Mergers & Acquisitions Due Diligence Checklist for Romania: A Guide for Foreign Investors

Introduction — The Problem / Why This Matters

Romania presents a dynamic and increasingly attractive landscape for foreign direct investment, with a growing economy, strategic geographical location, and access to the EU single market. For multinational corporations and international entrepreneurs, mergers and acquisitions (M&A) often serve as a primary vehicle for market entry or expansion. However, the success of any M&A transaction hinges critically on thorough due diligence. Without a comprehensive and legally sound investigation, investors risk exposing themselves to unforeseen liabilities, misvaluation of assets, regulatory non-compliance, and significant financial losses.

The complexities inherent in a cross-border M&A deal are amplified in a jurisdiction with a distinct legal and administrative framework. A robust due diligence process for a target company in Romania must navigate specific local regulations, accounting practices, taxation rules, and labor laws, which can differ substantially from those in Western European or North American markets. Ignoring these nuances or relying on a generic checklist can lead to critical oversights, delaying transactions, increasing costs, or even necessitating deal renegotiation or abandonment. Understanding the specific legal and practical obligations is paramount for mitigating risks and securing a favorable outcome.

Furthermore, the Romanian business environment, while maturing rapidly, still presents unique challenges related to historical corporate structures, environmental compliance, and intellectual property rights. A meticulous due diligence exercise, therefore, is not merely a procedural step but a strategic imperative. It provides the investor with a clear, accurate, and comprehensive understanding of the target company's true state, enabling informed decision-making and optimal deal structuring. This article aims to equip foreign investors with a detailed guide to conducting effective M&A due diligence in Romania, highlighting key legal requirements, potential pitfalls, and recent legislative updates.

More guides on this topic: Mergers, acquisitions and investment

Legal Framework — Key Laws and Regulations

Mergers and acquisitions in Romania are governed by a robust framework of national and EU legislation. Key laws that impact the due diligence process and the transaction itself include:

1. Company Law no. 31/1990, republished in the Official Gazette of Romania, Part I, no. 1066 of November 17, 2004, with subsequent amendments and completions. This is the foundational law governing the establishment, organization, functioning, and cessation of companies in Romania, including rules for mergers, divisions, and acquisitions by transfer of shares or assets. Articles 238-251 regulate merger procedures for Romanian companies.
2. Competition Law no. 21/1996, republished in the Official Gazette of Romania, Part I, no. 742 of August 16, 2012, with subsequent amendments and completions. This law transposes EU competition rules and establishes the Romanian Competition Council (Consiliul Concurenței) as the authority responsible for reviewing mergers and preventing anti-competitive practices. The notification thresholds and procedures for economic concentrations are detailed in Articles 28-36.
3. Labour Code (Legea nr. 53/2003) , republished in the Official Gazette of Romania, Part I, no. 345 of May 18, 2011, with subsequent amendments and completions. The Labour Code governs all aspects of employment relationships, including employee rights during an M&A transaction (transfer of undertaking, collective redundancies, consultation obligations). Specifically, Articles 67-73 address the transfer of undertakings.
4. Fiscal Code (Legea nr. 227/2015) , published in the Official Gazette of Romania, Part I, no. 688 of September 10, 2015, with subsequent amendments and completions, and the Fiscal Procedure Code (Ordonanța Guvernului nr. 2/2000) , regarding the approval of the Legea nr. 207/2015 on the Fiscal Procedure Code, republished in the Official Gazette of Romania, Part I, no. 513 of July 23, 2007, with subsequent amendments and completions. These codes are critical for understanding the tax implications of the transaction, transfer pricing rules, and potential tax liabilities of the target company.
5. Environmental Law (Ordonanța de Urgență a Guvernului nr. 195/2005) on environmental protection, approved with amendments and completions by Law no. 265/2006, republished in the Official Gazette of Romania, Part I, no. 1195 of December 12, 2009, with subsequent amendments and completions. This emergency ordinance is central to assessing environmental liabilities and compliance records of the target, particularly for companies operating in industrial sectors.
6. Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (General Data Protection Regulation - GDPR). As Romania is an EU member state, GDPR compliance is a critical aspect of due diligence, covering data processing practices, privacy policies, and potential fines for non-compliance.
7. Law no. 129/2019 on preventing and combating money laundering and terrorist financing, as well as for amending and supplementing certain normative acts, published in the Official Gazette of Romania, Part I, no. 589 of July 18, 2019, with subsequent amendments. This law imposes obligations on companies to identify beneficial owners and report suspicious transactions, which is relevant for financial due diligence.
8. Government Emergency Ordinance no. 109/2011 on corporate governance of public enterprises, approved with amendments and completions by Law no. 111/2012, published in the Official Gazette of Romania, Part I, no. 777 of November 4, 2011, with subsequent amendments. This ordinance sets specific governance standards for state-owned or controlled enterprises, which might be target companies.

Step-by-Step Process / Requirements

Conducting M&A due diligence in Romania typically involves several key stages, each requiring specific documentation and expertise. The process is multi-disciplinary, involving legal, financial, tax, and operational professionals.

1. Legal Due Diligence

This is focused on identifying legal risks, liabilities, and opportunities. Key areas include:

• Corporate Matters:

• Review of company constitutive acts (Articles of Association, Certificate of Incorporation), amendments, shareholder resolutions, board decisions, and any shareholder agreements.

• Verification of corporate registration data with the National Trade Register Office (Oficiul Național al Registrului Comerțului - ONRC). This includes checking the target company's J-number (e.g., J40/123/2000), CUI (Unique Identification Code), legal form, registered office, share capital, shareholders, directors, and any incumbrances on shares.

• Confirmation of the company's good standing and compliance with Company Law no. 31/1990.

• Contracts and Commercial Agreements:

• Review of significant commercial contracts: supply agreements, distribution agreements, services agreements, lease agreements, loan agreements, intellectual property licenses.

• Identification of change of control clauses, exclusivity clauses, material adverse change clauses, and termination rights.

• Real Estate:

• Verification of ownership titles for all real estate properties (extracts from the Land Book/Carte Funciară) from the National Agency for Cadastre and Real Estate Publicity (Agenția Națională de Cadastru și Publicitate Imobiliară - ANCPI).

• Confirmation of building permits, usage permits, and zoning regulations.

• Identification of any easements, mortgages, or other encumbrances registered against the properties.

• Intellectual Property (IP):

• Review of IP portfolio: trademarks, patents, copyrights, domain names.

• Verification of ownership and registration with the State Office for Inventions and Trademarks (Oficiul de Stat pentru Invenții și Mărci - OSIM) and/or the European Union Intellectual Property Office (EUIPO).

• Assessment of IP licenses granted to or by the target, and any potential infringement claims.

• Litigation and Disputes:

• Review of ongoing or threatened litigation, arbitration, and administrative proceedings (e.g., tax audits, environmental investigations).

• Obtaining official certificates from court registries (e.g., portal.just.ro, portal.instantelor.just.ro) regarding ongoing cases.

• Analysis of past disputes and their outcomes.

• Regulatory and Environmental Compliance:

• Review of permits, licenses, and authorizations required for the target’s operations (e.g., environmental permits from Agenția Națională pentru Protecția Mediului - ANPM, operating licenses from relevant ministries/agencies).

• Assessment of environmental liabilities, past contamination, and compliance with OUG 195/2005.

• Verification of compliance with specific sectoral regulations (e.g., energy, finance, telecommunications).

• Data Protection (GDPR):

• Assessment of the target's compliance with GDPR (Regulation (EU) 2016/679) and national data protection legislation (Law no. 190/2018).

• Review of privacy policies, data processing agreements, data security measures, and records of data breaches.

• Verification of registration with the National Supervisory Authority for Personal Data Processing (Autoritatea Națională de Supraveghere a Prelucrării Datelor cu Caracter Personal - ANSPDCP) where applicable.

2. Financial and Tax Due Diligence

This focuses on the financial health, historical performance, projections, and tax exposures.

• Financial Records:
• Review of historical financial statements (balance sheets, income statements, cash flow statements) for the past 3-5 years, audited if available.
• Analysis of revenue recognition, cost structures, working capital, debt, and contingent liabilities.
• Assessment of internal controls, accounting policies, and ERP systems.
• Tax Compliance:
• Review of corporate income tax, VAT, payroll taxes, local taxes, customs duties, and other applicable taxes.
• Verification of tax declarations, payment receipts, and reconciliation with financial records.
• Identification of deferred tax liabilities, tax incentives, and any unresolved tax audits (by Agenția Națională de Administrare Fiscală - ANAF).
• Assessment of transfer pricing policies and documentation.
• Asset and Liability Review:
• Detailed analysis of assets (fixed assets, inventory, receivables) and liabilities (payables, loans, provisions).

3. Human Resources (HR) Due Diligence

Crucial for understanding the workforce composition, costs, and potential labor-related liabilities.

• Employment Contracts:
• Review of standard employment contracts, collective bargaining agreements (if any), and individual addenda.
• Verification of compliance with the Labour Code (Law no. 53/2003) and sector-specific labor regulations.
• Analysis of employee benefits, compensation structures, pension schemes, and severance liabilities.
• Review of key employee agreements, management contracts, and non-compete clauses.
• Compliance with ReGES-Online:
• Verification of proper registration of all employees in the ReGES-Online system (Registrul General de Evidență a Salariaților) maintained by the Territorial Labour Inspectorate (Inspectoratul Teritorial de Muncă - ITM). This replaced the ReGES system as of January 1, 2026, per HG 295/2025 (Official Gazette, Part I, no. 310 of April 5, 2025).
• Assessment of any outstanding labour disputes, disciplinary actions, or claims related to discrimination or harassment.

4. Commercial/Operational Due Diligence

Focused on market position, customer base, supply chain, and operational efficiencies.

• Market Analysis: Industry trends, competitive landscape, market share, growth potential.
• Customer and Supplier Review: Key customer and supplier contracts, dependencies, payment terms, and relationships.
• Operational Efficiency: Manufacturing processes, supply chain management, quality control, IT systems.

Required Documents (Illustrative List):

• Certificate of Registration (Certificat de Înregistrare) from ONRC.
• Articles of Association (Act Constitutiv) and all amendments.
• Shareholder register and all minutes of General Meetings of Shareholders.
• Board of Directors meeting minutes.
• Audited financial statements (past 3-5 years).
• Tax returns and payment proofs (past 3-5 years).
• Bank statements and loan agreements.
• Material commercial contracts (sales, purchase, service, lease).
• Real estate title deeds (extrase de carte funciară) and permits.
• IP registration certificates (from OSIM).
• Environmental permits and compliance reports.
• Employee list, individual employment contracts, internal regulations (regulament intern).
• ReGES-Online extracts/reports.
• Insurance policies.
• List of ongoing and past litigations/disputes.

Costs and Timeline

The costs and timeline for M&A due diligence in Romania are highly variable, depending on the complexity, size, and industry of the target company, as well as the scope of the due diligence requested.

Legal Due Diligence:

• Costs: For a medium-sized transaction (e.g., target with EUR 5-20 million turnover), legal due diligence fees can range from EUR 15,000 to EUR 70,000 (approximately RON 75,000 to RON 350,000 based on an exchange rate of 1 EUR = 5 RON). For large, complex transactions, fees can easily exceed EUR 100,000.
• Timeline: Typically 2 to 5 weeks for a comprehensive review, following the provision of access to the data room. Urgent reviews can be expedited but often incur additional fees.

Financial & Tax Due Diligence:

• Costs: Similar to legal due diligence, costs can range from EUR 15,000 to EUR 60,000 for a medium-sized company. * Timeline: Also typically 2 to 4 weeks, often running parallel with legal due diligence.

HR Due Diligence:

• Timeline: 1 to 2 weeks.

Environmental Due Diligence (if applicable):

• Timeline: 3 to 6 weeks. These figures do not include internal costs, travel, or potential costs for deal structuring and negotiation.

Overall Timeline: A complete end-to-end M&A due diligence process, from initial setup of data room to final report delivery, usually spans 4 to 8 weeks, though simpler deals can be faster and complex ones longer.

Comparison Table

Key Considerations / Common Pitfalls

Foreign investors conducting due diligence in Romania should be aware of several common pitfalls and specific considerations:

1. Incomplete or Disorganized Documentation: Many Romanian companies, especially SMEs, may have incomplete, disorganized, or outdated records. This often necessitates extensive requests for additional documents and can prolong the due diligence process. Patience and persistence are key.
2. Ambiguity in Property Titles: Historically, land and property ownership records in Romania have been complex due to successive political regimes. Overlapping entries, lack of proper registration, or communal property claims can arise, particularly for older properties or agricultural land. Ensuring clear, unencumbered title through detailed Land Book verification is critical.
3. Labour Law Specificities: Romanian Labour Code is often considered protective of employees. Due diligence must carefully assess employment contracts, internal regulations (Regulament Intern), collective bargaining agreements, and compliance with the ReGES-Online system. Misclassified employment relationships (e.g., disguised employment through PFA or individual agreements for services) are a common risk area the authorities frequently target.
4. Environmental Liabilities: For companies in industrial or manufacturing sectors, historical environmental contamination can pose significant, undisclosed liabilities. Comprehensive environmental due diligence, including Phase I and Phase II assessments, is strongly advised, as remediation costs can be substantial.
5. Tax Compliance Risks: While Romania's tax system has become more predictable, legacy tax adjustments, transfer pricing non-compliance, or issues related to VAT refunds can still be identified. Tax due diligence can help quantify potential liabilities and assess the target's tax position.
6. Beneficial Owners Identification (UBO): Law no. 129/2019 mandates strict rules for identifying and registering ultimate beneficial owners. Non-compliance can lead to significant fines and reputational damage. Due diligence must verify the accuracy and completeness of UBO records with the ONRC.
7. Data Protection (GDPR) Compliance: With the full implementation of GDPR (Regulation (EU) 2016/679), non-compliance can result in substantial fines. Assessing the target's data processing practices, privacy policies, and security measures is vital, especially if personal data processing is central to their business.
8. Antitrust and Competition: Depending on the size of the transaction and market share, notification to the Romanian Competition Council (Consiliul Concurenței) under Law no. 21/1996 may be required. Failure to notify or proceeding without clearance can lead to significant fines (up to 10% of global turnover). Early assessment of notification thresholds is essential. Merger control procedures often take 30-45 days for Phase I reviews, potentially extending to further months for Phase II if competitive concerns arise.
9. Corruption and Bribery Risks: While Romania has made significant strides in combating corruption, foreign investors should remain vigilant. Due diligence should extend to identifying any red flags related to compliance with anti-bribery legislation, including reviewing internal policies, third-party relationships, and past governmental interactions.

Recent Changes 2026

The legislative landscape in Romania is dynamic, and investors must be aware of recent changes that impact M&A due diligence:

• ReGES-Online for Employment Records: As of January 1, 2026, the traditional ReGES system for recording employment contracts and changes has been replaced by ReGES-Online, as stipulated by HG 295/2025 on the approval of the methodological norms for the application of Law no. 53/2003 – the Labour Code, regarding the establishment and management of the General Register of Employees (ReGES), published in the Official Gazette of Romania, Part I, no. 310 of April 5, 2025. This new system aims to enhance transparency and real-time data submission to the Territorial Labour Inspectorates. Due diligence must now specifically verify the target company's compliance with ReGES-Online reporting requirements and the accuracy of employee data within this new platform.
• Continued Focus on Beneficial Ownership: Law no. 129/2019, as subsequently amended, continues to be rigorously enforced. The National Trade Register Office (ONRC) has intensified its efforts in verifying the Ultimate Beneficial Owner (UBO) declarations. During due diligence, it is crucial to ensure that the target company's UBO information is accurately declared and up-to-date in the ONRC register. Any discrepancies or failures to comply can lead to administrative sanctions, including potential dissolution of the company in severe cases, as per Article 32 of Law no. 129/2019.
• ESG Considerations: While not yet fully codified into a single comprehensive national law for private companies, environmental, social, and governance (ESG) factors are gaining increasing prominence, driven by EU directives (e.g., CSRD - Corporate Sustainability Reporting Directive via Directive (EU) 2022/2464, being transposed into Romanian law). Due diligence in 2026 should increasingly consider a target’s ESG performance, particularly regarding environmental impact, labor practices, and governance structures, as these can affect valuation, reputational risk, and access to funding. While specific penalties for private companies for non-compliance with ESG reporting are evolving, the market and regulatory pressure for adherence is growing.
• Digitalization of Public Services: Several governmental agencies, including the National Agency for Fiscal Administration (ANAF) and the National Trade Register Office (ONRC), have continued to digitalize their services. This can streamline data retrieval during due diligence but also means reliance on accurate online records. Verification of information through multiple official channels remains prudent.

Frequently Asked Questions

What is the primary purpose of M&A due diligence in Romania for a foreign investor?

The primary purpose is to identify and assess all material risks, liabilities, and opportunities associated with a target company in Romania. This includes legal, financial, tax, HR, environmental, and operational aspects. It allows the foreign investor to make an informed decision on whether to proceed with the acquisition, to properly value the target, and to structure the transaction with appropriate warranties, indemnities, and price adjustments to mitigate identified risks.

How does the Romanian legal framework impact due diligence compared to other EU countries?

While Romania, as an EU member, aligns with many EU directives (like GDPR and competition law), its national legal framework, particularly Company Law no. 31/1990, Labour Code no. 53/2003, and specific administrative procedures, retains distinct local characteristics. For example, specific requirements for company registration at ONRC, the history of land registration leading to potential title complexities, and the nuances of the ReGES-Online system for employment records (effective January 1, 2026) are unique to Romania. Local legal requirements are relevant to due diligence.

What are the most common hidden liabilities uncovered during due diligence in Romania?

Common hidden liabilities often include unrecorded tax liabilities (e.g., related to transfer pricing or underpaid contributions), historical environmental contamination, undisclosed litigation or administrative fines, non-compliance with labour laws (e.g., improper termination procedures, misclassification of employees leading to social security contribution shortfalls), and issues with real estate title or permits. Detailed investigation in these areas is crucial.

Is environmental due diligence always necessary, and what does it involve?

Environmental due diligence is highly recommended, especially for targets in industrial, manufacturing, or real estate sectors. It typically involves a Phase I Environmental Site Assessment (ESA), which is a non-intrusive review of historical records, site reconnaissance, and interviews, to identify potential contamination or environmental risks. If red flags are raised, a Phase II ESA (intrusive testing of soil and groundwater) may be necessary. This process helps quantify potential remediation costs and assess compliance with OUG 195/2005.

What is ReGES-Online, and why is it important for HR due diligence?

ReGES-Online (Registrul General de Evidență a Salariaților) is Romania's mandatory electronic register for employment records, replacing ReGES as of January 1, 2026. Employers must submit data regarding employment contracts, amendments, suspensions, and terminations to this online platform. During HR due diligence, verification of the target company's proper and timely registration of all employees and accurate data within ReGES-Online is critical for assessing labour law compliance and avoiding potential fines from the Territorial Labour Inspectorate (ITM) under HG 295/2025.

What is the role of the National Trade Register Office (ONRC) in due diligence?

The ONRC is a fundamental source of public information for corporate due diligence. It maintains official records of all registered companies, including their constitutive acts, shareholders, directors, share capital, legal status (e.g., insolvency), and beneficial owners (UBO declarations under Law no. 129/2019). Due diligence requires obtaining official extracts and certificates from the ONRC to verify the target company’s legal existence, structure, and compliance, including checking any recorded incumbrances or litigation on shares.

How long does a typical due diligence process take for a medium-sized company in Romania?

For a medium-sized company (e.g., EUR 5-20 million turnover), a comprehensive due diligence process covering legal, financial, and tax aspects typically takes 4 to 8 weeks. This timeline can be influenced by the target's responsiveness in providing documents, the complexity of its operations, and the scope of the investigation. Expedited processes are possible but often incur higher costs.

What are the consequences of not conducting thorough due diligence in Romania?

Failing to conduct thorough due diligence can expose the investor to significant risks: overpaying for the target, inheriting substantial undisclosed liabilities (e.g., tax debts, environmental cleanup costs, labour disputes), regulatory fines, unexpected operational challenges, and potential litigation. Ultimately, it can lead to financial losses, reputational damage, and even deal collapse post-acquisition.

What is the average cost range for comprehensive M&A due diligence in Romania?

The average cost for comprehensive M&A due diligence (legal, financial, tax) for a medium-sized company in Romania usually ranges from EUR 40,000 to EUR 150,000. This can vary significantly based on the target's size, industry, complexity, and the depth of the investigation required. Environmental due diligence, if extensive, adds another substantial cost.

Are there any specific cultural considerations during due diligence in Romania?

Yes, cultural nuances can play a role. Communication may sometimes be more indirect, and an emphasis on personal relationships can be present. Be prepared for potential delays in document provision and ensure clear, direct requests are made. Maintaining professional and respectful communication, alongside working with experienced local advisors, helps navigate these aspects effectively.

Conclusion and Next Steps

Navigating an M&A transaction in Romania demands a meticulous and multi-faceted due diligence approach. For foreign investors, a thorough investigation into the target company's legal, financial, tax, HR, and operational standing is not merely a formality but a critical risk mitigation strategy. By understanding the specific legislative requirements, potential pitfalls, and recent regulatory changes, investors can arm themselves with the necessary information to make sound investment decisions and ensure a successful integration.

The complexities introduced by local nuances, from corporate governance specifics and land registry intricacies to the recently implemented ReGES-Online system for employment records, underscore the importance of engaging experienced local legal counsel. We invite you to reach out to office@pantilimon.ro or visit our website at www.pantilimon.ro to schedule a confidential consultation.

*Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific legal guidance,