A European investor appoints a trusted local manager as director of a Romanian subsidiary. The subsidiary encounters financial difficulty. Within months, an insolvency administrator files a claim – not against the company, but against the director personally. The director's private assets are now at risk. This scenario is not exceptional in Romania. It reflects a body of corporate and insolvency law that imposes genuine personal exposure on individuals who manage companies in distress.
Director liability in Romania arises primarily under corporate legislation and insolvency law, which together allow courts to pierce the corporate veil and hold directors personally responsible for company debts in defined circumstances. Personal exposure is triggered when a causal link exists between the director's conduct and the company's insolvency or the harm suffered by shareholders or third parties. Romanian courts have developed a substantial body of practice on when and how this exposure crystallises.
This analysis examines the doctrinal foundations of director liability in Romania, competing judicial interpretations, the gap between statutory text and courtroom practice. Cross-border implications for European groups. Additionally, strategic steps directors and their advisers should consider.
Doctrinal foundations: the corporate veil and its limits
Romanian corporate legislation (the Legea societatilor – Law on Companies) establishes the company as a separate legal person. Shareholders are, in principle, shielded from company debts by the limited liability structure. Directors occupy a distinct position. They are agents of the company, bound by fiduciary obligations, and their conduct is measured against a dual standard: the diligence of a prudent administrator and the loyalty owed to the company's interests.
The articles of association govern many aspects of director authority. They define the scope of management powers, the requirement for board of directors approval on certain transactions, and the procedure for delegating decisions. Where the articles of association are silent, statutory defaults apply. Directors who act outside their mandate – or within it but in bad faith – face direct liability to the company.
Liability to third parties operates on a different basis. Romanian civil law recognises delictual liability: a director who causes harm to a creditor or counterparty through unlawful conduct may be sued directly. This route requires proving fault, causation, and damage. It is a meaningful but demanding path. The more frequently invoked mechanism in distress situations is the insolvency extension of liability.
Under Romanian insolvency legislation, a court-appointed insolvency administrator or, in certain cases, creditors may apply to extend the unpaid debts of an insolvent company to its current or former directors. The extension is not automatic. The applicant must identify one or more of the specific grounds set out in insolvency law and establish that the director's conduct on those grounds causally contributed to the company's inability to pay its debts. The Tribunalul (first-instance court) with jurisdiction over insolvency matters hears these applications.
Romanian insolvency legislation lists conduct that can ground an extension claim. The catalogue includes: using company assets for personal purposes. continuing trading after the company was insolvent. In a manner that deepened the deficit. failing to request insolvency within the period required by law. maintaining fictitious records or causing documents to disappear. and making payments to certain creditors in preference during the suspect period. Each ground has its own contours, and courts apply them with varying degrees of rigour.
Competing court interpretations and the gap between statute and practice
The statutory text appears precise. Practice reveals significant divergence. Romanian courts – particularly different panels of the Curtea de Apel (Court of Appeal) and the Inalta Curte de Casatie si Justitie (High Court of Cassation and Justice) – have taken inconsistent positions on several critical questions.
The first point of divergence concerns the standard of causation. Some courts require a direct and exclusive causal link: the director's specific conduct must be the proximate cause of the insolvency deficit. Others apply a contributory causation standard: it is sufficient that the director's actions materially worsened the company's financial position, even if external factors also contributed. The contributory approach substantially widens the pool of directors at risk. A director who continued trading during a period of market difficulty, even with some prospect of recovery, may be exposed under this interpretation.
The second contested area involves the "continued trading" ground. Romanian insolvency legislation requires directors to file for insolvency within a defined period – typically measured in months – after the company meets the statutory insolvency test. Courts disagree on what knowledge triggers this obligation. Some panels hold that directors are fixed with constructive knowledge as soon as accounts show a payment inability. Others require actual awareness. The practical gap matters: a director relying on management accounts that understated liabilities may argue good faith, but courts are not uniform in accepting this defence.
A third area of divergence involves the role of shareholder resolutions. A director may argue that a transaction later attacked as harmful was approved by a shareholder resolution at a general meeting. Romanian corporate legislation does give limited protection to directors acting on shareholder instructions. However, courts have consistently held that this protection does not extend to conduct violating mandatory legal rules. It does not insulate directors from insolvency extension claims. It does not apply where the resolution itself was based on incomplete or misleading information presented by the director.
The Inalta Curte de Casatie si Justitie has, over time, moved toward requiring courts to articulate the specific causal mechanism linking the director's conduct to the insolvency deficit. Vague references to mismanagement are insufficient grounds for an extension order. This represents a meaningful check on overly broad applications by insolvency administrators. In practice, however, first-instance courts do not always apply this standard with precision. Appeals are common, and outcomes at appellate level remain unpredictable.
The gap between statute and practice also appears in the treatment of executive versus non-executive directors. Romanian corporate legislation distinguishes between the consiliul de administratie (board of directors) and individual executive directors or a directorat (management board) in the two-tier system. Non-executive directors or supervisory board members in the two-tier structure are, in principle, less exposed than those with day-to-day management responsibility. In practice, however, courts sometimes treat all board members as jointly responsible for governance failures, particularly where the supervisory function was clearly not exercised.
For international groups operating in Romania, this creates a concrete risk. A parent company that appoints a nominee director – or a representative who holds the title but exercises no real management – may find that person exposed simply by virtue of the formal appointment. Romanian courts focus on the registered director, not on the de facto decision-maker. The practical consequence is that individuals who accept board appointments in Romanian subsidiaries of foreign groups often underestimate their personal exposure.
To explore how director liability interacts with acquisition structuring and post-closing governance, see our analysis of M&A matters in Romania, which addresses due diligence obligations and warranty exposure for incoming management teams.
Cross-border implications for European groups
For a European group with a Romanian subsidiary, director liability in corporate distress sits at the intersection of Romanian corporate law, EU insolvency rules, and the governance standards of the parent's home jurisdiction. These layers interact in ways that are not always intuitive.
The EU Insolvency Regulation determines which member state's courts have jurisdiction over main insolvency proceedings. For a Romanian company with its centre of main interests in Romania – established through its registered office and principal operations – Romanian courts will open and conduct the main proceedings. The insolvency extension of liability is a Romanian-law remedy, pursued before Romanian courts. A judgment extending liability to a director is enforceable within the EU under standard civil judgments rules. A director resident in Germany, Austria, or France whose assets are located in those countries faces enforcement of a Romanian court order against those assets.
This cross-border enforceability is frequently underestimated by directors appointed to Romanian subsidiaries by parent groups. The assumption that personal liability awarded by a Romanian court will remain confined to Romania is incorrect. EU civil procedure rules facilitate recognition and enforcement across member states without a separate exequatur procedure in most cases. A Romanian extension order therefore has real teeth across the EU.
Parent companies that exercise de facto control over Romanian subsidiaries face a further risk. Romanian courts have, in a line of decisions, treated controlling shareholders who directed company management as shadow directors. Romanian corporate legislation does not formally define shadow directorship, but courts derive the concept from the general civil law principle of liability for one's own fault. A parent entity that issues binding instructions to Romanian management – particularly instructions that contributed to the insolvency – may itself be subject to liability claims, either through the extension mechanism or through delictual liability. This is an emerging and unsettled area, but the trend in Romanian case law is toward greater scrutiny of parent influence.
Tax liability represents a parallel exposure. Romanian tax legislation imposes personal liability on directors for unpaid tax obligations of companies in certain circumstances, particularly where the director's conduct caused or facilitated the tax debt. The tax authority may pursue the director directly. This mechanism operates independently of insolvency proceedings. A director who resigned before insolvency opened may nonetheless face a tax liability claim for periods during which they held office. The company registration at the Oficiul National al Registrului Comertului (National Trade Register Office) determines the period of formal directorship for these purposes.
Criminal exposure adds a further dimension. Romanian criminal law covers a range of conduct in corporate distress: fraudulent insolvency, document destruction, preferential payments, and false accounting. Criminal liability is personal and cannot be discharged by a company-level resolution. Where insolvency administrators identify conduct that may be criminal, they are obliged to refer the matter to prosecutors. Directors of Romanian companies in distress should be aware that insolvency proceedings can generate criminal investigations as a secondary consequence.
For a comparative perspective on how personal liability for directors operates in a civil law system with Portuguese roots. a system that shares structural similarities with the Romanian approach. see our deep analysis of director liability in Portugal.
Strategic implications and defensive measures
Understanding the risk profile is the first step. Structuring governance to reduce exposure is the second. Several measures are available to directors and the groups that appoint them.
Board composition and role clarity. The articles of association should clearly delineate executive and supervisory functions. Directors with genuine decision-making authority should be identified, and their remit should be defined. Non-executive members should have documented oversight processes: regular board of directors meetings, written resolutions, and a record of questions asked and answers received. Courts assess whether a non-executive director exercised meaningful supervision. A paper trail of active governance reduces the risk of being treated as passively complicit.
Early distress protocols. Romanian insolvency law imposes an obligation to file promptly when the company meets the insolvency threshold. Waiting in hope of recovery is the single most common source of the "continued trading" liability ground. Directors should obtain formal legal advice – documented in writing – as soon as financial difficulty becomes apparent. The advice should address whether the insolvency threshold has been met and whether a voluntary filing is required. Acting on formal advice does not guarantee immunity, but it substantially strengthens the defence against claims of deliberate delay.
Transaction documentation. Directors who approve significant transactions during a period of financial difficulty should ensure those decisions are recorded in board minutes that articulate the business rationale. Romanian courts look for evidence of informed, reasoned decision-making. A board resolution that records the information reviewed, the alternatives considered, and the reasons for the choice made provides a substantially stronger defence than a bare approval without explanation.
Directors' and officers' insurance. D&O insurance does not eliminate personal liability, but it provides resources to fund a defence and, in some cases, to satisfy a judgment. Romanian corporate legislation does not require D&O coverage, but many international groups obtain it for Romanian subsidiaries as a matter of group policy. The policy terms matter: coverage for insolvency-related claims varies, and some policies exclude conduct that courts classify as wilful misconduct. The policy should be reviewed against the specific risk profile of the Romanian operation.
Resignation timing and documentation. A director who identifies serious governance concerns or believes the company is approaching insolvency may consider resignation. Resignation does not erase liability for prior conduct. It does, however, stop the accrual of new exposure. The resignation must be formally registered at the Oficiul National al Registrului Comertului to take effect against third parties. A director who resigns but whose resignation is not registered remains, in the eyes of Romanian law and third parties, the director of record. Ensuring prompt registration at the company's registered office is therefore essential.
For comprehensive advisory support on corporate governance, directorship obligations, and risk management in Romania, the firm's corporate law practice in Romania provides integrated counsel across governance structuring and distress scenarios.
To discuss how director liability exposure applies to your specific governance structure in Romania, contact us at info@ferrazwhitmore.com.
Outlook: regulatory trajectory and what to monitor
Romanian insolvency and corporate law continues to develop. Several directions are worth monitoring by directors and their advisers.
Romania has been implementing EU Directive provisions on preventive restructuring frameworks. These rules give financially distressed but viable companies access to restructuring tools before formal insolvency opens. A director who uses these tools in good faith, and who engages creditors through the restructuring process, is better positioned to resist an extension claim than one who simply delays filing. The restructuring regime creates both an opportunity and an obligation: directors who fail to use available preventive mechanisms when they are clearly applicable may face the argument that the insolvency deficit was deepened by that failure.
The treatment of shadow directors is likely to attract greater judicial attention. As Romanian courts encounter more cross-border group structures, the question of parent company influence over subsidiary management will recur. Groups that operate Romanian subsidiaries as pure execution vehicles – with all real decisions made at parent level – carry a risk that was modest a decade ago but is increasing.
Tax authority enforcement of personal liability against directors has become more systematic. The Romanian tax authority has expanded its use of personal liability provisions to recover unpaid corporate tax debts. Directors of companies with significant tax arrears should treat this as a live risk, not a theoretical one.
Finally, the quality of insolvency administration in Romania is improving. Insolvency administrators are increasingly sophisticated in identifying liability grounds and building extension claims. Early cases of director liability extension often failed on evidentiary grounds. That gap is closing. Directors and their advisers should assume that a Romanian insolvency proceeding will be followed by a thorough review of management conduct – and plan accordingly.
Frequently asked questions
Q: Can a director in Romania be held personally liable for company debts?
A: Yes. Romanian insolvency legislation allows courts to extend liability for unpaid debts to directors whose conduct contributed to the company's insolvency. This requires a causal link between the director's specific acts or omissions and the state of insolvency. The limited liability of the corporate entity does not protect a director from such extension claims.
Q: How long does personal liability exposure last after a director resigns?
A: Resignation does not eliminate prior exposure. Romanian courts assess conduct for the entire period during which the director held office. Acts taken or obligations incurred before resignation remain subject to review. The limitation period under insolvency legislation runs from the date the liability-triggering conduct is established, not from the date of resignation.
Q: Does a shareholder resolution approving management decisions shield directors from liability?
A: A shareholder resolution granting discharge provides some protection, but it is not absolute. Romanian corporate legislation limits the effect of discharge: it covers only matters fully disclosed to shareholders at the time of the resolution. Courts have held that discharge cannot be invoked against claims arising from concealed facts or from insolvency-related liability extensions.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in corporate governance, director liability, and distress management – including in Romania and across Central and Eastern Europe. Engaging a lawyer in Romania with cross-border experience is particularly important where European parent structures and local insolvency risk intersect. As a law firm in Romania and across the EU, we advise international entrepreneurs, institutional investors, and in-house legal teams on governance structuring, early distress protocols, and personal liability exposure. Our corporate law practice includes practitioners with experience before Romanian courts and in cross-border insolvency matters governed by EU rules. The firm's Lisbon base provides direct access to EU regulatory conditions, while our common law expertise supports enforcement and arbitration strategies across English-speaking jurisdictions. To discuss your director liability exposure or governance structure in Romania, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.