Direct foreign investment in Romania has decreased recently, as noticed by the National Institute of Statistics. The top foreign investors in Romania have become Romanian immigrants who send money to their relatives in the country.

In this context, one of the most experienced foreign lawyers specializing in investing in Romania, Mr. Nicholas Hammond, shared his thoughts on best practices to approach and mistakes to avoid when investing in Romania as a foreigner. His firm, Hammond Partnership, was the first foreign law company to open an office in Bucharest, and this was quite an adventure, as he remembers.

As a Romanian law firm with a wide range of clients from major industry leaders to small startups, we see our role as Romanian lawyers in Bucharest as to guide, lead, and sometimes contradict our clients and point out potential issues to be resolved.  As a solicitor fresh out of London, I came to Romania to open a Romanian law firm, and it was a new experience.  Opening the first foreign law office in Romana after 1989 was an adventure. To still be here some 30 years later is a success for my firm, and I am proud of it. There have been some missteps on the way, but as we emphasize to all our Romanian and international clients, Romania is still a wonderful place to do business.    Nicholas Hammond, Senior Partner at Hammond Partnership

According to Nicholas Hammons, it is essential to understand the local laws and society and how Romanian business works before going into business. Romanian company law differs from company law in England and the United States. The ways of doing business are vastly different.

The legal liability of Romanian company directors (administrators) differs from that of an English company director. The responsibilities of a director are different, as are their powers. The structure and authority in business are different, as is the thinking behind the law. It would be best if you had a clear explanation of the liabilities of an administrator before taking on this responsibility. This is not to advise you not to become a director of a Romanian company but to emphasize that you need to understand what it entails. A Romanian company’s taxation rules appear straightforward, but again, take advice. 

Nicholas Hammond also approached one sensitive topic: why Romanian lawyers are not so successful in certain situations when foreign investors need advice on opening a business in the country.

There are many Romanian lawyers who, unfortunately, do not understand the thinking of a foreign investor and, therefore, misadvise them. Too often, assumptions are made regarding their client. It is natural for investors to assume that if someone speaks English, the Romanian lawyer or the Romanian law firm delivers advice in the same manner and with the same understanding as they would receive in England. Just like any other relationship, the relationship between a lawyer and his client is based on trust and clear communication. Still, often, there is a vast difference between what is said and what is understood. Words used by a natural English speaker often do not mean the same for a Romanian speaker. Context can produce disastrous miscommunication. For example, “I want“ in Romanian is a translation of “I would like.” This can have an entirely different impact in English and on a native English speaker.Nicholas Hammond on why is better to choose an adequate law firm when investing in Romania

He advises that when you come to Romania to invest, write as many questions on paper as you can, ask your Romanian lawyer the questions, and seek to understand the answers. The price for fully answering their questions could save you higher fees. Do not choose your lawyer on price but on an evaluation of the advice that they give now and can give in the future. 

The US Beneficial Ownership Information (BOI) Report is a crucial development, particularly relevant for those in the Romanian business sector with connections to the United States. This report has become a focal point in corporate compliance and transparency, and this is something not only business owners but also lobbyists and advocates should be aware of.

From January 1st, 2024, it’s mandatory for US-based companies, under specified conditions, to submit the BOI Report. The purpose of this document is to transparently reveal the real owners and key decision-makers of these companies.

This report, officially known as the Beneficial Owner Information report, is a requisite filing for every US-based company with the Financial Crimes Enforcement Network (FinCEN), an agency under the U.S. Department of the Treasury. It aims to disclose the identities of beneficial owners – those who ultimately own or exert control over the company – along with company applicants and the individuals who first registered the entity in the US.

Filing a BOI report requires companies to detail information about their structure, their beneficial owners, those who ultimately hold ownership or exert control, the company applicants, and the individuals who established the company in the US.

Under this legislation, a ‘beneficial owner’ is defined as any individual who:

1. Holds significant control over the company, or
2. Possesses or controls a minimum of 25% ownership in the company.

Individuals capable of making pivotal decisions for the company are considered to hold significant control.

While there are certain exemptions, the introduction of this legislation marks a critical step by the US in its efforts to combat financial crimes like money laundering and tax evasion.

For those uncertain about the applicability of the BOI Report to their situation, consulting firms that specialize in the BOI Report process is highly recommended. They provide expert advice and insights into navigating this new regulatory landscape.

We recommend working with Corporate Mile, an American-based legal company which helps entrepreneurs clarify all aspects of their obligation to fill out a BOI Report or not if part of the exemptions to BOI filling. For all the questions regarding BOI and its impact on your business, if you have set up a company in the US, you can contact them directly or consult any other similar reliable company.