Starting on the 15.07.2018, business owners enjoy legislative amendments related to the regulation of a new dividend payment mechanism, which the Law no. 31/1990 has suffered following the entry into force of Law no. 163/2018 for the amendment and supplementing of the Accountancy Law no. 82/1991, the Companies Law no. 31/1990 and Law no. 1/2005 regarding the organization and functioning of the cooperation (“Law no. 163/2018”).
Law no. 163/2018 aims to set forth a more flexible approach to distribution of amounts registered as profits, throughout the course of the financial year. In particular, such companies who register profit will be henceforth able to approve and pay dividends to their shareholders not just annually, as was the case previously, but also quarterly. Moreover, the distribution of dividends earlier than the end of the annual financial exercise will no longer be classified as a crime and sanctioned with imprisonment, as per former legal provisions.
Subsequently, at the same time as the implementation of the new dividend payment mechanism, companies will have the obligation to prepare the interim financial statements along with the annual financial statements, pursuant to the new provisions of the law. Furthermore, the interim financial statements shall be subject to audit in case the respective entities have the statutory auditing obligation of the annual financial statements or in case such entities opt in for auditing their annual financial statements. If such annual statements are subject to the verification by censors, the same will apply to the interim financial statements as well.
Law no. 163/2018 further provides that entrepreneurs who decide to distribute profit throughout the financial year, within the limit of the quarterly net profit achieved, will always have to perform a regulating of interim distributions after approval of their annual financial statements. Following the regulating procedures, any amounts received by shareholders in addition to what they are entitled will have to be repaid within 60 days as of the date of approval of the annual financial statements.
Therefore, this new payment mechanism encourages the rotation of capital, new investments as well as economic growth, and entrepreneurs will be favoured by the fact that the company’s shareholders will not have to wait to make new investments or simply to receive dividends, as has been the case so far. According to the old provisions, a company could only distribute dividends at the end of the financial year, but in reality, dividends were paid much later, the payment being conditional upon the approval of the financial statements, which occurred most often within 120 – 150 days, as the case may be, from the closing date of the financial year.
The legislative amendments also have a financial impact on the general government budget, consisting in the obligation of shareholders who quarterly received their dividends, to quarterly pay the income taxes to the general government budget, being thus constituted cash availabilities and budgetary reserves during the fiscal year, as well as to pay the income taxes differences resulting from the regulating of the profit account by submitting the annual financial statements.
Should you have any questions or need further information in relation the above, please contact our Corporate Team, Silviu Stratulat, Managing Partner, at email@example.com, Ramona Iancu, Partner, at firstname.lastname@example.org and Cristina Man, Manging Associate, at email@example.com, or call the Stratulat Albulescu Attorneys at Law office on +40 (21) 316 87 49.
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