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20 October 2023

Romania: Who (else) can claim the nullity of a share transfer?

Can one or more of a company's shareholders claim that a transfer of shares to third parties by other shareholders is null, even if the claimants were not interested in acquiring those shares? And when faced with such a claim, would Romanian courts rule in favour of the claimant? A recent court ruling has answered both questions with a resounding "yes", opening new horizons in M&A-related matters in Romania.


In the court case, a minority shareholder of a joint-stock company claimed that a share transfer that took place within the company was illegal. The claimant requested the absolute annulment of the share sale-purchase agreement. It argued that this transfer had not been approved by the company's board of directors, in accordance with the articles of association in force at the time of the transfer.

The first-instance court ruled against the claim, asserting that the minority shareholder was not an interested party in relation to the transaction. On appeal, the court's decision was annulled in part as regards the decision to admit this lack of interest. The parties to the dispute challenged the appeal ruling and the case was referred to the Romanian High Court of Cassation and Justice ("High Court").

Court ruling

In its decision, the High Court ruled that a shareholder has an interest in challenging in court the legality of the acquisition of the shares by third parties within the company, even if the claimant did not intend to acquire them.

According to the court, that shareholder's role as an interested party in relation to the transaction arose out of its direct interest in ensuring the proper functioning of the company and the proper conduct of its business. Hence, the court argued that the shareholder's interest is all the more obvious, since it alleged in the case that the articles of association had been infringed and that an unlawful cause existed.

In addition, the court ruled that the shareholder's interest is determined, since the ultimate practical benefit is to ensure the legality of share transfers. Consequently, the legality of the shareholder's capacity in the company was at stake, as the legal action initiated was not purely preventative but sought to remedy specific situations which the minority shareholder claimed were unlawful.

The court ruling clarifies that, given the public nature of the absolute nullity sanction, an action may be brought by any person provided it can justify an interest. Thus, such a claim can be raised by anyone who can argue a cause-effect connection regarding a transfer of shares which, at the time of its conclusion, is alleged to have violated mandatory provisions of the law or to have been concluded fraudulently.

For that reason, it is of no legal significance that the contested transfer of shares does not affect the rights of the minority shareholder arising from its status as such, since what the minority shareholder was in fact claiming was a failure to comply with the conditions laid down in the articles of association for the acquisition of shares by persons who are not shareholders in the company.

Implications of the court ruling

This court ruling is important for future M&A transactions in Romania. It lays down the conditions under which a share transfer agreement that embodies the will of the parties can be challenged in court by any interested party to the extent that the latter justifies an interest, even if that person has no direct connection with the transaction itself.

Authors: Mihaela Popescu and Alexandra Șmahon


Attorney at Law