Private placement rules and law in Romania

There is no specific definition of private placement under Romanian law and the concept of “private placement” is generally interpreted in contrast to public offering and by referring to the exemption from the requirement to publish a prospectus under the provisions of Law No. 24 / 2017 on Financial Instruments Issuers and Market Transactions, as amended by Law No. 237/2022 (“Financial Instruments Issuers and Market Transactions Law”), implementing the Prospectus Directive (as amended). According to the Financial Instruments Issuers and Market Transactions Law, a placement can be done without the obligation to publish a prospectus for the following 

1. Types of offerings:
   • an offering is made solely to qualified investors; and/ or
   • an offering is made to fewer than 150 legal or natural entities, other than the qualified investors, per Member State; and / or
   • an offer of securities addressed to investors who acquire securities for a consideration of at least the RON equivalent of EUR 100,000, for each separate offer; and/or
   • an offer of securities whose denomination per unit amounts to at least the RON equivalent of EUR 100,000; and/or
   • an offer of securities with a total consideration in the EU of less than the RON equivalent of EUR 100,000, which limit shall be calculated over a period of 12 months;
2. Types of securities:
   • shares issued in substitution for shares of the same class already issued, if the issuing of such new shares does not involve any increase in the issued capital;
   • securities offered in connection with a public purchase offer/takeover bid by means of an exchange offer, provided that a document is available containing at least the information laid down in Regulation (EC) No 809/2004 of the Commission from April 29, 2004 of applying Directive 2003/71/EC of the European Parliament and Council regarding the information contained in the prospectus, inclusion of information by transmission, publishing of the prospects and distribution of the press releases with advertising purposes, depending the type of issuer and securities provided for exchange purposes;
   • the securities are offered, or which are to be offered, as the result of a merger or dissolution, provided a document containing information deemed to have the content provided for in the regulations issued by the Romanian Financial Supervisory Authority (“RFSA”) is supplied; and / or
   • dividends are paid to existing shareholders in the form of shares from the same class as those giving rise to the right to such dividends, provided that a document containing information regarding the number and nature of the shares, as well as the reasons and features of the offering, is supplied.
   • securities offered, allotted or to be allotted to existing or former members of the management or employees by their employer or by the parent undertaking or by an affiliated undertaking, provided that the undertaking has its head or registered office in the EU and that a document is made available containing at least the information laid down in the regulations issued by the Romanian FSA.

Under the Romanian law implementing UCITS and related directives (i.e. Directive 2009 / 65 / EC, Directive 2010 / 43 / EU, etc.), open-ended funds units cannot be distributed other than by a prospectus authorised by the Romanian FSA/ passported into Romania. Closed-end funds established in the form of joint stock companies may qualify for the exemptions from the obligation to publish a prospectus, subject to certain conditions as mentioned under the paragraphs listed above.

The Financial Instruments Issuers and Market Transactions Law provides a definition of qualified investors. Pursuant to the provisions of this law, qualified investors are the persons who are either qualified as professional clients, or are treated, on demand, as professional clients or are recognized as eligible counterparts, with the exception of the cases when these latter persons have requested not to be treated as professional clients.

Law 74 / 2015 (as amended, including by Law 237/2022), together with Romanian FSA Regulation no. 10 / 2015 (as amended), and Romanian FSA Regulation no.18/2021, transpose the AIFMD into the Romanian legislation. Law 74/ 2015 regulates the marketing activities undertaken by EU and non-EU AIFMs in Romania, these being defined as an offer or placement, direct or indirect, conducted at the initiative of an AFIM or in the name of an AIFM, of funds units of an AIF under its management and addressed to investors domiciled or headquartered in a member state.

Romania have adopted Law No. 243/2019 regarding the regulation of alternative investment funds (“AIFs Law”), and, together with FSA Regulation No. 7/2020, as amended by Regulation 20/2020 creates a legal framework for establishing, authorising and functioning of alternative investment funds. The AIF Law provides separate regimes for the two different type of entities that may be created under the law – the contractual entity and the investment company. The AIFs for professional investors includes, inter alia, private equity AIF, speculative AIF and AIF specialized in real estate investments. AIF may distribute the shares or membership units to without an authorised prospectus, but in accordance with the subscription and redemption policy made by its AIFM.

The offering document of an AIF which attracts private capital from professional investors is notified to RFSA with the request to authorise the AIF.

For an AIF which attracts funds from retail investors, a prospectus should be authorised by RFSA.

EEA AIFMs may commence pre-marketing AIFs which are not yet established or established but not yet compliant with the applicable marketing procedures, to potential professional investors in Romania, provided that the EEA AIFM sent a pre-marketing notification letter to their home State competent authority within two weeks of starting such pre-marketing activity, which in turn is directly transmitted to the RFSA. 

The information provided to potential professional investors within the context of the pre-marketing activity should not enable such investors to commit to acquiring units or shares of the pre-marketed AIF or amount to a subscription form or similar document, whether in draft or final form. 

Any subscription by professional investors, within 18 months of the AIFM having begun pre-marketing, to units or shares of a AIF referred to in the information provided in the context of pre-marketing, or of a AIF established as a result of the pre-marketing, shall be considered to be the result of marketing and shall be subject to the applicable notification procedures with respect to marketing activities.

Reverse solicitation is not explicitly accepted or captured by the relevant legislation. On a case-by-case basis, it could be argued that, as a matter of principle, this should not be considered a marketing activity, especially if it refers to the cross-border acquisition of fund units. Similar reasoning suggests that an approach made by a potential investor on an unsolicited, cross-border basis will also not be regarded as a breach of marketing and authorisation requirements.

By way of principle from a civil law perspective, an agreement concluded by breaching the mandatory provisions of law regarding placement would be annulled. Regulatory sanctions may result in fines of up to 10% of the yearly income of the company. The FSA could also suspend or withdraw the functioning authorisation of the issuer. Breach of the mandatory provisions regarding the authorisation regime may result in criminal sanctions.

Generally, the public offering and prospectus requirements should be observed by all issuers for securities tradable on a regulated market and/ or multilateral trading facility (“MTF”) i.e. shares, bonds, rights, etc.

Exemptions for these obligations related to non-fund investments are briefly described above, for example:

1. the securities offered, or which are to be offered, following a merger or dissolution, provided that a document containing information deemed to have the content provided for in the regulations issued by the Romanian FSA is supplied;
2. dividends paid to existing shareholders in the form of shares from the same class as those giving rise to the right to such dividends, provided that a document containing information regarding the number and nature of the shares, as well as the reasons for and features of the offer, is provided;
3. offerings where the nominal value is a minimum of EUR 100,000;
4. offerings where the total amount in the EU is a maximum of EUR 100,000;
5. shares allotted in stock option plans.

In accordance with Law 74 / 2015 for the implementation of the AIFMD, its provisions would not apply to the following entities:

1. holding companies;
2. pension funds;
3. supranational institutions such as, by way of example, EBRD, ECB, IMF;
4. the National Bank of Romania;
5. national, regional or local authorities or other institutions which manage funds supporting social services and pensions;
6. employee’s savings or participation schemes;
7. securitisation vehicles.

As mentioned above, no definition of private placement is provided under Romanian law but it is generally interpreted that an exemption from the obligation to publish a prospectus may benefit either qualified investors such as professional clients or regulated institutions; or any non-qualified investors within a group of less than 150 offerees.

On 2 August 2021, the Cross-border Distribution of Funds Framework (the “CBDF Framework”) on the distribution of funds on a cross-border basis within the EU was brought into effect.

The CBDF Framework comprises two main legislative normative acts, respectively:

1. Directive (EU) 2019/1160 amending Directives 2009/65/EC and 2011/61/EU with regard to cross-border distribution of collective investment undertakings (“CBDF Directive”) and
2. Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014, which was supplemented by the Commission Delegated Regulation 2021/955 on implementing technical standards (ITS) (“CBDF Regulation”).

Whilst the CBDF Regulation is directly applicable in Romania and fund managers must ensure compliance with the requirements provided within the Regulation, the provisions of the CBDF Directive has been transposed into Romania legislation by Law 237/2022 which is amending and supplementing GEO 32/2012.