BASIC FORMS OF DOING BUSINESS IN MOLDOVA

General Remarks
Under the Moldovan legislation, business (entrepreneurial) activity is the activity of production of goods, performance of works and provision of services carried out independently by citizens and their associations on their own behalf, risk and responsibility for the purpose of obtaining a permanent source of income. In Moldova , business activity may be practiced by:

any Moldovan citizen possessing full legal capacity; any foreign citizen or stateless person; a group of citizens and/or stateless persons (partners) considered to be a collective entrepreneur; any enterprise.

Foreign citizens and stateless persons practicing business activity in Moldova benefit the same rights as Moldovan citizens. In Moldova business activity should be practiced in the form of an enterprise. An enterprise is considered to be a business entity, which has its own brand name and is established by an entrepreneur in the procedure stipulated by law. An enterprise is entitled to practice any types of activity, with the exception of those prohibited by law. An enterprise may practice certain types of activity determined by the legislation only after obtaining a license or permission from a competent authority. Certain activities may be carried out only by state enterprises.

Forms of Enterprises
Moldovan law stipulates that business activity may be practiced in any of the following business forms:

sole proprietorship; general (full liability) partnership; limited liability partnership; joint stock company; limited liability company; production cooperative; business cooperative; lease enterprise; state and municipal enterprise.

In enterprises which are established as a sole partnership, a full liability partnership and a limited liability partnership the property of the founders is not separated from the property of the enterprise and the founders bear unlimited responsibility for the debts of the enterprise.

An enterprise is deemed to be created at the moment of its state registration in the procedure established by applicable law.

State Registration
Enterprises, their branches and representative offices (establishments) are registered by regional branch authorities of the Moldovan State Registration Chamber (hereinafter Registration Chamber). For the purpose of state registration of the enterprise, its founders shall submit to a regional branch authority of the Registration Chamber the documents stipulated by current Moldovan legislation. The Registration Chamber is obliged to check the legality of the submitted documents and no later than within 15 days from the receipt date thereof adopt a decision on registration or on refusal of registration of an enterprise. A registered enterprise is assigned a registration number, which, being an identification number of the enterprise, shall be indicated in the constituent documents, the registration certificate and the seal of the enterprise.

State and Municipal Enterprises

State and municipal enterprises are established with fully state- or municipality-owned capital and are treated as legal entities. State enterprises are created and provided with assets by the Moldovan Government or authorized public authorities. Municipal enterprises are created and provided with assets by local authorities. State and municipal enterprises are prohibited from leasing or pledging the assets provided to the enterprise in use and possession. Further, such enterprises may not participate with their assets in the operations of non-state entities or to make investments in another state.

Cooperatives
Current legislation provides for several types of cooperatives, the majority of which are production and business cooperatives. A production cooperative is considered to be an entity established by five or more natural persons for the purpose of practicing joint production and other business activity based for the most part on personal work of its members and accumulation of contributions in the registered capital of the cooperative. A production cooperative is considered to be a private enterprise created to generate profits. A business cooperative is an entity created by at least five legal and/or natural persons practicing business activity to generate profits for members of the cooperative. Depending on the types of practiced activity, applicable regulations provide for such types of business cooperatives as processing business cooperatives, servicing and consulting business cooperatives, crediting business cooperatives, etc.

Sole Proprietorships

A sole proprietorship is formed on the basis of the property of an individual or his family. This form of doing business entails unlimited liability for sole proprietors and deems the property of the business to be the owners' joint property.

Partnerships
General (Full Liability) Partnerships
A general (full liability) partnership is considered to be an entity created by no less than 2 and no more than 20 legal and/or natural persons, which joined their assets for the purpose of practicing joint business activity under a common brand name. All partners of a general partnership bear unlimited joint and several liability for the obligations of the partnership.

Limited Liability Partnerships

A limited liability partnership is an entity created by no less than 2 and no more than 20 legal and/or natural persons who joined their assets for the purpose of practicing joint business activity under a common brand name. A limited liability partnership requires at least one full partner and one limited partner. Full partners bear unlimited joint and several liability for the obligations of the partnership, while limited partners bear liability for the obligations of the partnership only to the extent of the value of their contribution (share) in the registered capital of the partnership.

Limited Liability Companies

A limited liability company is considered to be a business entity with a registered capital of at least 300 minimal wages established by law as of the date of state registration of the company (i.e. 5,400 Moldovan lei or about US $415) divided into shares (contributions), the value of which is determined by the constituent documents of the company. The number of participants (natural and/or legal persons) in a limited liability company may not exceed 50. A limited liability company may also be created by a single natural or legal person. As a legal entity, a limited liability company bears liability for its obligations only to the extent of the value of its assets. The participants in a limited liability company bear liability to the extent of the value of their contributions in the registered capital of the company. The participants which have not made their contribution in full bear liability for the obligations of the company to the extent of the value of their contributions including the unpaid part of their contribution.

Joint Stock Companies

A joint stock company is a business entity, whose registered capital is completely divided into shares of stock and whose obligations are secured by the assets of the company. The shareholders of a joint stock company may be natural and legal persons from Moldova and abroad, stateless persons as well as foreign states and international organizations. A joint stock company may also be created by one legal or natural person only. Current legislation provides for two types of joint stock companies: open and closed joint stock companies.

A joint stock company is considered to be open if its shareholders have the power to alienate their shares to third persons without any restrictions. An open joint stock company may exercise public placement and sale of its shares and other securities among the unlimited circle of persons. The law does not limit the number of shareholders in an open joint stock company. A joint stock company is considered to be closed if its shareholders or the company itself have a preferential right to purchase the shares being alienated by shareholders of the company. A closed joint stock company may not carry out public placement and sale of its shares and other securities among the unlimited circle of persons. A closed joint stock company shall have no more than 50 shareholders. The registered capital of an open joint stock company shall constitute no less than 20 thousand Moldovan lei (about US $1,538), while the registered capital of a closed joint stock company no less than 10 thousand Moldovan lei (about US $769). Shareholders bear responsibility for the obligations of the joint stock company to the extent of the value of their shares.

Lease Enterprises
Lease enterprises are considered to be legal entities created by the personnel of state and municipal enterprises or their structural subdivisions for the purpose of practicing joint business activity under a common brand name. Participants in a lease enterprise shall bear liability for the obligations of the company to the extent of the value of their share in the assets of the enterprise.

Branches and Representative Offices (Establishments) of Enterprises

The Moldovan law permits enterprises to establish their branches and representative offices (establishments). Branches and representative offices (establishments) are not considered to be legal entities, except for those created by foreign enterprises. Enterprise shall bear liability for the obligations of their branches and representative offices (establishments), while the latter shall bear liability for the obligations of the respective enterprise. Branches and representative offices (establishments) must be indicated in the constituent documents of the enterprise.

Associations of Enterprises
Enterprises are entitled to establish associations in the form of alliances, unions and concerns. Associations of enterprises are considered to be legal entities. The enterprises making part of an association preserve their independence and rights stipulated by applicable legislation.

Termination of Enterprises
Moldovan law provides that an enterprise is terminated by way of its reorganization or liquidation. An enterprise is reorganized by way of its merger, acquisition, split-off, separation or

transformation. An enterprise is liquidated by the decision of its founders or a judicial authority in cases stipulated by law.

As I regularly receive inquiries on how to register a company in Moldova, I decided to make a separate post on that issue describing some major procedures. Choosing the legal form of your company

Fist of all, before starting your business you should choose the form of your future company. Two most popular forms of companies in Moldova are limited liability company (Societate cu raspundere limitate SRL) and joint-stock company (societate pe actiuni - SA). As the second type (SA) is subject to a very complex regulation that deals with the securities market (as it issues stocks and bonds) and is subject to strict control of their activity by the National Commission on the Financial Market the vast majority of companies in Moldova are registered in the form of a limited liability company. SAs also require to disclose to public a lot of information about the company's activity. You must register an SA only in case you have more than 50 founders or you want to pursue certain kinds of activities like banking or insurance activity, for instance.

LLCs (SRL) are much easier to register and easier to operate. And that is why this form is the most preferable choice for newly registered companies. And in this post I will concentrate exclusively on them.

There are no restrictions for foreign private persons and companies to register a company in Moldova. They can be registered in common with Moldovan co-founders (joint ventures) or exclusively by foreign founders (companies with foreign capital). In order to do that they need to present a number of documents to the State Registration Chamber (Camera Inregistrarii de Stat). The procedure usually takes 1 to 5 days.

Documents that must be presented:

For founders - natural persons:

- Identification documents of the company's founders and of the future administrator (director). In case of foreign citizens temporarily staying in Moldova (up to 90 days) - valid national passports with the stamp of the Border Service on the entrance to the territory of Moldova. The ones permanently residing in Moldova should present a valid residence permit.

The administrator cannot work in that capacity in two different companies unless he/she is their (co)founder.

For founders - legal entities (companies):

- the extract from the commercial registry of the investor's country (containing all major information on the founding company). - foreign company's bylaws.

Additional documents:

- Decision on registering a company (in case the founder is another company). - Confirmation document on the payment of the registration fees. - Certificate of the administrator's lack of criminal records (both from his/her country of origin and from Moldova). - documents confirming the address of the company's seat.

All the documents in other languages should be translated into Romanian, the copies should be authenticated by a notary and apostilled (or legalised by a Moldovan Consulate in case the country of origin that has issued the documents is not a party to the 1961 Hague Convention Abolishing the Requirement of Legalisation for Foreign Public Documents).

There are no requirement to present apostilled or legalised copies of the notarized documents from the CIS (the Commonwelth of Independent State) countries, Lithuania, Latvia, Czech Republic and Turkey, with which Moldova signed bilateral agreements.

All the documents should be presented by the founder or his/her representative (in the latter case the representative should present an authorised power of attorney).

The administrator of the company can be a Moldovan or a foreign national with no previous criminal records.

The seat of the company

The founders of the company should present the document that confirms the address where the company will have its registered seat. This can be premises either in the ownership of the founders or rented by them. In case of owned premises documents on ownership should be presented (e.g., contract of sale), in case of rented premises the renting contract should be provided (or a written statement by the owner by which he/she gives consent to register a company at the indicated address).

Some companies in Moldova render services of providing premises for companies registeration, like this one, for example: http://www.welcome.md/eng/virtual_office

Minimum share capital:

The minimum share capital for a limited liability company is just 5 400 MDL (circa 307 euros/439USD)

In case the share capital is constituted in kind (when certain property, e.g. technological equipment or real estate, is introduced as the contribution into the share capital) than the valutation act signed by an authorised valuer should be annexed.

Costs and fees:

The cost of the registration in 5 days period is 544 MDL (about 31 euros/45 USD). That cost includes all the fees for the registration and concurrent services provided by the State Registration Chamber (checking the name of the company, drawing up standard bylaws, issuing the registration certificate and the extract from the commercial registry, publication in the official bulletin of the Chamber). In case of 1 day registration the costs are 965 MDL (about 55 euros/79 USD).

Bylaws

The company's bylaws is the main constituent act of the company. It should include the following data:

- the name of the company; - the data on the company's founders; - purposes of the company's activity (5 purposes should be indicated in the bylaws, though any company can carry out any other types of activities even they are not indicated in its bylaws unless it requires a separate licence); - the amount of the share capital; - the amount of the founders' shares and the order of the contribution. - the cost of the property - in case the share capital is constituted in kind. - the company's seat address.

- the structure, competence, formation and the order of functioning of the managing bodies. - the way of company's representation. - data on branch and representative offices - if relevant. - the grounds and the order of the company's reorganisation or liquidation. - other data that do not contradict the legislative requirements.

Usually, the State Registration Chamber provides services on elaborating standard bylaws for newly registered companies. However, you may resort to a private lawyer or a law firm in case you wish some particular requirements and wishes to be introduced into the bylaws. Otherwise there's almost no necessity in independent legal services in the process of a company registration as all major assistance is provided by the Registration Chamber.

Opening a temporary bank account and introduction of the share capital

After submission of all necessary documents the Registration Chamber issues a certificate with which the founders can open a temporary bank account. The temporary bank account is needed to introduce the share capital. After the necessary sum of the capital is transfered to the account the bank issues a certificate confirming the introduction of the capital. This certificate serves as a basis for the finalising of the company registration.

After the company is registered the money is transferred from the temporary banking account to the permanent one that is to be opened under the general rules for opening banking accounts in Moldova.

Completion of the registration

After you present the certificate from the bank the registrator of the State Registration Chamber checks all the documents presented. In case the documents meet all the legislative requirements the Chamber issues the Registration Certificate which is the main company's document confirming its registration and the exctract from the legal entities registry.

From that moment your company is considered registered and can start its activity.