Nullity of legal entity

Nullity of legal entity in Romania

Law Office Alina Szilaghi offers complete assistance and representation services in the matter of nullity of the legal person in Romania.

Nullity of legal entity

The nullity of the legal person is governed by the provisions of the New Romanian Civil Code and Law on companies regulates the cases and effects of the company’s nullity.

The delimitation of the categories of nullity leads to two types in terms of legal persons, namely:

a) absolute nullity – represents a sanction of non-compliance, when the legal act is concluded, with a legal norm that protects a general interest;

b) Relative nullity – is a form of sanctioning the non-observance, at the time of the conclusion of the legal act, of a legal norm that protects the individual, private or personal interest.

The causes of nullity are provided by art. 196 of the New Romanian Civil Code, it states in particular that the following provisions are sanctioned with absolute nullity:

  • the situation in which the act of establishing the legal person is missing or it has not been concluded in compliance with the authentic form in the cases provided by the law;

In this respect, Law on societies establishes that the authentic form of the company’s constitutive act is necessary if among the assets subscribed as a contribution to the share capital a real estate is found in the case of the constitution of a joint-stock company or of a limited partnership, as well as in the case of the public subscription of a joint-stock company.

  • the object of activity is unlawful, contrary to good morals or public order – it is natural that the non-compliance with these provisions is sanctioned with absolute nullity because the interest protected by these legal norms is of a general,
  • in the absence of the administrative authorization that is necessary for the establishment of the legal person;
  • the situation in which the establishing act does not establish the headquarters, the name or the object of activity of the legal person;
  • the act of setting up the legal person does not provide for the contributions of the founders or associates or the subscribed and paid-up share capital;
  • where the legal norms regarding the initial patrimony or the minimum, subscribed and paid-up share capital have been violated;

Therefore, the causes of relative nullity established by the New Romanian Civil Code are those which it does not foresee under the sanction of absolute nullity, namely:

  • the hypothesis in which all founders or associates were incapable, according to the law, at the moment of establishment of the legal person;
  • when the minimum number of associates or founders stipulated by the law occurred;
  • there have been violated mandatory legal provisions established under the sanction of the nullity of the act of setting up the legal person.

However, it may be observed that some causes of nullity can only be applied, for example, to associative societies, when it comes to non-observance of legal rules on associates.

Cases of invalidity established by Law no. 31/1990 on societies are similar, referring to non-compliance with the following legal rules:

  • if the constituent act is missing or it has not been signed in an authentic form (examples in this respect are to be found in the previous paragraphs);
  • all founders were incapacitated at the time of the formation of society;
  • the object of activity of the society is unlawful or contrary to public order;
  • the situation where the conclusion of the delegated judge for registration of the company is missing;
  • lack of legal administrative authorization for the incorporation of the company;
  • the articles of association do not establish the name of the company, the object of activity, the subscribed share capital or the contributions of the associates;
  • non-observance of the legal provisions regarding the minimum, subscribed and paid-up share capital;
  • non-observance of the minimum number of associates established by law.

According to the provisions of the New Civil Code mentioned above, the nullity of a legal person can be ascertained or declared by the court. From the date on which the judgment declaring or invalidation has become final, the legal person will cease without retroactive effect and will enter into liquidation.

The judgment will also establish the liquidators and it will be communicated for the purpose of being recorded in the public registers in which the legal person was registered or mentioned.

The founders or associates will be liable for the liabilities incurred by the legal entity from its establishment and up to the date when the judgment is registered in the public registers.

The relative nullity of the legal person may be invoked within one year from the date of its registration or establishment, but both relative nullity and absolute nullity may be covered if, until the conclusion of the debates before the first court, place the cause of nullity.

Similarly, Law on companies provides that the nullity of a company which has been registered in the trade register may be declared by the tribunal. Mail a lot, this law establishes that the date of the final stay of the judgment finding or invalidation will be the moment when the company ceased to have a retroactive effect and its entry into the liquidation procedure.

As regards the nullity of companies, it can be invoked through the application for annulment, but the nullity cannot be declared in the event that its case, invoked through the application for annulment, was removed before substantiating the substance of the case.

The declaration or the invalidity of the legal person shall not affect the acts previously concluded on its behalf by its administrative bodies, either directly or through representation, but the provisions of the New Romanian Civil Code provide that the legal person, the founders or its associates can not to oppose the nullity of the legal person to third parties only if it is proved that the latter was aware of the cause of nullity at the time when the act was concluded.

Similar provisions are also laid down by the rules contained in Law on companies and the declaration of invalidity of the company will not affect the acts concluded on its behalf.

If a society that has been declared null and void will, however, continue to exist in practice, thus pursuing an object of activity, this society will only be a true society, more precisely a form of simulation.

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