However, the recent overhaul of the Romanian Civil Code has included certain steps in that direction, even though the result is not quite the institution of trust in its common law meaning. Accordingly, the new Civil Code has extensively developed the concept of fiducia, which allows any individual or legal entity (the settler), to place real rights, receivables, securities or a collection of such assets, under the management of a third party (the trustee) to the benefit of one or several beneficiaries. The settler can also be the beneficiary. Only credit institutions, asset management and financial services companies, notaries public or lawyers are allowed to act as trustees. A settler can appoint a third party to represent its interest and exercise the rights reserved to the settler, provided that no provision to the contrary has been stipulated in fiducia contract. There are several important features of the fiducia contract:
The fiducia relationship has to be created either by law or by a notarised contract;
It is mandatory for the fiducia contract (comparable to a trust deed under English law) to include a number of stipulations, under the sanction of absolute nullity, for example, which assets are being transferred, the duration of the transfer (limited to a maximum of 33 years), the identity of the settler, trustees and beneficiaries;
Once the fiducia contract is accepted by the beneficiary, it cannot be amended or revoked without the beneficiary’s agreement or a court order;
Fiducia contract becomes binding on third parties only after its registration with the Electronic Archive for Real Movable Guarantees. If real estate properties are transferred, the fiducia contract will also need to be registered in the Land Register of the territorial unit where the properties are located;
Importantly, fiducia assets are ring-fenced from bankruptcy proceedings or any forced sale by a settlor’s creditors after the establishment and registration of the fiducia contract; and
Trustees can borrow and mortgage/encumber any assets which the settler has put into fiduciary management of the trustee.
Notably, specific tax rules in respect of fiducia arrangements have been introduced recently in the fiscal legislation. This aims at align the tax regulations with the legal concept introduced in the Civil Code. Therefore, the fiscal legislation includes rules referring to the corporate/individual income tax and local tax treatment of fiducia arrangements. Now it remains to be seen how extensively fiducia will be used in practice and especially in commercial transactions involving Romanian parties.
Dan Ciupala (dan.ciupala@ro.ey.com)
Ernst & Young
Website: www.platisbazilescu.ro
