Directors’ Duties in Romania

>> Liabilities and Penalties in Romania

If a director negligently or intentionally violates his duties he is liable to the company for damages, jointly and severally with any other director who is also in breach of their duties. A director can be held liable for payments made

by the company after over-indebtedness was ascertained or illiquidity arose, particularly where those payments would not have been made by a diligent and prudent businessman. In exceptional cases, the directors can also be liable directly to the shareholders or third parties.

In several cases, misconduct of a director can lead to criminal liabilities, eg in case of:

  • reporting false information to the commercial register or in the reports or communications intended for the public, regarding the company’s economic conditions
  • divulging of business secrets
  • failure to comply with bookkeeping and accounting obligations
  • failure to file for insolvency when required by law
  • failure to convene the general meeting of shareholders when provided by the law
  • use of the company’s assets contrary to the company’s interests or in his own interest, with the intention of favouring another company in which he holds an interest
  • generating the insolvency of the company, causing a delay in filing for insolvency or preferential treatment towards certain creditors and/or debtors

Limitation of liability

In principle, the director cannot be held personally liable if the actions undertaken by him were approved by a shareholder resolution, unless such actions are illegal. In such case the director is obliged to ignore any instructions received by the shareholders.

A shareholder resolution can grant full discharge thereby releasing a director from his liability to the extent that the shareholders are or could have been aware of the facts that would have led to a claim of the company against the director. This does not apply to criminal offences or liabilities resulting from gross negligence or wilful misconduct.

The director is personally liable only to third parties if he acted outside the boundaries of his powers of representation and if such third parties were not aware of this situation or if the company did not ratify the director’s actions.

Delegation of authorities

If specifically allowed by the bylaws the  company, several authorities of a director can be delegated to holders of a special proxy or authorized representatives. Nevertheless, the directors remain responsible for observing their obligations and can, hence, be held personally liable for the actions of their delegates in case the company did not approve of the delegation of authority. Otherwise, the director is liable for the due care and diligence in selecting the proxy/ authorized representative.

Directors and officers (“D&O”) insurance

D&O insurance can be obtained against the liabilities of the director vis-à-vis the company. Under Romanian law, third parties generally do not have a direct claim against the managing director, only against the company. The creditors of the company may hold the directors liable in case of bankruptcy of the company. The cases where a third party may have a direct claim against the company are not generally covered  by D&O insurance.

Please note that the D&O insurance does not generally protect the director against his criminal liabilities or against acts committed wilfully.

Latest version updated 9th April 2018

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