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Market Overview

Romania

1. Overview of the Romanian market Romania continues to be one of the most attractive destinations for doing business in Central and Eastern Europe (CEE). There are strong arguments supporting this claim, including: its Strategic Location & EU Market Access - positioned at the crossroads of Europe, Asia, and the Middle East: Member of the EU, NATO; Gateway to a 450+ million consumer market in the EU; Access to major transportation hubs (access to the Black Sea via Constanța port, major highways, and rail links); Recent Schengen membership (as of 2025). Competitive Labor Force (highly skilled workforce, especially in IT, engineering, and manufacturing, with many professionals speaking English, German, and French); Strong IT & Tech Sector (notably, all large US companies in the technology sector are also present in Romania) Competitive Tax System & Business Incentives (a flat 16% corporate tax rate , among the lowest in the EU) Well-Developed and stable Banking & Financial Sector, with major EU banks operating in Romania (BCR, part of Erste group, ING, Raiffeisen, UniCredit) as well as local banks (e.g., Banca Transilvania has gained traction following multiple M&A deals which have enlarged its market share). As the market remains fragmented, there seems to still be potential for further banking M&A deals. Strong e-commerce growth – which has been booming in recent years, with increasingly fast digital adoption and strong logistics support and promotion of an increased number of digital financial products (including buy-now-pay-later and other types of digital consumer credit which have been thriving recently). According to 2023 reports of the World Bank, Romania ranks 12th in the European Union by total nominal GDP1 and 7th largest for GDP adjusted by purchase power (PPP).2 Despite the proximity to the war in Ukraine, Romania remains a top destination for foreign investment, tech startups, and industrial expansion. With Schengen integration effective as of 1st of January 2025, and ongoing infrastructure development, Romania is an increasingly attractive business hub in the CEE region. As Romania navigates its economic landscape, the stability of the political environment remains an important factor influencing market opportunities. The current Government coalition looks quite solid and the redo of the presidential elections set to occur in May 2025 is unlikely to affect Romania’s overall policies and the economic environment will continue to support a stronger EU and NATO membership. Anticipated fiscal reforms and ongoing negotiations around government policy will likely impact economic growth and inflation rates.   2. Business environment Generally, Romania offers a friendly business environment, including a simplified business registration procedure, further enhanced by Law 265/2022 on the Trade Registry. Romania has made efforts to simplify the process of registering a business, reducing the time and paperwork required for starting a company. As such, the registration formalities may be fulfilled either through the dedicated Trade Registry online portal, by email, or in person, with processing times typically ranging between 2 to 5 business days. The ease of doing business in Romania has also been heavily impacted by its adherence to harmonized EU legislation since its EU accession in 2007, the Romanian legislation being generally in line with relevant EU norms. Legislative Changes in 2025 versus 2024 - What has changed in the last year that has impacted the way business is conducted? While it is widely acknowledged that legislation has been enacted both in Romania and, more generally in the EU, at an unprecedented pace and level of complexity, making businesses face a higher risk of compliance due to increased legislative burden, efforts are being made both at national level (e.g., the National Capital Markets Strategy for 2023-26) 3and at EU level, via the EU Commission Competitiveness Compass4 to address this issue. In this context and until the objective simplification and codification to increase overall competitiveness is reached, it is likely that business in Romania will continue to face the above-mentioned risk, which is generally mitigated to the extent that proper legal advice is sought at an early stage of structuring the business. It is to be expected that business will continue to be impacted by EU legislation in 2025 as well, in all relevant business areas (e.g., banking and financial services, energy, IT, data privacy and cybersecurity). Some of the most important general legislative changes last year that will likely impact business in general more heavily are: Full Schengen access. Starting January 1, 2025[5], Romania, alongside Bulgaria, became a full member of the Schengen Area. By eliminating land border controls between Schengen countries (previously in 2024 air controls were eliminated), free movement of people and goods were facilitated. The decision is expected to reduce border wait times, lower logistics costs, and make Romania more attractive for foreign investments. Amendments to Company Law No. 31/1990 brought under Law no. 299/2004 which aim to modernize corporate legislation, by enhancing digital engagement, regulating digital participation in shareholder meetings and simplifying administrative processes for businesses (e.g., removal of UBO details in the articles of incorporation, granting more flexibility to delegation of powers to the board of directors). Adoption of NACE Rev.3 Classification System: The adoption of the NACE Rev.3 Classification System, which amends and updates the previous system, was formalized under Order No. 2938/C of 20 December 2024 on the measures and procedures for the implementation of the Classification of Activities in the National Economy - NACE Rev. 3. The Order establishes the legislative framework for the implementation of the new classification, which is designed to meet the demands of a market-oriented economy and align it with European standards. Starting from 2025, companies are required to update their scope of activity to comply with this new classification, with the implementation to be carried out through the National Trade Register Office. Amendment to the Cybersecurity legal framework following transposition of Directive 2022/2555 (“NIS2 DIRECTIVE”) - Government Emergency Ordinance no. 155/2024 on the establishment of a framework for the cybersecurity of networks and information systems in the national civil cyberspace (“NIS2 GEO”) was published and entered into force on December 31, 2024. In line with NIS2 Directive, NIS2 GEO no longer distinguishes between “operators of essential services” and “digital service providers”, defining instead new categories of “essential entities” and “important entities” mainly based on sector and size. In terms of sectors/ industries, the scope has also been broadened compared to the previous regulatory framework. Important changes to the Foreign Direct Investment Regime (FDI) - In 2024, Romania introduced notable amendments to its FDI regime under Law No. 231/2024, aiming to enhance clarity and consistency in FDI screening procedures, particularly concerning EU-investments, including by expanding sanctionable conduct to cover EU-investments. Additionally, Law No. 231/2024 provides clarifications on nullification of non-compliant investments and of the agreements implementing such investments. Furthermore, recent amendments to FDI legislation introduced at the end of 2024 under Government Emergency Ordinance no. 152/2024 specify that investments made by Romanian citizens will also be subject to FDI security screening.   3. What are the main business structures in Romania? Generally, the following types of companies may be set up in Romania: Limited Liability Company (SRL) (in Romanian, “Societate cu Răspundere Limitată”), Joint Stock Company (SA) (in Romanian, “Societate pe Acțiuni”), Limited Partnership by Shares (SCA) (in Romanian, “Societate în Comandită pe Acțiuni”), Limited Partnership (SCS) (in Romanian, “Societate în Comandită Simplă”), and General Partnership (SNC) (in Romanian, “Societate în Numele Colectiv”), as per Company Law no. 31/1990. However, in practice, in Romania, the Limited Liability Company (SRL) is the predominant business structure, significantly outnumbering Joint-Stock Companies (SA). The main reason for the investors’ preference for the SRL structure is related to lower capital requirements, a more flexible and simpler management structure, fewer legal requirements and administrative costs. The SA structure is generally chosen by more sophisticated and larger investors, often operating in regulated sectors (e.g., certain sector specific requirements impose the SA to obtain a business license, for example, in the case of non-banking financial institutions and credit institutions). All companies must be registered with the Romanian Trade Register Office following the registration procedure set out under Law no. 265/2022 on the Trade Registry and for amending and supplementing other regulatory acts on Trade Registry registration. A limited liability company (LLC, or SRL in Romanian) may be established with up to 50 shareholders, although the Company Law also allows for the creation of a company with a sole shareholder. On the other hand, a joint stock company (JSC, or SA in Romanian) requires a minimum of two shareholders in order to be set up. As an alternative to the incorporation of a legal entity in Romania with legal personality, investors have the possibility to incorporate a branch or representative office of the foreign company in Romania. Such legal structures will act in the name and on behalf of the parent company and will be subject to registration formalities (the representative office is subject to an authorization and registration procedure with the Ministry of economy, digitalization, entrepreneurship and tourism instead of the Trade Registry). Business Structure Min. Capital Liability   Common Use SRL (Limited Liability) No minimum provided by law (cannot be null) Limited to share capital Small to medium-sized businesses SA (Joint-Stock) 90.000 RON (18.000 EUR) Limited to share capital Large businesses, public companies Sole Proprietorship None Unlimited (owner's personal liability) Freelancers, consultants Branch of Foreign Company None Parent company liability Foreign companies entering the market Representative Office None Parent company liability Market research, promotion   4. Economy Currency strength In 2024, the Romanian leu (RON) demonstrated resilience despite global economic fluctuations. Throughout the year, the EUR/RON exchange rate remained quite stable, with a medium exchange rate of 4.9750 RON per EUR6, reflecting a favourable and trustworthy environment for investments and market confidence. This stability was primarily driven by the National Bank of Romania’s (NBR) prudent monetary policies. These efforts helped to moderate excessive volatility and foster a steady economic scene. Looking ahead to 2025, the NBR’s decision to lower the monetary policy rate to 6.50% signals a continued focus on maintaining stability in the currency market [7]. While some short-term fluctuations may occur due to external risks, the NBR’s steady approach, alongside Romania’s fiscal discipline and ongoing structural reforms, is expected to support the leu's strength. The outlook remains cautiously positive, with efforts focused on promoting the gradual appreciation of the currency, in line with broader economic objectives, such as anchoring medium-term inflation expectations and contributing to sustainable economic growth. While geopolitical conflicts and the budget consolidation may negatively affect the economy, a stronger and more efficient absorption of EU funds, especially those under the Next Generation EU programme, are expected to counterbalance such negative effects and strengthen the resilience of the Romanian economy. Inflation rates Romania’s inflation rate experienced fluctuations in 2024, but the recent landscape points to a positive trajectory. In January 2025, the annual inflation rate dropped to 4.95%, down from 5.14% in December 2024, according to the official report released by INSSE on 14 February 2025, this decline reflecting the gradual easing of inflationary pressures, particularly from food prices and wage growth.8 While the National Bank of Romania (NBR) had initially revised the inflation forecast for 2024 upwards to 4.9%, driven by adverse weather conditions and higher wages, the outlook remains optimistic. The NBR currently projects that inflation will gradually decline, reaching 3.5% by the end of 2025 and returning to within the target range by mid-2026. These projections indicate a steady return to price stability, supported by sound monetary policies and favourable economic conditions.[9] Main trade sectors In 2024, Romania's economy continued to showcase its industrial diversification, positioning it as a resilient player in the region. Romania benefits from a well-balanced economy with significant contributions from agriculture, services, and the rapidly growing IT sector. This diversification has helped Romania maintain a competitive edge in a challenging European economic landscape.10 Romania is characterized by a highly trained labor force, abundant natural resources in key areas, and geographical conditions that facilitate the transportation of goods. These factors, along with one of the largest markets in Central and Eastern Europe, make the country an increasingly attractive destination for investment. With a solid foundation and growing opportunities in various sectors, Romania continues to offer numerous prospects for investors looking to capitalize into its dynamic market.   5. Current opportunities & future prospects What opportunities exist for clients looking to invest in your jurisdiction? The reforms and investments in Romania’ are likely to be supported by Romania’s commitments under the National recovery and resilience plan (PNRR) agreed with the EU Commission11. The PNRR is a comprehensive plan that targets sustainable development, economic modernization, and social resilience. The main investment areas favored by the PNRR include green energy, digital transformation, health system modernization, education, infrastructure, and social inclusion. These investments aim to align Romania with the EU’s broader goals for post-pandemic recovery, digitalization, and sustainability, creating a more competitive and inclusive economy for the future. In this context, digitalization will continue to provide interesting investment and growth opportunities across many sectors (e.g., e-commerce, digital banking, digital investment and financial services etc.). As such, Romania's retail and e-commerce sectors are projected to experience significant expansion in the near future. This growth is largely attributed to increased internet access and evolving consumer habits, which have driven an increased demand for online easy to access solutions. Investors that focus on innovative online commerce strategies, such as rapid delivery platforms and personalization tools, are well positioned to capitalize on this trend and growth potential in the marketplace. As regards capital markets opportunities, despite the volatile and high market uncertainty also triggered by the Presidential elections set to take place in May 2025, investors should consider Romania’s commitments assumed under the National Resilience and Recovery Plan, which refer to the obligation to list three of the State-owned companies (most likely in the energy and transportation sectors). However, this decision is yet to be taken by the Romanian Government. Another area of interest is the public private partnership projects (PPP) sector, especially relevant in the context of the Romanian high budget deficit (8.6% in 2024). In spite of the absence of successful precedents for PPPs under the current PPP legislation, projects to be developed under PPP are awaited in the following period - the main opportunities being in infrastructure such as hospitals, roads, railways, metro lines, power plants and airports. In the banking sector, the consolidation trend that we have seen in the past years is expected to continue (we have been actively supporting our clients in major banking M&A deals (including the recent acquisition of Alpha Bank by Unicredit12); additional opportunities may arise in connection with innovative digital finance products (we have assisted in the implementation of some first-on the-market digital products including digital retail loans / buy-now-pay-later products). The recent Schengen membership should also offer significant additional efficiency and synergies to numerous sectors.   6. Legal system How does the legal system operate? What should clients be mindful of when doing business in your jurisdiction? Romania is a civil law system, which means that the primary source of law are written statutes and codes (e.g., Civil Code, Civil procedure Code, Administrative Code etc.) and court decisions generally do not have the same precedential value as in common law systems. While being part of the EU strongly facilitates doing business in Romania, given that the domestic law is generally aligned with EU law and EU regulations are directly applicable (e.g., GDPR), the areas which are not harmonized at EU level or for which gold plating is permitted, should be carefully factored in by investors in their business plan prior to investing (e.g., real estate13, tax law regime, FDI regime). 7. Foreign investment restrictions Regulatory environment, Direct investment In Romania, the FDI regime is mainly regulated by Government Emergency Ordinance no. 46/2022 for the implementation of EU Regulation 2019/452 (GEO 46/2022), which, among other things, defines the relevant concepts, sets out the types of deals reviewed, procedural aspects and potential sanctions[14]. Pursuant to GEO 46/2022, filing is mandatory for a FDI, an EU investment or a new investment, as defined under GEO 46/2022, made by a foreign investor or an EU investor  (which also includes Romanian citizens), that: (i) covers the activities relevant to national security according to Decision no. 73/2012 of the National Council for Country's Defence, in conjunction with the criteria set out in article 4 of Regulation 2019/452; and (ii) whose value exceeds a threshold of €2 million (by exception, FDIs not exceeding €2 million may also be subject to scrutiny if they are likely to have an impact on security or public order or pose a risk to them). Foreign investors or EU investors can protect themselves by ensuring that any transaction carried out in Romania is internally pre-assessed from an FDI perspective (in other words, verifying whether the transaction falls under the criteria set out in GEO 46/2022), followed by formal filing if they conclude that the transaction meets the relevant criteria, in addition to other regulatory clearances that may be required, such as the merger clearance by the Romanian Competition Council. Foreign exchange controls In Romania, foreign exchange controls are primarily regulated by the National Bank of Romania (NBR) under Regulation No. 4/2005 on the foreign exchange regime. This regulation establishes the framework for foreign exchange operations, including the rights and obligations of residents and non-residents, the conduct of foreign currency transactions, and the roles of financial institutions in monitoring compliance. Both residents and non-residents are permitted to acquire, hold, and use financial assets denominated in both foreign and domestic currencies. They may also open and maintain accounts in these currencies with authorized institutions. Transactions between residents involving the sale of goods and services must be conducted in the national currency (leu), unless specific exceptions outlined in the NBR Regulation No. 4/2005 apply. Other transactions between residents, such as financial operations, can be conducted in either national or foreign currency, depending on mutual agreement. Restrictions on foreign capital In exceptional cases laid down under NBR Regulation No. 4/2005, the National Bank of Romania may impose restrictions to foreign exchange transactions. However, to the best of our knowledge, such restrictions have not been yet imposed in practice in recent times. If such an exceptional event occurred, the National Bank of Romania could impose various FX restrictions on short term FX operations (e.g., notifications /limits on FX transactions between residents and non-residents). Under the applicable norms, FX operations that could theoretically be affected are broadly defined, including payments, transfers, loans and offsets, as well as any other means of payment, depending on the nature of the relevant operation. 8. Top 5 tips to know before Investing Investing in Romania can prove to be a fruitful endeavor, but from a legal perspective, it is key to consider the following main general aspects: Carefully choose the most appropriate legal structure for your business Be mindful of the applicable FDI regime, as pecuniary and civil sanctions are severe and might affect business prospects Strictly observe AML and anti-corruption laws Understand sector- specific regulations that may apply (banking, financial services, healthcare, energy, environment etc.) and local specificities In case you are a non-EU investor, consider that in many cases Romania has concluded trade agreements (bilateral investment treaties) with other countries outside the EU, offering favourable trade terms. It is highly recommended to consult the local legal experts to navigate Romania's intricate legal framework, understand expectations of various competent authorities to ensure compliance with local laws and maximize your chances of success in the Romanian market. Interested in Doing Business in Romania? Bondoc și Asociații SCA is a leading Romanian law firm (and top 10 in size in the country), involved in many of the most complex projects in the country, offering full-range of business law legal assistance. In recent years we have worked on many of the largest and most complex transactions in the Romanian market. For more details about our firm and partners please see: https://bondoc-asociatii.ro/ https://www.legal500.com/firms/17801-bondoc-si-asociatii-sca/c-romania/rankings Authors: Lucian Bondoc, Managing Partner Diana Ispas, Partner 1 https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=RO&most_recent_value_desc=true 2 https://data.worldbank.org/indicator/NY.GDP.MKTP.PP.CD?locations=RO&most_recent_value_desc=true 3 https://asfromania.ro/uploads/articole/attachments/659e5a3d502c9507465771.pdf 4 Around €37.5 billion potential annual savings are expected for EU companies if EU achieves its simplification goals – see https://commission.europa.eu/topics/eu-competitiveness_en. 5https://ec.europa.eu/commission/presscorner/detail/pl/statement_24_6401 6 Romanian leu (RON) 7 Banca Naţională a României - Minutes of the monetary policy meeting of the National Bank of Romania Board on 14 February 2025 8 Template press release 9 National Bank of Romania (Banca Naţională a României) - Inflation Report 10 EBRD, Romanian officials debate industrial policy with entrepreneurs at BVB event in Bucharest | Romania Insider 11 https://commission.europa.eu/business-economy-euro/economic-recovery/recovery-and-resilience-facility/country-pages/romanias-recovery-and-resilience-plan_en. 12 https://bondoc-asociatii.ro/bondoc-si-asociatii-sca-advised-unicredit-spa-in-connection-with-the-acquisition-of-alpha-bank-romania-s-a/ . 13  Please see our relevant Legal 500 Guides - https://www.legal500.com/guides/chapter/romania-real-estate/ and https://www.legal500.com/guides/chapter/romania-data-protection-cybersecurity/. 14 Please see also FDI comments in Chapter 6 above.

Ethiopia

Country overview Name - Federal Democratic Republic of Ethiopia Capital city - Addis Ababa Population (2021) - 120,283 million (World Bank) Languages spoken (three most widely spoken) - Amharic, Afan Oromo, Somali Neighbouring countries - Somalia, Kenya, South Sudan, Sudan, Eritrea, Djibouti Economy GDP – USD111.27 billion (2022) (World Bank) Net inflow of FDI (2021) – USD 4.26 billion (World Investment Report) Top three exports by value (2022) – gold, coffee, live animals, oil seeds, flowers. (Trading Economics) Top three import sources (2022) – China, Saudi Arabia and United States. (Trading Economics) Top three export destinations (2022) – Switzerland, Somalia and China. (Trading Economics) Currency - Ethiopian Birr (ETB) – 1 USD = 545.8 ETB as at August 2, 2023   1. Current Economic Conditions 1 Recent legislation reforms Since 2018, Ethiopia has undergone several holistic policy and legislative reforms. In light of this, several laws that have aimed at easing doing business have been enacted. The enactment of the new Commercial Code; Movable Property Security Rights Proclamation; Public-Private-Partnership Proclamation; Capital Market Proclamation; the revision of different investment regulations and the Ethiopian Civil Societies Proclamation, as well as the ratification of the New York Convention are among many others.   1.1 New Capital Market Law The Ethiopian Government passed the Capital Markets Proclamation No. 1248/2021 to set up a local capital market with a clear set aim of developing the national economy through mobilizing capital, promoting financial innovation, and sharing investment risks. The Government has also set up a project team that has been working to draft proper directives for approval by the Board of Directors of the Capital Market Authority to supply detailed guidance and requirements to enable the effective implementation of the Capital Market Proclamation. Last January, the Ethiopia Capital Market Authority (ECMA) disclosed that it has finalized preparations to start operation within the coming two years.   1.2 Public Enterprises Privatization Law According to this 2020 Proclamation, privatization is a transaction that results in either the sale of assets or share capital of a public enterprise in full or in part to private ownership and control. The Proclamation considers extensively pre-privatization activities, public enterprise restructuring, and other activities before privatization. Essentially, the Proclamation provides for the procedure of conversion of a public enterprise to a share company, valuation of public enterprises, and issues relating to post-privatization   1.3 Telecom and Mobile Money Liberalization Under the new investment law, the telecom sector has been liberalized for foreign participation. Following such liberalization, the Ethiopian Communications Authority issued a bid for a license to engage in the telecom sector. Safaricom Consortium has won the bid and successfully launched in the Ethiopian market. Further, a second bid for a license to enter into the Ethiopian telecom market has been issued. The government has also decided to sell 49% of its stake in its ownership of Ethio- telecom, a government-owned telecom   1.4 New Investment Law On 30 January 2020, Ethiopia enacted a New Investment Proclamation. The major development in this new investment law is the shift from the positive listing of areas allowed for foreign investors to a negative listing which is broader. The government has also opened up previously closed sectors to foreign investment. In addition to this, these legislations lay down procedures for handling investors’ grievances and for resolving investor–state disputes, principally through domestic institutions.   1.5 Revision of the 1960 Commercial Code Revising the old Commercial Code that has been in effect since 1960 has brought one of the major legislative changes.  In this new Code liability limited partnership (LLP) has been recognized as one form of business organization.   1.6 Ratification of the 1958 New York Convention Ethiopia ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 2020. The Convention applies to arbitration agreements and arbitral awards made only after Ethiopia acceded to the Convention.   2. Business vehicles/structures for doing business Introduction Business can be set up in the form of sole proprietorship, business organisations incorporated in Ethiopia (a one member private limited company, a private limited company, a share company or partnerships), branch of a foreign company, public enterprises, and cooperative societies. Partnerships are associations of persons whose liability is unlimited (except limited partners in limited partnerships and partners of limited liability partnership). Limited liability companies could take the form of a one member private limited company, a share company or a private limited company.   Presence of Foreign Entities Incorporating a subsidiary company and opening a branch of a foreign company are the main vehicles for foreign entities to trade in Ethiopia. Foreign companies may also promote their business in Ethiopia by opening a commercial representative office. A branch of a foreign company is treated as an extension of its parent foreign company. In contrast, a subsidiary of a foreign company is treated as separate from its parent company. Foreign investors that come to operate in Ethiopia by winning international bids can also set up a project office to perform a specific contract.   Registration requirements and level of protection offered to share-holders of the various business vehicles Companies A one member private limited company is a limited liability business organisation incorporated by a unilateral declaration of a single shareholder. This form of legal entity was recognized for the first in 2021 by the Revised Commercial Code of Ethiopia. A share company and a private limited company are associations of capital formally established by the signing of a memorandum of association and articles of association. A private limited company and a share company require a minimum of two and five shareholders respectively. The maximum number of shareholders in a private limited company cannot exceed 50. Once shareholders have signed the memorandum and articles of association before a public notary and the same are deposited in the commercial register, the company becomes a legal person. After registration, obtaining a business license is necessary to start business operations. Companies are legal persons whose liabilities are met by their assets only. Shareholders of companies are liable only to the extent of their contributions. Private limited companies are not subject to detailed regulations when compared to a share company, which the law regulates strictly. A private limited company is more of a family company while a share company is a public company. A share company is required to have a board of directors and auditor/s and it should also conduct a general meeting of shareholders at least once a year. A private limited company is not required to have an auditor unless the number of its shareholders exceeds 10 or its total assets exceeds 10 million Ethiopian Birr. A private limited company cannot issue transferable securities like bonds, debentures, while a share company can issue transferable securities.   Branch of Foreign Entities Foreign incorporated companies can register a branch in Ethiopia to undertake business activities. The requirements for registering a branch of a foreign company include the submission of: notarised and authenticated minutes of a resolution passed by an authorised organ of a foreign business organisation authorising the opening of a branch in Ethiopia Certificate of incorporation of a foreign parent company Copies of memorandum and articles of association or similar documents of the business organisation. There are four types of partnership recognised under Ethiopian law. These are limited liability partnership, general partnership, limited partnership and joint venture. Partnerships should be formed by a partnership agreement and registration is a prerequisite for a partnership to obtain legal personality. However, these requirements do not apply to joint ventures, which have no legal personality.   Sole Proprietor A sole proprietor is a person who conducts a business in his/her own name with unlimited liability. For a sole proprietor to operate a business, he/she has to obtain a commercial registration certificate and a business license.   Trade Representative Office (TRO) Foreign investors who are not interested in trading activities can register a commercial representative (liaison) office and appoint a commercial representative to undertake pro - motional activities in Ethiopia. Before starting its operation, the commercial representative should be registered with the Ministry of Trade and Regional Integration and get a certificate of commercial representative. To secure the certificate, among other things, a minimum of USD100,000 has to be brought into Ethiopia, which is expected to cover salaries and operational expenditures of the office for a year. After the issuance of a valid certificate, a commercial representative can promote the products and services of the principal foreign company, study projects that will enable the principal to make investments in Ethiopia and to promote export products of Ethiopia in the country of origin of the principal company.   Registration requirements Registration is a requirement for companies to do businesses in Ethiopia. Operating a business without obtaining a business license entails administrative and criminal liabilities.   Business rights and regulatory environment Licenses and regulatory Requirements to trade Various kinds of permits, registrations and licenses are required to operate business in Ethiopia. These include investment permit, business license, commercial and tax registrations. No person may carry out a commercial activity without obtaining a valid business license.   Anti-money laundering, anti-bribery and corruption The Prevention and Suppression of Money-Laundering and Financing of Terrorism Proclamation No. 780/2013, the Criminal Code of 2004, Prevention and Suppression of Terrorism Crimes Proclamation No.1176/2020, Corruption Crimes Proclamation No. 881/2015, Revised Anti-Corruption Special Procedure and Rules of Evidence (Amendment) Proclamation No. 882/2015, Financial Intelligence Centre Establishment Council of Ministers Regulation No. 171/2009, Revised Federal Ethics and Anti-Corruption Commission Establishment (Amendment) Proclamation No. 883/2015 and the National Payment System Proclamation No. 718/2011 are major laws that regulate crimes related to money laundering, bribery and corruption in Ethiopia.   Competition The Trade Competition and Consumers' Protection Proclamation No. 813/2013 aims to promote competitive practices in the local market, and eliminate or prevent anti-competitive and unfair trade practices. It also regulates anti-competitive practices such as price-fixing, collusive tendering, market and consumer segregation, refusals to deal to sell or render services, practices intended to eliminate competitors, and practices regarded as abuse of dominance.  The threshold for a merger notification is 30 million ETB. Regarding mergers, the law requires the consent of shareholders and the amendment of memorandum and articles of associations for mergers to take place. Two or more firms may merge, either by taking over or by the formation of a new firm. A decision to merge shall be taken by each of the firms concerned. Special meetings of shareholders of different classes or meetings of debenture holders shall approve the taking over or being taken over. The claims and liabilities of the firms that have been merged shall pass to the firm taking over as a result of the merger.   Consumer protection The Trade Competition and Consumers' Protection Proclamation No. 813/2013 established the Trade Competition and Consumer Protection Authority. However, Trade Competition and Consumer Protection Authority was dissolved and its mandates has been transferred to the Ministry of Trade and Regional Integration since September 2021. Under this Proclamation, consumers have the right to be provided with accurate information on the quality and type of goods or services, and to claim for remedies in relation to problems associated with such transactions.   Data protection and privacy Ethiopia does not have a comprehensive law, which is specifically designed to regulate privacy and data protection issues. However, there are a set of rules contained in various pieces of legislation that guarantee the right to privacy in an indirect fashion.   Environmental law The law provides that all investors have an obligation to observe social and environmental sustainability values including environmental protection standards and social inclusion objectives in carrying out their investment projects. The specific laws on environmental protection in Ethiopia are the Environmental Pollution Control Proclamation No. 300/2002 and the Environmental Impact Assessment Proclamation No. 299/2002. Proclamation No.300/2002 imposes obligations on companies to prevent environmental pollution in the course of their operations and penalizes failure to do so.   Intellectual property (IP) Ethiopia acceded to the Convention establishing the World Intellectual Property Organisation (WIPO) in 1998. The Ethiopian Constitution of 1995 provides the foundation for protection of intellectual property rights. Additionally, the Inventions, Minor Inventions and Industrial Designs Proclamation No. 123/1995, the Copyright and Neighbouring Rights Proclamation No. 410/2004 (as amended by Proclamation No. 872/2014) and Trademark Registration and Protection Proclamation No. 501/2006 are in place to protect intellectual property rights.   Land rights The Constitution of Ethiopia provides that ownership of land belongs to the state and the nations, nationalities and peoples of Ethiopia. The Constitution similarly provides that the Government will ensure the right of private investors to use land on a lease holding basis. The Urban Land Lease Proclamation of 2011 gives investors the right to use of land on leasehold for periods of 15 years up to 99 years. The land cannot be mortgaged or sold, but the lease value of the land and the fixed assets thereon may be mortgaged or transferred to third parties. Regional governments and municipal administrations are authorised to allocate rural and urban land on rent lease in accordance with their respective laws.   Employment and labour relations Currently, the principal legislations that regulate private employment relationships in Ethiopia include the Labour Proclamation (Proc. No. 1156/2019), the 1960 Ethiopian Civil Code) and the Private Enterprise Employees Social Security Proclamation (Proc. No. 715/2011), as amended. These sets of law are complemented by different decisions of the Cassation Division of the Federal Supreme Court. Ethiopian labour law classifies employment relationships into managerial and non-managerial employment. The Labour Proclamation No. 1156/2019 governs non-managerial employees, and the Ethiopian Civil Code applies to managerial employees. The Proclamation defines ‘Managerial Employee’ as an employee who, by law or delegation, of the employer, is vested with powers to lay down and execute management policies, and depending on the type of activities of the undertaking, with or without the aforementioned powers, an employee who is vested with power to hire, transfer, suspend, layoff, dismiss, or assign employees, and includes a legal service head who recommend measures to be taken by the employer regarding such managerial issues, using his independent judgement, in the interest of employer.   Employment of foreign nationals Under Ethiopian law, employers can employ expatriates only for positions that could not be filled by Ethiopian nationals. Foreign employers may, however, employ expatriates for top management positions without any restriction.   Corporate governance Laws governing corporate governance The Ethiopian Commercial Code of 2021, the Banking Business Proclamation No. 592/2009, Bank Corporate Governance Directives No. SBB/62/2015, the Insurance Business Proclamation No. 746/2012 and the Commercial Registration and Business Licensing Proclamation No. 980/2016 are the principal sources on corporate governance.   Banking and finance The Commercial Code of 1960 (Book IV), the National Bank of Ethiopia Establishment Proclamation No. 591/2008, the Banking Business Proclamation No. 592/2008 (as amended), the Insurance Business Proclamation No. 746/2012, the Capital Goods Leasing Business Proclamation No. 103/1998 (as amended), the Registration and Supervision of Capital Goods and Capital Goods Leasing Agreement Regulation No. 309/2014, the Micro-Financing Business Proclamation No. 626/2009, and different directives of the National Bank of Ethiopia regulate the financial services sector in Ethiopia. Financial services are reserved for Ethiopian nationals and foreign nationals of Ethiopian origin. Foreign financial institutions are not allowed to operate in Ethiopia and foreign nationals and companies are prohibited from owning shares of local financial institutions. A foreign company may open a local bank account through its subsidiary or branch or representative offices duly registered in Ethiopia.   Foreign exchange regulations Ethiopia has a number of exchange control directives issued by the national bank of Ethiopia at various times. All capital brought in and invested in Ethiopia should be registered by the Ethiopian Investment Commission and the National Bank of Ethiopia. Technology transfer agreements should also be registered with the Ethiopian Investment Commission to avoid difficulties during repatriation. It is very important to comply with the requirements set forth above as subsequent requests for repatriation of profits and dividends and other payments depend in large part upon compliance with this requirement. Foreign investors having business in Ethiopia have the right to repatriation of profits and dividends accruing from their investments, principal and interest due on foreign loans, payments related to technology transfer, payments related to collaboration agreements, capital gains proceeds from transfer of shares or transfer of partial ownership to a domestic investor, proceeds from the sale or liquidation of the business and compensation paid to an investor under the investment laws.   Private equity The law requires that foreign investors should obtain approval from the Ethiopian Investment Commission in order to acquire shares of existing companies. The approval of the Ministry of Trade and Regional Integration (the successor of Trade Competition and Consumers Protection Authority on merger related issues) is also a requirement.   Tax, duties and tariffs The principal taxes currently in place are corporate income tax, value added tax (VAT), customs duties and excise taxes.  A number of final withholding taxes are imposed on income such as income from employment, dividend, and royalties. Ethiopia follows a classical corporate income taxation system in which tax is imposed both at corporate and shareholder level. Corporate income tax rate is 30% and dividend tax rate is 10%. All entities (except those currently enjoying income tax holidays) that carry on business or trade are subject to corporate tax. A business or a trade is defined as any industrial, commercial, professional or vocational activity or any other activity recognised as trade by the Commercial Code of Ethiopia and carried on by any person for profit. Partnerships are treated as entities for tax purposes and are therefore subject to corporate income tax. Distribution of dividends is subject to 10% withholding tax at the time of declaration of dividends by companies. Companies are liable for withholding of dividend tax regardless of whether they distribute dividends or not unless they transfer the dividends declared to increase their capital within the time limit set down in directives issued by the Tax Authorities. Interest on bank deposits is subject to 5% withholding tax, which is final. Interest paid on loan from foreign lender recognised as a financial institution by the National Bank of Ethiopia is subject to a 10% withholding tax, which again is final. The borrower in Ethiopia must withhold the 10% tax on a foreign loan in order to obtain deduction of the interest in Ethiopia. The withholding tax rates may be reduced by the provisions of an applicable double taxation treaty for non-resident shareholders but these reductions are subject to taxpayers meeting beneficial ownership limitations. Ethiopia has ratified double taxation treaties with countries like UK, France, Israel, Romania, Russia, Turkey, South Africa, Tunisia, Algeria, Yemen and Czech Republic. Capital gains tax applies to transfers of shares, bonds and buildings held for business purposes. The capital gains tax rate on transfer of shares or bonds is 30% of the gain. The capital gains tax on transfer of buildings held for businesses is 15% of the gain. VAT is chargeable on the supply of goods or services by registered suppliers. Suppliers are normally required to register for VAT if their annual turnover of supply exceeds one Million Ethiopian Birr. Some supplies are exempted from the VAT. These include financial services, educational, health and transportation services. Some supplies, most notably exports and international transport services, are zero-rated under the VAT regime of Ethiopia. Import duties are payable on imports by all persons and entities which have no duty-free privileges. The rate of customs duties ranges from 0% to 35%. Other taxes may also be imposed on imports: Excise duties on selected goods (e.g., tobacco); surtax on many imports; value added tax (15%) and an advance payment of corporate tax (3%). Most export products and services from Ethiopia are free from export tariffs. However, some exports from Ethiopia such as raw hides and skins are subject to export duties. Ethiopian investment and tax laws grant tax incentives in the form of duty free privileges for imports, income tax holidays, and in some cases income tax deductions. The tax incentives depend on the type, size and location of investments.    Charities and societies The major law that governs civil society organizations (CSOs) in Ethiopia is the Civil Society Organisations Proclamation No. 1113/2019 (the ‘Proclamation’). There are major aspects and significant developments of this law as compared to the previous law and regime which placed excessive restrictions.   Mining and energy Ethiopian Constitution Provides for State form of land and resource tenure. The fast-growing mining sector, primarily as a result of the foreign direct investment, in Ethiopia, has necessitated the revision of antiquated mining laws that were in place. Currently, there are a number of laws that govern mining operations, petroleum operations, and transaction in precious minerals. The laws that currently regulate the industry include: Mining Operations Proclamation No. 678/2010; Mining Operation (Amendment) Proclamation No. 816/2013; Petroleum Operations Proclamation No. 295/1996; Mining Operations Regulation No. 423/2018 and Transaction of Precious Minerals Proclamation No. 651/2009. The laws regulate the requirements and procedures for acquiring the different licenses (Reconnaissance, Exploration and Mining) that are required to undertake various activities associated with mining and minerals. The rights and duties that these licenses carry are also dealt with under these laws. These laws task, among others, the FDRE Ministry of Mines and Petroleum and the respective regional bodies to license and supervise entities that are involved in the mining industry. Investments in the Ethiopian energy sector are regulated principally by the Energy Proclamation No. 810/2013 (as amended by Proclamation No 1085/2018), the Energy Regulation No. 447/ 2019, Geothermal Resources Development Proclamation No. 981/2016 (as amended by Proclamation No. 1204/2020) and Regulations No. 453/2019, EEA Directive No. 418/2020 and Ethiopian Energy Authority Establishment Regulation No. 308/2013. Pursuant to the Investment Proclamation No. 1180/2020, the business of generation of electricity as well as off- grid transmission and distribution are open to foreign investors either to carry out the investment in a solely foreign- owned entity or through a joint venture with a local company or the government.   Real estate and conveyancing Ethiopia's current investment policy not only encourages foreign investment in the real estate sector but it is 100% free and suitable for foreigners to enter into the sector. Nonetheless, there are no duty free privileges or any other incentives provided by the government to the sector.   Legal framework The 1960 Civil Code of Ethiopia, Urban Land Lease Holding Proclamation No. 721/2011, Investment Proclamation No. 1180/2020, Ethiopian Building Proclamation No. 624/2009, Building Regulation No. 243/2011 and the Building Directive, are the principal laws that govern land and real estate matters in Ethiopia. However, Real estate is one of the under regulated sectors in Ethiopia. Since there is no single law that specifically applies to the sector, there exists a huge gap in laws that govern the area. A draft proclamation that provides for Real Estate Development, marketing and valuation has been in the in the pipeline for quite some time now. The Urban Land Lease Holding Proclamation of 2011 gives investors the right to use of land on leasehold for periods of 15 years up to 99 years. The period of urban land lease is currently 99 years for residential purposes and 60 years for land acquired for commercial purposes. The land cannot be mortgaged or sold, but the lease value of the land and the fixed assets thereon may be mortgaged or transferred to third parties. Regional governments and municipal administrations are authorised to allocate rural and urban land to investors on lease in accordance with their respective laws.   Requirements An investor who wants to develop real estate in Ethiopia must first secure an investment permit from the Ethiopian Investment Commission provided that it fulfils all requirements such as proof of a minimum capital of USD200,000 for a wholly foreign owned investment and USD150,000 for a joint investment of foreign and domestic investors, and payment of registration and permit fees. Any foreign real estate developer may acquire land in Ethiopia through lease from the government or a private contract. An investor who acquires land under a lease has to enter into a land lease agreement with the Government. Once the necessary permits and certificates have been acquired, an investor must then apply for and be issued with a construction permit from the competent office, on presentation of documents such as the proposed building plan and a land lease certificate.   Exiting an investment Disposal of investment Shareholders can dispose their shares in companies through direct sale to willing third party purchasers. There is also a possibility under the Ethiopian Commercial Code for companies to redeem their own shares. Shareholders may also agree to contractually provide for call options in company bylaws or shareholders/investment agreement in accordance with which the sale or purchase of shares can be enforced under specified conditions.   Listing There is no stock exchange market in Ethiopia.  The Capital Market Proclamation No. 1248/2021 was came in to force in July 2021. This Proclamation established Ethiopian Capital Market Authority with a mandate to regulate secondary market in Ethiopia. There are ongoing activities to establish securities exchange in Ethiopia.   Stock acquisition, asset acquisition and business acquisition The Ethiopian Investment Commission must approve the acquisition of shares of existing companies by foreign investors and the Ethiopian Trade Competition, and Consumer Protection Authority should approve an acquisition of share interests in existing companies in Ethiopia.  Ministry of Revenue should issue tax clearance to the existing company before the acquisition of shares.   Investment protection In Ethiopia, no investment can be expropriated or nationalised by the government except for public interest and then, only in conformity with the requirements of the law. The Constitution of Ethiopia protects private property. The Investment Proclamation also provides investment guarantees against measures of expropriation and nationalisation. In the event of expropriation or nationalisation, adequate compensation has to be paid in advance. Ethiopia is a member of the World Bank affiliated Multilateral Investment Guarantee Agency (MIGA), which issues guarantees to investors against non-commercial risks such as expropriation. Moreover, Ethiopia has also concluded bilateral investment promotion and protection agreements with various countries. Ethiopia has also signed (but not ratified yet) the Convention on Settlement of Investment Disputes between States and nationals of other states. Ethiopia acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the New York Convention entered into force in Ethiopia as of 22 November 2020.   Firm overview Mehrteab & Getu Advocates LLP (“MLA) is a leading full-service law firm in Addis Ababa. MLA is staffed with high-calibre lawyers who are accomplished in their fields of expertise as well as support staff which include legal assistants and other office personnel.   Practice areas Arbitration and litigation Aviation Banking and finance Charities and societies Contract negotiation and drafting Corporate and commercial Employment and immigration Hospitality and leisure Intellectual property Investment Mergers and acquisitions Mining and energy Private equity Real estate and conveyancing Sovereign debt Tax Website www.mehrteableul.com

Romania

Key facts about Romania Population: 19,328,838 (as of 1st of January 2020, according to the Romanian National Institute of Statistics) Size: 238,397 square kilometers, approximatively the same size as the United Kingdom, place in Europe by size: 12; Geographic location: South East Europe, bordering the Black Sea Official language: Romanian (a latin/romance language, such as French, Spanish, Italian or Portuguese) Capital: Bucharest, having 2,155,240 inhabitants (as of 1st of July 2020, according to the Romanian National Institute of Statistics) Main seaports: Constanța, Mangalia Currency: lei (RON). Romania however undertook the obligation to adopt the euro once the nominal, legal and real convergence criteria are fulfilled. At the moment, Romania is committed to joining the euro area, targeting the year 2024. Regime: Semi-presidential republic EU Membership: EU member state since 2007 NATO Membership: NATO member since 2004 Legal system: Civil law system Introduction Back in 2021, we were all thinking that the world is in a volatile, uncertain, complex and ambiguous state and that there is nothing else that could surprise us. It seems however that reality tends to be a better source for fiction novels than imagination itself. Romania is no stranger to ambiguity and uncertainty, of course. Situated at the junction of deep geopolitical divides, one is almost certain to fail in making any successful predictions about Romania’s immediate future, other than the simple, evergreen, prediction: it will be something we did not (fully) anticipate. Now Romania is facing yet another crisis, so unexpected and yet so usual and almost predictable for this part of the world. For business, it is time again to look carefully at risks, opportunities and plan for a rough but possibly very lucrative next decade. We see great things ahead for those cunning enough to seize the day. The Romanian economy – a very quick guide Following the end of the communist rule in 1989, Romania’s businesses have continued to grow year by year. Most recently, the turnovers of the country’s most important companies are considered to be double than those registered 10 years ago[1]. The capital city, Bucharest, draws the majority of business interest, and generates almost 38% of the total turnover in the Romanian economy. If we also count the economies along the Bucharest-Brașov route (therefore including Bucharest and Ilfov, Prahova, Brașov counties) together they amount for more than 50% of business in Romania. According to the European Economic Forecast[2], in 2021, Romania’s economy is expected to have grown by 6.3 percent, mainly driven by strong domestic demand. As for 2022, latest readings of sentiment indicators point to a rather positive, albeit moderate, growth outlook, in particular in services, retail trade, construction and industry. Private consumption is expected to pick up in the second half of 2022 and investment is expected to remain strong, supported by the Recovery and Resilience Facility and other EU Funds, but the expected increase in private investments is projected to dampen private investments[3]. Companies’ performance in the (hopefully) last year of the pandemic The easing of COVID-19 containment measures in the first quarters of 2021 and the companies’ experience of the previous pandemic year resulted in an increase in profits for companies active in the business services, trade, construction, real estate, manufacturing and utilities sector. Conversely, mobility restrictions brought by the Delta variant of the SARS-COV-2 virus and the decrease in aggregate demand dealt a heavy blow to services to households, mining and quarrying, while agricultural output contracted due to the weather conditions which had a negative impact on the sectors profitability[4]. The lessons of the previous global crisis seem to be looming on us as we also see a surge in the number of insolvency cases. According to the data published by the Romanian Trade Registry, the number of insolvencies has risen by 7.9 percent in 2021 compared to 2020. Hence, as the moratorium and the relaxed conditions under the insolvency legislation promoted by the Romanian government are being lifted, the postponed effects of the pandemic may now start to show. The need for reform in the Romanian restructuring sector is now greater than ever. The issuance of legislation that would create an efficient restructuring framework is one of the measures that might prevent the occurrence in many companies of a serious state of degradation, which may cause the closing or bankruptcy thereof. As Romania is bound to transpose into national legislation the EU legislation on preventive restructuring frameworks, the Romanian legislator is now having a major opportunity to implement a wide range of legislative reforms in order to improve the options available to debtors in financial difficulty. Romanian labour market in the past year The pandemic has left its mark on the Romanian labour market as well, with the unemployment rate fluctuating in line with the emergence of each new wave. Against the backdrop of the easing of restrictions, the unemployment rate fell to almost 5 percent in September 2021, but was followed by a new spike in the last quarter of the year as a result of the forth wave triggered by the Omicron variant and the population’s low vaccination rate. The Romanian labour market was nevertheless greatly supported by the authorities’ financial support for workforce retention. In early 2021, furlough schemes were reintroduced until the end of the year for the economic agents directly hit by the restrictions. Romania also benefits from EUR 4.1 billion under the EU’s programme for Support to mitigate Unemployment Ricks in an Emergency (SURE)[5]. A new challenge The latest Inflation Report published by the National Bank of Romania in February 2022 has confirmed that the global inflation fueled by marked rises in energy, food and other non-energy commodity prices is also a reality Romania cannot escape. The annual CPI inflation rate in Romania has stepped up significantly in the last quarter of 2021, reaching a 10-year high of 8.19 percent in December 2021. As the public health risks have persisted and the energy market strains have gained renewed momentum due to the conflictual situation in Ukraine, forecasts are not so positive either. The National Bank of Romania forecasts shows a higher annual CPI inflation rate in April, ahead of a gradual deceleration over the next quarters, when lower adjustments in energy prices are envisaged. The National Bank of Romania has also been constantly increasing the monetary policy rate and decided to maintain firm control over money market liquidity. The current monetary policy rate is of 3 percent per annum (increased as of 6 April 2022 from a previous rate of 2.5 percent)[6]. Analysts[7] also have lowered their estimate for 2022’s economic growth to 3 percent, down half a percentage point from the previous forecast, while their inflationary expectations have continued to rise (a inflation rate for 2022 is seen at 8.03 percent currently) amid the invasion in Ukraine. As regards the euro to lei exchange rate, a depreciation of the national currency is also expected in the next 12 months, while the key interest rate established by the National Bank of Romania is anticipated to surge to at least 4.25 percent in the next 12 months. Piece authored by Valentin Voinescu, Partner, Banking & Finance [1] According to an analysis by the consulting company Frames. [2] https://ec.europa.eu/info/sites/default/files/economy-finance/ip169_en.pdf [3] Idem. [4] Financial Stability Report of the National Bank of Romania, published in December 2021 [5] Financial Stability Report of the National Bank of Romania, published in December 2021 [6] https://www.bnr.ro/Monetary-Policy--3318-Mobile.aspx [7] CFA Romania’s Macroeconomic Confidence Indicator survey