Last updated: 19 February 2014
PERSONS SEVERALLY LIABLE WITH THE INSOLVENT DEBTOR TOWARD THE TAX AUTHORITY
Frequently, the State has issues in recovering its receivables from companies, especially from companies who no longer have the financial resources necessary to pay their debts and who become subject to insolvency proceedings.
Therefore, the Code of Fiscal Procedure provides the several liability of the company subject to insolvency proceedings with the persons who have contributed to the company’s insolvency (such as, for example, directors, shareholders or third parties). Of course, the causal link has to be proven.
The Order of the ANAF President (the Romanian tax authority) no. 127/2014, approving the several liability procedure provided by the Code of Fiscal Procedure entered into force on February 4th 2014. Thus, the Order expressly regulates the means and procedures to be followed by the tax authority in order to prosecute the person responsible for a company’s insolvency in order to oblige this person to pay severally with the company.
PERSONS RESPONSIBLE FOR A COMPANY’S INSOLVENCY
The Code of Fiscal Procedure provides that the following persons may be held severally liable with a company that has not paid its debt towards the State:
a. Persons who, prior to insolvency, granted themselves or had the company grant them, in bad faith, company assets, which lead to the company’s insolvency;
b. Shareholders, directors or other persons who have determined the company’s insolvency by selling or misappropriating, in bad faith, company assets;
c. Directors who, in bad faith, have not requested the initiation of insolvency proceedings, although the company was fulfilling the legal conditions;
d. Directors or other persons who, in bad faith, have determined the non-payment of the tax debt or the reimbursement of the amounts from the State budget, without being due.
Moreover, the legal person controlling or being controlled or being controlled jointly with the insolvent company may be held severally liable with the latter, under certain conditions.
HOW IS SEVERAL LIABILITY ENGAGED?
In order to engage the several liability, the tax authority shall have to perform a research on the directors, shareholders or third parties, including on the deeds concluded by them with the insolvent company or referring to the company’s assets (e.g.: sale agreements, receivable transfer agreements, donation agreements, exchange agreements, asset contributions to the company’s share capital etc.) and who influenced the company’s status.
For each case, the tax authority shall have to prove the bad faith of the concerned persons and to prove the causality between their actions and the company’s insolvency.
DECISION OF ENGAGING SEVERAL LIABILITY
The prosecution procedure is finalized by the issuance of a decision engaging the several liability; this is a debt instrument and obliges the person held severally liable to pay the insolvent company’s debts. This decision may be appealed through the proper legal channels.
The definitive several liability engagement shall also be registered in the tax record of the natural/legal person held severally liable.