Context Note: This paper was written in response to a high-profile investigative report published by a prominent media outlet, which exposed systemic irregularities in corporate registrations. It aims to analyse the legal and administrative repercussions of those findings, with particular focus on the subsequent evolution of practice within the Romanian Trade Registry. By examining the tension between fraud prevention and the principle of legality, the paper highlights how administrative reactions to public scrutiny may generate unintended legal and economic setbacks.

The starting point of this written work is a report by Recorder, a media outlet known for uncovering institutional irregularities. The investigation revealed several companies registered with the Fiscal Authority and the Romanian Trade Registry whose declared business activities and reported profits were manifestly inconsistent.

Further inquiry exposed a systematic scheme of corporate identity theft: individuals’ personal data had been used without consent to create fictitious companies, which were later renamed and transferred through fabricated share-sale agreements. These transactions were nevertheless recorded by both authorities without meaningful scrutiny.

The case sparked public debate about the scope of administrative responsibility in verifying the legality of registration documents and prompted a noticeable shift in the Trade Registry’s practice, which, apparently seeking to avoid future liability, began imposing additional formal requirements not grounded in the law.

The aftermath of this investigation started to feel its effects in day-to-day practice of the Romanian Trade Registry (i.e., Oficiul Național al Registrului Comerțului – ONRC). In an attempt to strengthen its internal procedures, control mechanisms, and avoid assuming liability, the Romanian Trade Registry began to apply excessive requirements when handling corporate registrations. This institutional change became evident in a case I personally encountered, concerning a Share Purchase Agreement (i.e., “SPA”) between two companies.

The transaction involved the transfer of all shares of a limited liability company (the ”Company”), in which the sole shareholder, a Cypriot company, sold its entire participation to a Romanian company. All contractual documents, including the SPA and the shareholder resolutions of both companies, were duly signed and submitted for registration. However, the Trade Registry issued an observation requiring the physical presence of the signatories before the registrar, or that all documents be either notarised or lawyer-certified. Such issues bear no legal basis as the Companies’ Law no. 31/1990, nor does the secondary legislation governing the registration formalities prescribe such certification for share transfers.

Despite providing explanatory notes and attending an audience with the Registry officials, the files were initially withheld on procedural grounds, but were ultimately admitted, only under the express recommendations that future submissions should comply with the Romanian Trade Registry’s new and upcoming “internal requirements”.

This episode reflects a broader pattern of administrative overreach, whereby authorities introduce extra-legal conditions under the guise of “risk management”. Although motivated by concerns about fraud prevention, such practices blur the boundary between statutory legality and administrative discretion.Central to this issue is the principle of legality, a foundational norm of Romanian administrative law, which requires public authorities to act exclusively within the limits set by statute. Any requirement lacking explicit legal basis constitutes an excess of power under Article 1(5) of the Romanian Constitution and is actionable under Law no. 554/2004 on administrative litigation. Departures from this principle erode legal certainty and proportionality, both of which underpin the stability of corporate law.

In the context of corporate registration, this principle means that the Romanian Trade Registry must apply only those procedural conditions expressly provided by law. The authority may verify whether the documents submitted are complete and legally compliant, but it cannot create additional formal requirements that extend beyond the letter of the law. The imposition of mandatory notarisation or lawyer certification for share purchase agreements (SPAs), when such formalities are not prescribed by any legal act, therefore represents an instance of administrative overreach.

With respect to the legal basis for such operations, the applicable framework derives from Law no. 265/2022 concerning the Romanian Trade Registry and the registration of legal entities. Although the law does not expressly regulate the registration of SPAs, it provides general procedural rules that apply to all corporate amendments. In particular, Article 30(b), Article 84, and Article 105(2) define the authority’s role as verifying the legality and completeness of submitted documentation. These provisions limit the Registry’s control to ensuring that formal conditions are met and that the documents are coherent and properly signed. They do not authorise the creation of additional substantive obligations, such as requiring authentication by a notary or attestation by a lawyer. By exceeding these boundaries, the Trade Registry effectively transforms a purely administrative verification process into a quasi-notarial or quasi-judicial one, thereby altering the legal nature of the institution’s function. This form of defensive administration,where public authorities, motivated by fear of liability, introduce restrictive or excessive requirements, undermines the predictability and efficiency of administrative procedures. Rather than enhancing legal security, such practices generate uncertainty for practitioners and investors, leading to inconsistent enforcement and unequal treatment between applicants.

Beyond the legal implications, these administrative practices carry significant economic consequences. By introducing redundant formalities and unpredictable procedural hurdles, the Romanian Trade Registry reduces the overall attractiveness of corporate transactions, particularly share purchase agreements (“SPA”s). Investors and practitioners alike depend on procedural predictability and swift execution, key features that define a jurisdiction’s business climate.

When transactions become subject to discretionary or inconsistent administrative interpretation, the risk premium associated with corporate restructuring increases. Legal uncertainty discourages both domestic and cross-border M&A operations, as parties may perceive the Romanian registration process as burdensome or unreliable. In this context, formalistic risk aversion becomes counterproductive: rather than ensuring legality, it deters legitimate investment and undermines Romania’s competitiveness as a business environment.

At the national level, the Romanian legislature appears to be re-evaluating the very structure of administrative control in corporate registrations. A draft law currently under debate in the Senate seeks to partially align with the approach informally promoted by the Trade Registry, by simplifying formalities for companies whose annual turnover does not exceed 400,000 lei (approximately €80,000). However, this alignment is only partial and may inadvertently create a legislative vacuum. Corporate resolutions or other acts adopted by companies below this fiscal threshold would no longer be subject to any statutory requirement of attestation or notarisation, yet the Trade Registry could still demand such formalities in practice, invoking fraud prevention as justification. This inconsistency would perpetuate uncertainty, leaving room for discretionary interpretation rather than ensuring clear, predictable rules.

This initiative reflects a growing awareness that over-regulation can undermine both efficiency and competitiveness, and that administrative energy should be redirected toward areas of genuine fiscal or social risk. Yet the proposal also reveals a persistent tension in Romania’s institutional culture: the tendency to view the Romanian Trade Registry not as a facilitator of business activity, but as an instrument of fiscal surveillance, a mechanism serving the interests of tax collection and macroeconomic oversight rather than those of market fluidity.

By contrast, the UK’s Companies House model, grounded in transparency and efficiency, maintains the balance between accountability and accessibility. Its predictability reinforces transactional trust, a prerequisite for the vitality of corporate markets.

From a comparative standpoint, the United Kingdom’s Companies House provides an instructive contrast. Under the Companies Act 2006, Companies House functions primarily as a registrar, not as a supervisory authority. Its responsibility is limited to verifying that statutory filings are complete, properly formatted, and consistent with procedural requirements. It does not assess the substantive legality or commercial soundness of the underlying transactions.

The UK registrar operates under a model of minimal formalism and ex post accountability, founded on two core principles of the common law tradition:

– Private autonomy, under which the parties themselves bear responsibility for the legality, accuracy, and good faith of their acts; and
– Post-transactional liability, which allows false statements or fraudulent filings to be sanctioned retrospectively through civil or criminal proceedings. This is explicitly safeguarded by statutes such as Section 1112 of the Companies Act 2006, which establishes a criminal offense for making a materially misleading, false, or deceptive statement to the registrar.

This approach reflects a profound trust in contractual freedom and the self-regulation of economic actors. By placing responsibility primarily on companies and their advisers, the law fosters a business environment grounded in efficiency, transparency, and predictability — all essential for market confidence and transactional speed.

A key illustration of this logic appears in the regime of pre-emption rights for share issues. Under Section 561 of the Companies Act 2006, shareholders of an unlimited or public company benefit from statutory pre-emption rights, meaning that new equity securities must first be offered to existing shareholders in proportion to their holdings. This rule safeguards equality and prevents dilution of ownership.

However, the flexibility for private companies is embedded in Section 567, which expressly allows them to exclude or modify these statutory rights through provisions in their articles of association. Thus, while the law provides a default safeguard to prevent abuse in widely held or publicly traded entities, it simultaneously recognises that private companies, often characterised by close relationships among shareholders and reduced public risk, should retain freedom of contractual arrangement.

This distinction illustrates the UK’s deliberate balance between legal protection and economic pragmatism. The state establishes baseline rules to protect transparency and fairness, but it also respects the autonomy of private parties to depart from those rules when the nature of their corporate structure justifies it. Importantly, the registrar plays no discretionary role in this process. It neither approves nor disapproves the exercise of pre-emption rights; its function is to record, not to judge.

Such calibrated flexibility ensures that legality is determined by statute and contract, not by administrative preference. It avoids the pitfalls of discretionary overreach and fosters an environment in which compliance and efficiency coexist. The result is a legal culture where predictability replaces procedural anxiety and where administrative bodies act as facilitators rather than gatekeepers of business activity.

The comparative analysis between Romanian Trade Registry and the United Kingdom’s Companies House reveals two distinct legal philosophies: one built on control through caution, the other on order through clarity. The Romanian model, driven by institutional self-protection, translates legality into a series of formal hurdles; the British model, by contrast, translates legality into trust – in the law, in institutions,and in the parties themselves.

Romania now stands at a crossroads. The draft law under debate in the Senate signals an intention to “simplify”. Yet by aligning its procedures with fiscal thresholds rather than with legal principles, therefore risks reducing the Trade Registry’s function to that of a fiscal checkpoint, rather than a neutral legal body ensuring corporate transparency.

Excessive formalism in corporate registration increases transaction costs, delays restructuring processes, and introduces uncertainty into ownership transfers. From a financial perspective, such frictions raise the cost of capital and deter both domestic and cross-border investment. The comparison therefore shows that the UK model succeeds not because it is less regulated, but because its regulatory boundaries are clearly defined. Companies House operates within a narrowly circumscribed statutory mandate, which promotes predictability and limits discretionary interference. Romania’s Trade Registry, by contrast,compensates for institutional risk aversion through unlegislated formalism, thereby weakening the rule of law and introducing economic frictions. The contrast illustrates that administrative efficiency arises not from increased control, but from disciplined adherence to statutory limits.

Ultimately, the lesson of this comparison is simple: the rule of law is not strengthened by multiplying signatures, but by multiplying certainty. The difference between bureaucracy and governance is not paperwork, it is the purpose. And legality, when stripped of fear and restored to clarity, becomes not a brake on commerce, but its greatest guarantor.

Elena Mihaela Șolcă