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19 June 2018
newsletter
romania

Romanian companies will be able to distribute dividends on a quarterly basis

The Romanian Parliament recently approved the Law on the Amendment and Completion of the Accounting Law No. 82/1991, Amendment and Completion of the Companies Law No. 31/1990 and Amendment and Completion of Law No. 1/2005, on the organisation and functioning of cooperative companies.

Before entering into force, the law will have to be promulgated by the President of Romania and published in the Official Gazette.

Quarterly distribution of dividends

The legislation in force allows companies to distribute dividends to shareholders only upon approval of the annual financial statements for the year ended.

Through these recent amendments, the adopted normative act will allow Romanian companies to decide whether to distribute dividends quarterly or annually.

Dividends therefore can be distributed to shareholders quarterly in proportion to their participation in the paid-up share capital based on the interim financial statements, and annually, after adjustments made according to the annual financial statements, unless the articles of association state otherwise.

Profit may be distributed to shareholders on a quarterly basis during the financial year, up to quarterly net profit, plus any reported profits and amounts withdrawn from reserves available for that purpose, less any losses incurred and amounts deposited in reserves in accordance with legal or statutory requirements.

Dividends may be paid on a quarterly basis by the deadline set by the GSM or by special laws. Differences resulting from the distribution of dividends during the year are adjusted according to the annual financial statements.

Registration of partial dividends in financial statements and in the company's accounting

Amounts relating to the interim distribution of dividends should be recorded in the accounts and reflected in the interim financial statements as receivables against shareholders.

The interim financial statements will be audited if the persons drafting them are legally obliged or opt to audit the annual financial statements, according to the law. Interim financial statements are subject to auditing by censors if the annual financial statements are also subject to it by law.

Adjusting the quarterly distribution of dividends

In case of partial dividend distribution during the financial year, the annual financial statements must show the partially distributed dividends and must adjust the resulting differences accordingly.

The amounts distributed during the financial year are adjusted upon approval of the annual financial statements, and dividends distributed and paid in excess during the financial year must be returned within 60 days from the date of approval of the annual financial statements. Persons who have received quarterly dividends are subject to the restitution obligation and the management of the company is obliged to recover these amounts and to order any necessary measures for their recovery.

If, following adjustment in the annual financial statements, the company owes amounts/dividends to shareholders, these are paid within 60 days of approval of the annual financial statements. Otherwise, after this term the company owes penalty interest calculated according to O.G. no. 13/2011, unless the articles of association or the GSM resolution that approved the financial statements set a higher interest rate.

Any dividend repayments owed by shareholders following adjustment in the annual financial statements must be paid to the company within 60 days from approval of the annual financial statements. Otherwise, after this term the shareholders owe penalty interest calculated according to O.G. no. 13/2011, unless the articles of association or the GSM resolution that approved the financial statements set a higher interest rate.

Changing the content of the offence under Law 31/1990 on companies concerning the unlawful distribution of dividends

In order to reflect the changes brought about by the introduction of quarterly dividend distribution, this offence was modified accordingly in the Companies Law and now states that the founder, administrator, director, member of the supervisory board or board of directors, or legal representative of the company who receives or pays dividends in any form from fictitious profits or which could not have been distributed during the financial year based on the interim financial statements or annually based on the annual financial statements or contrary to what results from them, shall be punished by imprisonment of one to five years.

To read the text of the law, click here.