The law on the stimulation of individual investors

THE LAW ON THE STIMULATION OF INDIVIDUAL INVESTORS – BUSINESS ANGELS:

The Law no. 120 of May 29, 2015 on the stimulation of individual investors – business angels was published in the Official Gazette of Romania on June 2, 2015.

The law regulates the conditions under which natural persons, referred to as individual investors – business angels, can benefit from fiscal facilities, following the acquisition of shares by investments in micro-enterprises and small-sized enterprises.

The fiscal benefits acknowledged to the investor are granted by law as follows:
– the individual investor – business angel is exempted from tax on income under the form of dividends for a period of 3 years from the purchase of shares, for the dividends relating to the shares purchased.
– the individual investor – business angel is exempted from the tax on the capital gain established under art. 66 par. (3) of Law no. 571/2003, with subsequent amendments and completions, if the transfer of shares takes place at least three years after the purchase of the shares.

The fiscal facilities provided for in art. 3 shall be granted if the following conditions are cumulatively met:
a) the individual investor – business angel shall not alienate the shares before the deadline of 3 years after the purchase thereof,
b) the articles of incorporation of the company, submitted for supporting the registration of the share capital increase by issuing new shares in the Trade Register, shall contain the following clauses:
(i) the shareholders’ participation to gains and losses shall be pro rata to the respective percentage of shares owned by each shareholder;
(ii) the decisions regarding the business plan and the renunciation to the distribution of profits resulting from the investment shall be subject to the unanimous consent of the shareholders;
c) the company and the shareholders shall not use the issuance premium upon the capital increase and it shall not be distributed to the shareholders for a period of at least 3 years starting from the registration of the individual investor – business angel with the Trade Register;
d) the company has no debts towards the general consolidated State budget at the time of transfer of shares to the individual investor – business angel.

The Law takes into consideration the acquisition of shares by investments in micro-enterprises and small-sized enterprises, defined by the Law 346/2005.

In the sense of Law 346/2005
– micro-enterprises are those enterprises that have up to 9 employees and have an annual net turnover or total assets up to 2 million Euros, in Lei equivalent; and
– small-sized enterprises – have between 10 and 49 employees and an annual net turnover or total active assets up to 10 million Euros, in Lei equivalent.

Fiscal facilities shall be applied to investments made in micro-enterprises and small-sized enterprises which meet the following conditions:
a) they are set up as limited liability companies under the conditions of art. 2 of the Companies Law no. 31/1990, as republished, with subsequent amendments and completions;
b) they are autonomous companies under the Law no. 346/2004, with subsequent amendments and completions (a company is considered as autonomous if it holds less than 25% of the share capital or the voting rights (whichever is higher) in one or more enterprises or if one or more enterprises do not own more than 25% of the share capital or the voting rights of the enterprise in question);
c) is not in payment default or insolvency or bankruptcy and the procedures of composition with creditors or liquidation have not been opened.

Are not covered by Law 120/2015 the investments made to companies that carry out activities in the following fields:
a) banking;
b) insurance and reinsurance, capital markets, financial intermediary services and any other activities related to financial field;
c) real estate transactions, real estate leases, real estate intermediary services, real estate development;
d) gambling and betting;
e) steel production or trade;
f) charcoal production or trade;
g) maritime and river ship construction;
h) production or trade of guns, ammunition, explosive, tobacco, alcohol, substances under national surveillance, plants, narcotics and psychotropic substances;
i) consultancy services in any field;

Any natural person can become an individual investor – business angel if cumulatively complying with the following conditions:
a) is a person not related to the company and acquires the quality of a shareholder thereof by its cash contribution to the share capital of the company, resulting in the issuance of new shares in its favour; the individual investor – business angel shall acquire a number of shares in the company at the nominal value with issuance premium corresponding to its contribution, paid on the date of the share capital increase;
b) invests an amount from EUR 3,000 to EUR 200,000, equivalent in Lei at the exchange rate of the National Bank of Romania from the date of carrying out the operation in the company whose shareholder it becomes, by the purchase of shares; the acquisition of shares is carried out through the share capital increase, in accordance with the provisions of letter a), and the amount invested shall be paid using the bank system in Romania and it shall be registered in the company accounts, according to the law; these amount limits shall be cumulatively applied, regardless the number of investors;
c) the investment is carried out strictly in order to meet the main object of activity of the company and the business plan for which the individual investor – business angel shall invest;
d) has clean tax record issued by the competent authorities on the date of the investment;
e) may not own, following the investment, either directly or indirectly, more than 49% of the share capital of the company in question;
f) is not incapable or has not been convicted for crimes against property by disregarding trust, corruption, embezzlement, crimes of false documents, fiscal evasion, crimes provided for by Law no. 656 / 2002 on the prevention and sanctioning money laundering, as well as for the establishment of certain measures to prevent and combat terrorism, as republished, with subsequent amendments, or for crimes provided for by Law no. 31/1990, as republished, with subsequent amendments and completions.

If more natural persons become individual investors – business angels under the aforementioned conditions, fiscal facilities may only be granted with a reference to maximum 49% of the share capital of the company in question, pro rata to the related shares held by each investor.