Mergers and spin-offs impacted by new rules on land registration

Starting with May 23^rd 2019, Law no. 105/2019 regarding the amendment and supplement of Law no. 7/1996 on cadastre and real estate publicity, as well as regarding the amendment and supplement of other normative acts[1] (“Law no. 105/2019”) entered into force. The law amends a series of provisions regarding the registration formalities in the land registries of rights in rem over immovables transferred during reorganization procedures of legal entities (merger, spin-off, transformation). The newly amended provisions of the Law no. 7/1996 on cadastre and real estate publicity (“Cadastre Law”) shall have to be correlated with those in the same matter included in the Order no. 700/2014 on the Regulation of endorsement, reception and registration in the cadastre and land book records (“Reception Regulation”). Elements of novelty The amendments remove the requirement of submitting the reorganization certificate previously issued by a notary public in view of registering in the land book the ownership right over the immovable properties obtained as a result of the reorganization. A novel element by reference to the current provisions of the Reception Regulation (whose purpose is to ensure the framework for the enforcement of the provisions applicable in the land book field), the newly amended provisions of the Cadastre Law additionally establish the obligation to submit documents that were not necessary until this moment, namely: a) the establishment deed of the newly incorporated legal entity – this requirement becomes applicable only provided that, as a result of the reorganization, at least one new legal entity with a juridical personality is incorporated, which acquires an immovable or a right in rem; and b) the deed amending the articles of incorporation of the legal entity under reorganization or, if the case may be, the agreement concluded between the legal entities by means of which the changes in its the share capital and/or patrimony are ascertained. Documentation requirements The new provisions include a list of the necessary documents for the registration in the land book of the transfer of the rights in rem that operates as an effect of the merger/spin-off. The below documents have to be concluded in notarized form and have to explicitly specify the identification data of the relevant immovables (cadastral number, land book number). Thus, the following documents will be necessary: a) the decision of the court of law regarding the merger/spin-off project of the legal entity under reorganization; b) the establishment deed of the newly incorporated legal entity; c) the deed amending the articles of incorporation of the legal entity under reorganization or, if the case may be, the agreement concluded between the legal entities by means of which the changes in its share capital and/or patrimony are ascertained; d) the resolution of the general meeting of shareholders/the decision of the sole shareholder regarding the reorganization manner of the legal entity; e) the registration certificate issued by the trade registry for the newly established legal entity. The documents mentioned above have to be accompanied by the proof of registration of the amendment regarding the reorganization form of the existent legal entity. As previously mentioned, a series of documents (even among the newly introduced ones) shall have to be concluded in a notarized form, which may affect the costs and logistical resources necessary to be allocated for the reorganization project, thus rigorous planning of the entire procedure becoming essential. At this moment, the reasonable interpretation of the abovementioned provisions is that the notarization and submission to the land book of the deed amending the articles of incorporation (i.e. addendum) are necessary only in case the immovables transferred in the context of merger enter the share capital of the absorbing company. In case the immovables are not contributed to the share capital of the absorbing company but are transferred to its patrimony, we deem that the notarization of the agreement referred to under letter c) of the law will be necessary, and not also the notarization of the deed amending the articles of incorporation. You can read and download this legal alert in PDF format right here.

[1] This normative act was published in the Official Gazette no. 392/20.05.2019.