SAFE Notes & Convertible Loans in Romania: Legal Framework for Foreign Investors

Introduction — The Problem / Why This Matters

Foreign investors, particularly those engaged in early-stage ventures and startups, frequently encounter challenges in traditional equity financing. Conventional equity rounds can be time-consuming, expensive, and require precise valuation negotiations at an early stage when a company's prospects are highly uncertain. This often creates a significant impediment for both founders seeking capital and investors keen to deploy funds efficiently without immediate and complex valuation exercises. The dynamism of the Romanian startup ecosystem necessitates flexible financing instruments that bridge the gap between seed funding and Series A rounds, accommodating rapid growth and evolving business models.

Traditional debt, while seemingly simpler, often comes with fixed repayment schedules and interest obligations that can strain a nascent company’s cash flow. Furthermore, standard debt instruments typically do not provide investors with an upside participation in the company’s potential growth, which is a primary driver for venture capital and angel investors. This misalignment of interests can deter crucial early-stage financing, impacting the innovation and development vital for economic expansion.

In this context, instruments like Simple Agreements for Future Equity (SAFE notes) and convertible loans have emerged globally as popular, founders-friendly, and streamlined alternatives. They defer the valuation discussion to a later, more material financing round, allowing startups to secure capital quickly and efficiently. For foreign investors, understanding the nuances of these instruments within the Romanian legal landscape is paramount. The absence of specific, tailor-made legislation for SAFE notes in Romania presents unique interpretative challenges and necessitates a careful structuring of these agreements to ensure enforceability and compliance with existing corporate and civil law provisions.

This article provides a comprehensive overview of how SAFE notes and convertible loans are implemented in Romania, focusing on the legal framework, practical considerations for their structuring, conversion mechanics, and essential protections for founders and investors. Our aim is to demystify these instruments for foreign investors, offering clarity on the legal implications and strategic advantages of utilizing them in the Romanian market, while strictly adhering to local regulations and corporate governance principles.

Legal Framework — Key Laws and Regulations

The legal framework governing SAFE notes and convertible loans in Romania is not concentrated in a single, dedicated piece of legislation. Instead, these instruments are structured by carefully applying principles derived from several key pieces of Romanian and, where relevant, European Union law. The primary legal pillars are the Romanian Civil Code, the Companies Law, and specific provisions concerning financial instruments and contractual obligations.

The Civil Code forms the foundation for all contractual agreements in Romania. It governs general principles of contracts, such as offer, acceptance, object, cause, capacity, and form (Art. 1166 – Art. 1323 C. Civ.). For both SAFE notes and convertible loans, the underlying agreement is a private contract. Key articles include:

• Art. 1166 C. Civ.: Defines a contract as an agreement between two or more persons to establish, modify, or extinguish legal relationships.
• Art. 1169 C. Civ.: States that parties are free to conclude any contract and determine its content, within the limits of the law, public order, and good morals.
• Art. 1270 C. Civ.: Emphasizes the binding force of contracts lawfully entered into, serving as law between the parties.
• Art. 1573 – Art. 1583 C. Civ.: Regulates loan agreements (contract de împrumut), which is the basis for convertible loans, outlining aspects like interest, repayment, and security.
• Art. 1650 – Art. 1770 C. Civ.: Pertains to sales contracts (contract de vânzare), which becomes relevant upon the conversion of the instrument into equity, as it involves the transfer of shares. The 'future equity' aspect of SAFE notes is essentially a conditional promise to sell/transfer shares at a future date under specific触发事件.

This law is crucial for understanding the corporate implications of issuing shares, share capital increases, and shareholder rights. When SAFE notes or convertible loans convert into equity, the provisions of Law 31/1990 become directly applicable. Key articles include:

• Art. 93 – Art. 101: Deals with share capital increases for limited liability companies (SRLs), outlining requirements for shareholder decisions, valuation of non-cash contributions (if any), and registration with the Trade Registry.
• Art. 210 – Art. 220: Specifies procedures for share capital increases for joint-stock companies (SAs), including prospectus requirements for public offerings (if applicable).
• Art. 195 alin. (2) and Art. 216 alin. (2): Requires that the share capital of a limited liability company (SRL) or joint-stock company (SA) must be fully paid up on subscription.
• Art. 60 – Art. 62: Addresses the transfer of social parts (shares) in an SRL, including pre-emptive rights of existing shareholders, which must be carefully considered during conversion.
• Art. 135: Deals with the issuance of convertible bonds (obligațiuni convertibile), which, while not SAFE notes, provides a legislative pathway for debt-to-equity conversion in the context of public offerings, and its principles can inform the structuring of private convertible instruments.

3. Other Relevant Legislation:

• Legea nr. 227/2015 privind Codul Fiscal, cu modificările și completările ulterioare (Fiscal Code): Relevant for tax implications, particularly regarding interest deductions on convertible loans, capital gains on share sales post-conversion, and potential VAT implications on certain fees. For example, interest paid on convertible loans may be deductible under specific conditions, provided the debt-to-equity ratio requirements are met (thin capitalization rules, Art. 402 Cod Fiscal).
• European Union Directives: While not directly legislating SAFE notes, certain EU directives influence corporate governance and capital markets, especially for larger companies. The Second Company Law Directive (Directive (EU) 2017/1132) on capital formation and maintenance of capital of public limited liability companies (codified version of Directive 77/91/EEC) provides principles on capital increases, which implicitly impact how equity conversions must be carried out, particularly concerning the protection of shareholders and creditors. For private companies (SRLs), the national law offers more flexibility, but the underlying principles often mirror these directives.

Specific Challenges for SAFE Notes in Romania:

SAFE notes, as developed in the US by Y Combinator, are not explicitly recognized as a distinct legal instrument in Romanian law. Their implementation relies on contractual freedom and a careful combination of elements resembling a conditional sales agreement (of future shares) and, in some interpretations, an advance payment for services/goods (though less common for investment). The absence of specific legislation means that:

• No standardized conversion mechanism: Unlike some jurisdictions where SAFE notes automatically convert upon a triggering event, in Romania, the conversion typically requires a formal decision by the company’s shareholders and potentially an amendment to the articles of association, followed by registration with the Trade Register. This is essential to comply with Law 31/1990 regarding capital increases.
• Tax treatment ambiguity: The tax treatment of a pure SAFE note (without an interest component) can be less straightforward than a convertible loan, as it doesn't fit neatly into traditional 'debt' or 'equity' categories prior to conversion. Careful structuring is needed to clearly define the nature of the funds received.

To circumvent potential legal ambiguities, many Romanian practitioners structure SAFE notes as conditional agreements to subscribe to future equity, often combined with a pre-emption right waiver from existing shareholders (if applicable) and a future share capital increase resolution. Convertible loans, on the other hand, benefit from a clearer legal basis as loan agreements under the Civil Code, coupled with an embedded option for the lender to convert the principal and/or accrued interest into equity under pre-defined terms. This option is typically structured as a conditional agreement to subscribe to new shares upon certain events.

Step-by-Step Process / Requirements

Implementing SAFE notes or convertible loans in Romania involves several critical steps to ensure legal validity and proper execution, particularly given the reliance on contractual freedom within existing corporate and civil law. The process outlined below focuses on a typical SRL (limited liability company), the most common legal form for Romanian startups.

I. Due Diligence and Negotiation Phase:

II. Drafting and Signing the Agreement:

3. Drafting the Convertible Instrument Agreement: The legal counsel drafts the SAFE Note Agreement or Convertible Loan Agreement. This document must clearly define:
   • Parties: Investor and company.
   • Principal Sum: The investment amount.
   • Conversion Mechanics: Detailed conditions and formulas for conversion into equity (e.g., based on a Series A valuation cap or discount).
   • Trigger Events: Next financing round, change of control, IPO, or maturity date (for convertible loans).
   • Maturity Date (for Convertible Loans) : Date by which the loan must be repaid or converted.
   • Interest Rate (for Convertible Loans) : Annual interest, payment schedule, and whether it capitalizes or is repaid.
   • Founder/Company Representations and Warranties: Standard assurances regarding the company's legal and financial status.
   • Covenants: Obligations of the company (e.g., information rights, negative covenants).
   • Governing Law and Dispute Resolution: Typically Romanian law and arbitration or Romanian courts.
   • Shareholder Approval (Pre-emptively) : It is advisable to obtain a prior shareholder decision (or at least a clear understanding) from existing shareholders to approve the potential future share capital increase required for conversion, possibly including a waiver of pre-emption rights if new shares are to be issued to the investor at conversion without an explicit offering to existing shareholders. This is crucial for compliance with Art. 60 and Art. 93 of Law 31/1990. (Timeline: 1-2 weeks for drafting).

III. Funding and Post-Signing Actions (Pre-Conversion):

IV. Conversion Phase (Upon Trigger Event): * Specify the nominal value of new shares and the number of shares. * Approve the investor as a new shareholder (if applicable) and amend the Articles of Association to reflect the new share capital and shareholder structure. * Explicitly address any pre-emption rights. If they were waived initially, the resolution confirms this; otherwise, current shareholders must be offered the new shares proportionally or expressly waive their rights in this meeting. (Art. 60, Art. 93, Art. 202 Law 31/1990). * Be adopted by the required majority (e.g., ¾ of share capital for SRLs for Articles of Association amendments, Art. 192 Law 31/1990).

*Required Documents for AGA:* Convening notice, attendance list, minutes of the meeting, updated Articles of Association.

11. Trade Register Registration: The company submits an application to the National Trade Register Office (ONRC) for registration of the share capital increase and the updated Articles of Association. This step formally recognizes the investor as a shareholder. Required Documents for ONRC: Application form, AGA resolution, updated Articles of Association, updated shareholder list, proof of funds (bank statement showing investment receipt), valuation report (if applicable), proof of payment of registration fees. (Timeline: 3-5 business days for ONRC processing, if documents are complete).

V. Post-Conversion:

Costs and Timeline

The costs and timelines associated with structuring and converting SAFE notes and convertible loans in Romania can vary based on the complexity of the deal, the company's legal form (SRL vs. SA), and the specific requirements of the investors.

I. Initial Drafting and Signing Phase (SAFE Note / Convertible Loan Agreement)

*   Due Diligence: EUR 2,000 – EUR 8,000 (depending on company size and complexity). This can range significantly.
*   Drafting & Negotiation: EUR 3,000 – EUR 10,000. For complex structures or extensive negotiations, fees can be higher. This covers the term sheet, agreement drafting, and associated legal consultations.

• Notary Fees (if applicable) : Generally, the agreement itself does not require notarization. However, power of attorneys or certain collateral documents (e.g., mortgage over shares for convertible loans, if any) might. EUR 30-60). Notary fees are calculated based on transaction value for collateral, so this is highly variable.
• Timeline: 3-6 weeks from initial contact to signing, assuming efficient negotiation and document flow. This includes legal due diligence.

II. Conversion Phase (Share Capital Increase)

This phase incurs costs associated with corporate formalities and registration.

*   Preparation of Shareholder Resolution & Articles of Association Amendments: EUR 1,500 – EUR 4,000. This covers drafting the General Meeting of Shareholders (AGA) summons, minutes, resolution, updated Articles of Association, and coordinating with the Trade Register.
*   Trade Register Application Assistance: Included in the above, or a standalone fee of EUR 500 – EUR 1,500 if handled separately.

• Trade Register Fees (ONRC) :
  • Registration of Share Capital Increase: The official fee for registration of amendments to the Articles of Association with the Trade Register is generally a fixed fee plus a variable fee based on share capital increase. As of April 23, 2026, based on Legea nr. 265/2022 privind registrul comerțului, publicată în M.Of. nr. 823 din 02.12.2009, cu modificările și completările ulterioare, the main fee is RON 135 (approx. EUR 27) for modifications to the articles of association. There might be additional fees for publication in the Official Gazette (Part IV), which starts from around RON 30 (approx. EUR 6) per page for registration acts.
  • Issuance of Extract from the Trade Register: RON 45 (approx. EUR 9) for a standard extract.
• Valuation Report (if required) :
  • If a valuation report by an independent authorized valuator is deemed necessary (e.g., for complex pricing above par value, or for contributions in kind if structure changes), costs typically range from EUR 1,000 – EUR 5,000, depending on the company's size and assets. (Under Art. 96 Law 31/1990, for contributions in kind, an expertise is mandatory; for cash contributions premium over par value, while not strictly mandatory, it can reinforce the decision).
• Accounting Fees: For registering the transaction, adjusting financial statements, and preparing tax declarations. Varies greatly based on the accountant, typically RON 500 – RON 1,500 (approx. EUR 100-300) for the specific transaction.
• Timeline:
  • Shareholder Resolution: 1-2 weeks (including convening period and meeting).
  • Trade Register Registration: 3-5 business days if all documents are perfectly in order. Can extend to 2-3 weeks if there are requests for clarification or corrections from ONRC.

Total Estimated Costs:

• Official Fees (ONRC) : Approximately RON 200 – RON 500 (EUR 40 – EUR 100).
• Other Potential Costs (Valuation, Notary) : EUR 1,000 – EUR 5,000+ (if required).

Overall Timeline:

From initial discussions to formal investor entry as a shareholder (post-conversion) can take anywhere from 2 to 4 months, considering due diligence, drafting, negotiation, funding, and the formal conversion process with the Trade Register. While SAFE notes and convertible loans aim for speed, the corporate formalities for equity conversion in Romania introduce a necessary time component.

Comparison Table

Key Considerations / Common Pitfalls

When utilizing SAFE notes and convertible loans in Romania, both founders and foreign investors must navigate several critical aspects to ensure a smooth and legally sound process. Overlooking these can lead to disputes, delays, or unforeseen liabilities.

• Pitfall: Vague or incomplete definitions of conversion events, pre-money valuation caps, discount rates, and the methodology for calculating the number of shares to be issued. This can lead to significant disagreements when the trigger event occurs, especially if the company's valuation trajectory is unexpected.

• Consideration: The agreement must meticulously detail every aspect of the conversion. For example, specify what constitutes a “Qualified Financing Round” (minimum investment amount, type of investors), how to calculate the price per share using the valuation cap or discount, and the treatment of accrued interest (for convertible loans) – whether it converts or is repaid. This often involves defining a triggering event, a conversion price, and a conversion ratio with utmost clarity.

• Pitfall: Failing to obtain necessary shareholder approvals for future share capital increases, particularly concerning waivers of pre-emption rights. Romanian law (Art. 60, Art. 93 and Art. 202 of Law 31/1990) grants existing shareholders pre-emption rights to subscribe to new shares issued during a capital increase. If these rights are not properly waived or managed, the conversion can be challenged or delayed.

• Consideration: It is crucial to address pre-emption rights at the time of signing the SAFE note or convertible loan. Existing shareholders should either explicitly waive their pre-emption rights in a separate, formal document (e.g., a specific shareholder resolution) that is acknowledged by the company and the investor, or the financing round that triggers conversion must inherently accommodate these rights. Often, it's stipulated that the conversion will occur in conjunction with a Series A where existing shareholders have already waived or exercised their rights proportionately.

• Pitfall: Assuming SAFE notes operate identically to their US counterparts. As there's no dedicated Romanian law, practitioners rely on applying general principles of contract law and corporate law. Directly copy-pasting a US-style SAFE note without local adaptation can result in unenforceable clauses.

• Consideration: Structure SAFE notes as conditional agreements for the subscription of future equity. This means the investor provides funds now, and the company promises to issue shares under certain conditions. This implies a future obligation for the company to increase its share capital, which requires a formal shareholder decision and registration with the ONRC. The agreement must clearly reflect this multi-step process.

• Pitfall: Neglecting to consider the tax treatment of the investment, particularly for SAFE notes, which are not clearly debt or equity pre-conversion. Misclassification can lead to incorrect accounting entries, tax audits, and penalties. For convertible loans, thin capitalization rules (Art. 402 Cod Fiscal) regarding interest deductibility must be observed if the lender has control and the debt-to-equity ratio exceeds 4:1.

• Consideration: Engage Romanian tax advisors early. For SAFE notes, the funds are typically treated as a liability (advance for future capital increase) until conversion. For convertible loans, the interest can be a deductible expense for the company, within fiscal limits. Capital gains for the investor upon exit (after conversion) are taxed according to Romanian tax law on share sales.

• Pitfall: Lack of clear enforcement mechanisms or an inadequate dispute resolution clause. Should a company fail to convert, or if disputes arise, a poorly drafted agreement can prolong legal battles.

• Consideration: Include robust dispute resolution clauses, generally favoring Romanian courts or international arbitration (e.g., under the rules of the Court of International Commercial Arbitration attached to the Chamber of Commerce and Industry of Romania – Curtea de Arbitraj Comercial Internațional de pe lângă CCIR). Specific performance clauses relevant to the capital increase obligation should also be considered.

• Pitfall: Overlooking founder protections or investor minimum rights. Founders might be overly diluted or concede too much control. Investors might lack adequate information rights or anti-dilution provisions.

• Consideration: Even though pre-conversion investor rights are limited, the agreement can include robust information rights (e.g., access to financial statements, participation in board meetings as observer), pro-rata rights post-conversion (right to participate in future funding rounds to maintain ownership percentage), and most-favored-nation (MFN) clauses to ensure the SAFE/convertible note holder benefits from better terms offered to subsequent investors.

• Pitfall: Failing to address currency fluctuation risks if the investment is in EUR or USD and the company's operating currency is RON. This can affect the real value of the investment or repayment amount.

• Consideration: Clearly specify the currency of investment and, if applicable, the conversion rate to RON at the time of conversion or repayment for a convertible loan. Consider clauses for currency hedging or adjustments.

By proactively addressing these considerations and avoiding common pitfalls, founders and investors can leverage the flexibility and efficiency of SAFE notes and convertible loans effectively within the Romanian legal ecosystem.

Recent Changes 2026

The Romanian legislative landscape is dynamic, with amendments and updates occurring regularly. As of April 23, 2026, several key areas have seen developments or clarifications that are particularly relevant to financing instruments, company registration, and employment. Below are the most significant changes impacting SAFE notes and convertible loans, or the general operative environment for startups and foreign investors.

• Change: Effective January 1, 2026, HG nr. 295/2025 privind înființarea și funcționarea Registrului General Electronic de Evidență a Salariaților (ReGES-Online), publicată în M.Of. nr. 1290 din 20.12.2025, cu modificările și completările ulterioare, officially replaced the antiquated ReGES system. ReGES-Online is the new mandatory online platform for all employers to register and update data regarding employment contracts, employee details, salary, position, and other related information. This is a fundamental shift in employment data management.

• Impact on SAFE/Convertible Loans: While not directly related to the financing instruments themselves, this change is critical for the general compliance framework of any Romanian company. Accurate and timely reporting to ReGES-Online is essential. Failure to comply can lead to significant administrative fines, as outlined in Legea nr. 53/2003 – Codul Muncii, republicată, publicată în M.Of. nr. 345 din 18.05.2011, cu modificările și completările ulterioare, particularly Art. 272 alin. (1) which penalizes non-registration of employment contracts. For foreign investors, due diligence will now include verifying compliance with ReGES-Online requirements.

• Change: registration requirements follow Legea nr. 265/2022 and the ONRC practice in force.Of. nr. 1021 din 15.11.2025, has further streamlined the online registration processes at the National Trade Register Office (ONRC). This includes expediting the digital submission of documents for company incorporation, articles of association amendments, and share capital increases.

• Impact on SAFE/Convertible Loans: This change positively impacts the conversion phase. The ability to submit documentation for share capital increases and changes to articles of association online, with potentially faster processing times, means that the formal recognition of investors as shareholders post-conversion can be quicker. This aligns with the efficiency goals of SAFE notes and convertible loans. Foreign investors using e-signature or power of attorney for registration procedures will benefit from clearer guidelines for digital submissions. The fee structure outlined in Legea nr. 265/2022 for Trade Register services remains largely consistent, though minor adjustments to specific service codes are possible.

• Change: Amendments to Legea nr. 227/2015 privind Codul Fiscal, cu modificările și completările ulterioare, specifically within Art. 402, have provided additional clarifications regarding the tax treatment of debt-to-equity conversions, particularly concerning the deductibility of interest expenses on convertible loans. These amendments aim to prevent tax avoidance schemes while providing clearer guidance for legitimate financing arrangements.

• Impact on SAFE/Convertible Loans: For convertible loans, the refined anti-circumvention rules and stricter adherence to transfer pricing principles for intra-group loans (if applicable) are important. Companies must ensure that interest rates on convertible loans are at arm's length. The amendments also offer more detail on how the 'premium' paid above par value during conversion (when new shares are issued at a higher value than their nominal value) is treated for tax purposes, often as capital contribution that is not taxable for the company. Foreign investors should seek up-to-date tax advice to optimize the structure of their convertible instruments in light of these clarifications.

• Change: While no radical overhaul, Law 31/1990 privind societățile has seen minor interpretive clarifications through guidance regarding the execution of shareholder resolutions and the protection of minority interests in capital increases and share transfers. These clarifications emphasize the need for transparency and strict adherence to voting thresholds.

• Impact on SAFE/Convertible Loans: This reinforces the importance of meticulously following the procedures for shareholder resolutions to approve capital increases for conversion. Any deviation or lack of transparency could open avenues for existing minority shareholders to challenge the conversion process. For foreign investors becoming minority shareholders post-conversion, these clarifications offer reassurance regarding their statutory rights within the Romanian corporate framework.

These recent changes underscore Romania's ongoing efforts to modernize its legal and administrative infrastructure, aiming for greater efficiency and clarity. For foreign investors, staying abreast of these developments is crucial for ensuring compliance and optimizing investment structures.

Frequently Asked Questions

Can a Romanian SRL (Limited Liability Company) issue SAFE notes or convertible loans?

Yes, a Romanian SRL (Societate cu Răspundere Limitată) can issue SAFE notes and convertible loans. While SAFE notes are not explicitly defined in Romanian law as a distinct security, they can be effectively structured as a conditional agreement for the subscription of future equity, based on the principle of contractual freedom under the Romanian Civil Code (Legea nr. 287/2009, Art. 1169). Convertible loans, being a form of debt instrument with an embedded conversion option, are even more straightforward as formal loan agreements under the Civil Code (Art. 1573 C. Civ.). Both require careful drafting to ensure compliance with the Companies Law (Legea nr. 31/1990), particularly concerning future share capital increases and shareholder approvals, including waivers of pre-emption rights.

What are the main differences between a SAFE note and a convertible loan in Romania?

In Romania, the primary distinction lies in their legal nature and repayment obligation. A convertible loan is fundamentally a debt instrument, meaning the company has a legal obligation to repay the principal and accrued interest by a specific maturity date if it is not converted into equity. It typically includes an interest rate. A SAFE note, conversely, is generally structured as an advance payment for future equity without a repayment obligation or interest. It converts into equity upon a predefined trigger event (like a qualified financing round), and if no such event occurs, the investor usually does not have a right to demand repayment. The legal structuring of a SAFE is more complex as it needs to avoid being reclassified as a de facto loan or an immediate equity issuance by Romanian authorities.

Is a valuation of the company required when issuing a SAFE note or convertible loan?

No, typically, an immediate and precise valuation of the company is not required at the time of issuing a SAFE note or convertible loan. This is one of their core advantages. The valuation conversation is deferred to a future, larger equity financing round (e.g., a Series A). The conversion mechanics within the SAFE note or convertible loan agreement – such as a valuation cap or a discount on the future financing round's share price – will determine the number of shares the investor receives at conversion. However, when the actual equity conversion occurs, and new shares are issued, the conversion price must comply with the Companies Law, and implicitly, the issue price needs to be justifiable, especially if it's significantly above par value.

How are pre-emption rights of existing shareholders handled during the conversion of these instruments?

Pre-emption rights are a critical aspect in Romania. Legea nr. 31/1990 (Art. 60 for SRLs, Art. 202 for SAs) grants existing shareholders the right to subscribe proportionally to new shares issued during a capital increase. For SAFE notes and convertible loans to successfully convert into equity, these pre-emption rights must be waived or properly managed. It is common practice to secure an explicit waiver of pre-emption rights from existing shareholders either at the time of signing the SAFE/convertible loan agreement or, more commonly, within the shareholder resolution at the time of conversion, ensuring they are aware and agree to the dilution. Without proper management of these rights, the share capital increase can be challenged or even invalidated.

What are the tax implications for the company and the investor in Romania?

For the company: For convertible loans, the interest paid (or accrued) is generally a tax-deductible expense (subject to thin capitalization rules under Art. 402 Cod Fiscal if conditions are met). For SAFE notes, since there is typically no interest, there are no immediate tax deductions. Upon conversion, the capital increase is generally not a taxable event for the company. For the investor: No immediate tax event upon signing. Upon conversion, there is generally no immediate tax. The main tax event for the investor occurs upon a future exit (sale of shares), where capital gains will be taxed according to Romanian fiscal regulations. It is essential to consult with Romanian tax advisors for specific advice tailored to the deal structure and investor's tax residency.

Is it possible to secure a convertible loan with collateral in Romania?

Yes, it is possible and often recommended, particularly for early-stage companies where the risk profile is higher. A convertible loan, being a debt instrument, can be secured by various forms of collateral, such as a pledge over the company's shares (Art. 2380 C. Civ.), movable assets (e.g., equipment, intellectual property rights via an Arhiva Electronică de Garanții Reale Mobiliare – A.E.G.R.M. registration per Legea nr. 99/1999), or even real estate if the company holds such assets. The security agreement would be separate but ancillary to the convertible loan agreement. This provides the investor with an additional layer of protection in case the loan is not converted and also defaults on repayment.

What happens if a SAFE note or convertible loan never converts (e.g., no financing event, no exit)?

For a convertible loan, if no conversion trigger occurs by the maturity date, or if the investor chooses not to exercise the conversion option, the company is obligated to repay the principal amount plus any accrued interest. Failure to repay would constitute a default, allowing the investor to pursue collection efforts, potentially including enforcement of any colateral. For a SAFE note, since it typically lacks a maturity date or repayment obligation, if no qualifying financing event or exit occurs, the funds effectively remain with the company as an indefinite advance for future equity. The investor continues to hold the right to future equity, but without a clear path or deadline for conversion, their investment remains in limbo. This scenario highlights the importance of robust founder-investor relationships and potential 'fallback' clauses in SAFE notes that might outline alternative resolutions if no conversion event materializes over a very long period.

Are there specific reporting requirements for these instruments to the National Bank of Romania (BNR)?

For foreign investments exceeding certain thresholds, there might be statistical reporting requirements to the National Bank of Romania (BNR), as part of balance of payments statistics. These are typically annual or quarterly reports on foreign direct investment. The company receiving the investment is responsible for these reports, as stipulated by Regulamentul BNR nr. 4/2012 privind raportarea statistică a datelor destinate elaborării balanței de plăți și a poziției investiționale internaționale, publicat în M.Of. nr. 191 din 23.03.2012. The thresholds and specific reporting forms can vary, so it's always advisable to verify current BNR regulations, particularly for investments over EUR 500,000.

Conclusion and Next Steps

SAFE notes and convertible loans offer invaluable flexibility and efficiency for financing early-stage ventures in Romania, presenting an attractive alternative to traditional equity rounds for both foreign investors and innovative founder teams. While Romanian law does not feature specific legislation for SAFE notes, their robust implementation is achievable through careful structuring based on the Civil Code's principles of contractual freedom and the Companies Law's provisions on share capital increases. Convertible loans, similarly, leverage existing debt and corporate law frameworks. The key to success lies in meticulous drafting, explicit definition of conversion mechanics, proper management of shareholder pre-emption rights, and a clear understanding of the tax and corporate compliance requirements.

Navigating these instruments in the nuanced Romanian legal environment requires specialized expertise. Our firm, Pantilimon Cabinet Avocatură - Law Office, possesses extensive experience in structuring, negotiating, and executing complex financing rounds for startups and high-growth companies. We guide foreign investors and international entrepreneurs through every step, ensuring full compliance with Romanian regulations and maximizing transactional efficiency.

To discuss your specific investment strategy or financing needs in Romania, or for in-depth legal advice on SAFE notes, convertible loans, and corporate governance, we invite you to contact us directly. The firm is ready to provide tailored solutions and strategic insights.

Feel free to reach out to us at office@pantilimon.ro or visit our website at www.pantilimon.ro for further information.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For specific legal guidance, contact Pantilimon Cabinet Avocatură - Law Office at office@pantilimon.ro. Legal information accurate as of April 23, 2026. ",