Romanian Capital Market Regulatory Framework
 |
Noiembrie 2010 |
 |
ALPHA BANK ROMANIA S.A. |
Adresa
Calea Dorobanţilor, Nr. 237B
Cladirea Neocity Tower
010566 Bucureşti, Sector 1
Telefon
+40-21-455.99.98
Fax
+40-21-231.65.70
Website
www.alphabank.ro
Key regulations
The legislative framework of the Romanian Capital Market is in line with European standards and enforces the principles of the applicable EU Directives. It consists of the following Laws and Regulations:
- Capital Market Law (Law 297/2004);
- Companies' Law (Law 31/1990);
- CNVM instructions, regulations & disposals of measures;
- Bucharest Stock Exchange regulations;
- Central Depository regulation;
- Privatisation laws;
- European Commission regulations.
Key regulators
The National Securities Commission ("CNVM" in Romanian) is the main regulatory and supervisory authority and functions as an independent administrative authority accountable to the Romanian Parliament.
CNVM is responsible for all the operations on the Romanian securities markets, the protection of investors against unfair, abusive, and fraudulent practices, the circulation of information regarding securities, holders and issuers, and the establishment of a legal framework for financial services activities. In order to protect the investors' interest, the Commission has the right to apply sanctions for the breach of the provisions of the laws and the regulations issued for its implementation. Sanctions may range from fines to withdrawal of authorization.
There are currently two self-regulatory organisations (SRO), namely the BSE and SIBEX (the Sibiu Futures Market). The SROs have the authority to adopt their own rules regarding membership, listing, trading, clearing, settlement, and registry activities.
The National Bank of Romania’s main involvement in the functioning of the capital markets refers to:
- Authorisation of clearing and custodian banks, in co-operation with CNVM;
- Cash settlement bank for both equity markets.
Main company & stock market provisions
Corporate governance
The general framework for managing a Romanian company is provided by Companies' Law 31/1990, modified by Law 441/2006, Government Emergency Ordinance 82/2007 approved by Law 88/2009 and Government Emergency Ordinance 52/2008 approved by 284/2008, while some of the provisions have been adjusted by the Capital Market Law for application to listed companies.
Law 441/2006 establishes minimum legal quorum requirements for both Ordinary and Extraordinary General Shareholders Meetings. More precisely, the minimum quorum needed for the 1st call of the Extraordinary General Shareholders Meeting (EGSM), is 25% of total voting rights, while for the 2nd call the EGSM must gather at least 20% of total voting rights. The EGSMs are called whenever necessary in order to discuss issues such as: the change of the company's legal form, object of activity, headquarters, and share capital; the issuance of bonds; the merger with other companies or the splitting/spinning-off of a part of it; and changes to the company’s by-laws.
A shareholder meeting can be called at the request of any significant shareholder (holding at least 10% of the company’s shares outstanding). Shareholders can be also represented by other persons that the company’s shareholders, based on a notarised proxy.
In case of the Ordinary General Shareholders Meeting (OGSM), minimum quorum requirements are imposed only for the first call of the shareholders meeting, i.e. 25% of total voting rights. The OGSMs are called at least once a year and can decide on the following main issues: the analysis of the management’s performance, the approval of the annual financial statements and the setting of the dividend level; the discussion on the budget for revenues and expenses for the following year; the election of the company’s board of administration and censors.
The identification of the shareholders that are entitled to receive dividends or any other rights as a result of the GSM decision is set during the respective GSM and should be no earlier than 10 days after the GSM date.
Listing on the capital market
In order to be eligible for listing on the capital market, a company should be operating for at least three previous years and to have an expected market capitalisation of at least EUR 1 mn. In addition, the company should provide adequate free float, which is set by law at 25% of its shares outstanding; however this can be lower if approved by CNVM given that a large number of shares are dispersed among the public investors.
Corporate disclosure requirements
Listed companies are obliged to disclose quarterly, half-year and annual financial reports (including consolidated reports, if available) to the public and submit them to CNVM and the stock market (BVB). The companies must also make public the audited results at the end of a fiscal year and, if the case, at half-year. The reports have to be published in maximum five days from their approval. The annual financial statements and the annual report should be made public within four months from the end of the fiscal year (December 31st for all Romanian companies), while the half-year report should be made public within two months from the end of the reporting period. According to CNVM Regulation no. 31/2006, for companies that prepare consolidated statements, these statements should be prepared and disclosed according with European Commission Regulation no. 1606/2002 together with the annual statements of the parent company.
Listed companies are required to disclose any privileged information and send a report in maximum 24 hours to CNVM and to the market operator. At the same time, listed companies should inform the markets about any material event (which can influence the stock's or bond's price) within 48 hours from occurrence. Also, the companies are bound to inform the shareholders about the shareholder meetings, dividends and share capital increases.
The administrators must report any legal act signed by the company with its administrators, employees or controlling shareholders, as well as with their related parties, whose value exceed EUR 50,000. A company must inform without delay the public and CNVM in relation with any privileged information but, if approved by CNVM, can decide to delay the disclosure of the sensitive material information that can affect its interests. However, CNVM can impose the company to disclose such information in order to maintain transparency and integrity of the market.
However, the companies traded on the Rasdaq section are subject to less stringent disclosure requirements than those listed on BSE tiers, relating mainly to EGSM decisions, calling of EGSM, litigations, bankruptcy/recovery procedures, auditing at the request of a shareholder having more than 5%, publishing of annual reports.
BSE offers online delivery of corporate information.
At the same time, the enforcement by the Government of the General Framework for Harmonising the Romanian accounting regulations (RAR) to the Fourth Directive of European Economic Community and to the International Financial Reporting Standards (IFRS) led to an improvement in the quality of financial information prepared by the listed companies, although the new RAR are still not fully compliant with IAS standards. All companies listed on the BSE and RASDAQ are now required to prepare their financial statements also in accordance with the above mentioned rules.
The cumulative voting method can be used to elect the members of a publicly-traded company’s board of administration if the number of board members is at least five, but is mandatory if it is expressly requested by a significant shareholder (which holds at least 10% of the company’s voting rights). A significant shareholder can request only once during a financial year for the meeting of GSM regarding the election of administrators by cumulative votes.
