The legal landscape for corporate transactions in Romania has undergone a deep structural shift.

Dealmakers must now look beyond traditional protocols to navigate a completely overhauled regulatory and fiscal environment. The introduction of a new fiscal regime via Law 239/2025 profoundly alters how corporate transactions must be structured and executed.

At first glance, while the new law deals with recovering unpaid taxes by the Romanian state to collect public revenues, these new requirements have a major impact on how M&A deals must be structured First, this legislation has effectively forced a new, uninvited guest to pull up a chair at every M&A negotiation table: the Romanian tax authority.

For founders, C-suite executives, and investors, understanding these deep structural shifts is no longer optional—it is the direct threshold between an executed transaction and a costly regulatory deadlock.

A. Share Transfers & Outstanding Fiscal Liabilities

The crux of this new mechanism lies in a strict condition regarding historical corporate compliance. If the target company (the "Target") carries outstanding tax liabilities or fiscal debts to the state, the transaction cannot proceed under standard historical timelines. Specifically, the law mandates that either the Target itself or the acquiring Buyer must establish formal financial guarantees capable of completely covering the total value of those outstanding obligations, assuming these debts are not entirely paid off prior to completion.

It is crucial to note that these stringent requirements regarding the block on share transfers apply specifically to Limited Liability Companies (LLCs / societăți cu răspundere limitată).

The Operational Bottleneck: In the absence of an explicit, formal agreement from the fiscal organ validating the constitution of these guarantees, the National Trade Registry Office (Registrul Comerțului) is legally prohibited from registering the transfer of shares. This creates an absolute transactional standstill until fiscal compliance is proved or formally guaranteed.

Deep Dive: Restructuring Classical Pricing Mechanisms

This legal requirement directly disrupts the fundamental mechanisms used to calculate and pay purchase prices, particularly in "cash-out" deals where a buyer directly acquires shares and pays the consideration directly to the selling shareholders. To evaluate the operational impact, we must examine the two primary pricing structures used in the market:

1. The Locked Box Mechanism

In a standard locked box model, the transaction price is fixed based on a historical financial situation at a specific date prior to signing, known as the "Locked Box Date". From this reference date until the formal transaction closing, the Seller is strictly prohibited from extracting value from the Target via "leakage", such as distributing dividends or issuing special bonuses.

The Target is usually permitted to make ordinary day-to-day business expenditures and accrue regular current liabilities, including routine operational tax debts.

Historically, any outstanding debts discovered between the reference date and closing were categorized as leakage and simply deducted from the final price, and left to be handled post-closing as normal current debts by the Target.

Today, this approach is completely broken: even minor, current, or routine outstanding tax liabilities cannot be left to be borne by the Target post-closing without actively triggering the mandatory involvement and formal review of the tax authority.

2. The Completion Accounts Mechanism

Under this structure, the parties negotiate an initial "Enterprise Value" predicated on the baseline assumption that the Target is completely debt-free and holds a normalized level of working capital on a Cash-Free / Debt-Free basis. At or immediately following the formal closing date, a detailed closing balance sheet is drawn up to capture the real financial standing of the business.

All actual outstanding fiscal obligations identified at the closing date are formally factored into the Net Debt calculation. If the closing audit uncovers unestimated or understated historical taxes, these liabilities are directly deducted from the final purchase price paid to the Seller.

Much like the locked box model, historical practice allowed these identified tax liabilities to be handled directly by the Target post-closing. Under the current framework, this transition is impossible to execute without encountering the cooperation of the fiscal authority.

Strategic Options for Dealmakers to Avoid Gridlock

To navigate these pricing impediments, corporate actors currently have two primary operational paths:

• Option 1 (Pre-Closing Debt Clearance): The Target company must fully liquidate and pay off all outstanding fiscal debts to the state prior to the formal Closing date.
• Option 2 (Formal Fiscal Guarantees): Either the Buyer or the Target must formally set up financial guarantees to cover the outstanding tax debt, which requires obtaining the explicit approval of the tax authority. Crucially, the law imposes a strict 60-day deadline from the date the share transfer is recorded at the Trade Registry to fully settle the underlying debts, after which the tax authority will immediately execute the guarantees.
• The Structural Alternative: To avoid dealing with the fiscal authority entirely, dealmakers must completely strip out the classic mechanism of price deductions for tax debts. Instead, agreements must include a strict Condition Precedent (CP) for closing that mandates the total, absolute absence of any state liabilities. This requires a structural pivot that must be set forth into documents from the very first day of negotiations.

The Ripple Effect on Structural Protections: Call/Put Options and "Bad Leaver" Pitfalls

The new requirement for tax compliance also introduces severe vulnerabilities into subsequent equity transfer mechanisms, such as Call and Put options. These are highly relevant in partial exits (where a Seller retains a minority stake), cash-in financings, or hybrid structures.

Because any subsequent share transfer is legally blocked unless there are zero tax debts or an approved fiscal guarantee framework, these standard option agreements require urgent legal redesign.

The "Bad Leaver" Call Option Vulnerability

In many transactions, the founding Seller remains with the business post-closing in an executive or managerial capacity. To protect the incoming investor, the shareholder agreement usually sets forth strict performance and corporate governance obligations, colloquially termed "good behavior" duties.

If the manager breaches these duties—specifically, if their bad management or corporate waste causes the company to rack up severe tax liabilities to the state—the Buyer holds a "Bad Leaver" call option. This option traditionally allows the Buyer to acquire the manager's remaining shares at a penalty price without requiring the manager's subsequent consent.

Under the current framework, this classic enforcement mechanism is fundamentally flawed. Because the manager's poor management created outstanding tax debts, the Trade Registry will reject the Buyer's application to transfer the bad leaver's shares.

The Buyer finds themselves trapped: if they do not yet possess full managerial or executive authority over bank accounts, they cannot easily deploy company funds to clear the debt. Alternatively, the Buyer must evaluate whether putting up capital to back a high-risk fiscal guarantee under a tight 60-day execution window is commercially sane. Similarly, Put options face severe complications regarding the underlying pricing and valuation formulas.

Rethinking the Mitigation Toolkit

To bypass these deadlocks, structural protections must be re-engineered. For deals already closed, parties may proactively look into renegotiating existing shareholder agreements. For new deals, alternative remedies must be introduced:

• Contractual Sanctions: Drafting different or complementary contractual sanctions, such as cash penalties applicable directly to the individual responsible for causing the corporate tax debt.
• Managerial Vetoes: Inserting mandatory clauses that automatically appoint a representative from the Buyer's side with managerial competencies to immediately step in and pay off debts using available funds.

B. A Complete Overhaul of Shareholder and Affiliate Financing

The final major shift impacts how equity partners finance target companies through shareholder or affiliate loans, heavily altering both the repayment and conversion protocols.

These new requirements apply to any type of Romanian companies.

1. The Blockade on Loan Repayments

According to the new regulations, if a company's net assets fall below 50% (half) of its subscribed share capital, any loans granted by shareholders or affiliated entities cannot be repaid. This represents a severe risk for cash-in or hybrid deal structures.

Traditionally, shareholder loan agreements contain "accelerated maturity" clauses. If the business experiences a material adverse effect or the founding management underperforms, the investor can fast-track the loan's maturity and demand immediate cash repayment.

Now, if that operational decline pushes net assets below the 50% capital threshold, acceleration clauses become legally unenforceable. The investor is legally trapped, holding an uncollectible debt claim against a financially weak entity.

2. Mandatory Debt-to-Equity Conversions

The regulatory burden compounds further over time. If a company fails to restore its net assets or formally reduce its capital within a strict timeline—specifically 2 years from the end of the financial year following the one in which the losses were first recorded (effectively a 3-year total window)—and still carries outstanding debts to shareholders from loans or financings, it faces a mandatory statutory obligation.

The company is legally compelled to execute a capital increase by converting those outstanding loan claims directly into equity.

The Business Angel Pitfall

While professional investors, institutional investment funds, and specialized investment vehicles are exempted from this mandatory conversion rule, individual "Business Angels" are only protected if:

• The total capital invested via the loan must not exceed €200,000.
• The funding must be injected exclusively into a micro or small enterprise.
• The angel's total equity holding must not exceed 25% of the company's social capital.
• The 4-Year Catch: Even if an investor or business angel meets all exemption criteria, the law explicitly dictates that these loans cannot be repaid in cash for a minimum of 4 years from the date they were granted if the company's net assets remain below half of its share capital.

This creates an existential crisis for convertible loans, a standard funding mechanism in early-stage tech startups where net assets may drop below half of the share capital. If a Business Angel provides a startup with a convertible loan exceeding €200,000, they lose the conversion exemption.

If the startup fails to raise a subsequent funding round before the 3-year statutory clock runs out, the angel is forced to convert their loan into equity. They may be obliged to do so without receiving their anticipated valuation discount or capitalizing on growth milestones, all while knowing that cash repayment is legally banned.

Investors are left at a disadvantage, forced into high-stakes renegotiations with founders to artificially manipulate capital structures just to protect their original deployment.

Conclusion: The Era of Strategic Plasticity

The current landscape proves that this is a period defined by mandatory adaptation and strategic plasticity. The standard, paint-by-numbers M&A blueprints that corporate lawyers and investors relied on for decades are fundamentally shifting.

Successfully crossing the finish line and safeguarding corporate value now demands additional legal precision and creative structuring on both sides of the table.