysis is of a general nature and focuses on corporate legal implications. Any measure must be assessed in the light of an accounting, tax and financial analysis of the specific situation.

Authors:
Ioana Hațegan
Ioana Chiper Zah