Setting up a Nongovernmental and Nonprofit Organization in Romania

The applicable Romanian law regulates two different types of nongovernmental and nonprofit organizations (hereinafter referred to as NGOs) which can be set up in Romania: (i) associations; (ii) foundations. Both become legal persons after their incorporation.
The association is a legal body set up by three or more persons who share without the right to a refund a material contribution, their knowledge or work in view of realizing activities of general interest or of interest to particular collectivities or in their own non-pecuniary interest.
The foundation is a legal body set up by one or more persons who, based on a legal act concluded between living persons or based on a last will, constitute a patrimony attributed permanently and irrevocably to the realization of a general interest or of an interest of a collectivity.
Besides the differences presented above, there exists also the cost difference between the two types, the foundation being more costly to set up than the association.
Foundations are generally constituted in view of performing charity acts while associations can be set up even for the personal interest of the settlers, i.e. they can set up an association having as object the creating of a sporting club for its members.
It is important to observe that there are no limitations as to the citizenship or nationality of the founders of either the association or the foundation: they can be Romanian or foreign persons.
The most important aspect which must be taken into consideration by persons interested in setting up an association or a foundation in Romania is that they can assure financing for these NGOs by way of setting up a Romanian commercial company having as sole shareholder the respective NGO. The eventual profit realized by commercial companies set up by the NGOs can be either reinvested in the activity of the companies, or can be transferred through dividends to the NGOs.
This aspect is worth taking into consideration by persons wishing to perform charity in Romania but lack the adequate funding for their activity. They can thus use the profit of the company set up by their NGO to fund the NGOs activity.
Other financing resources admitted by the Romanian law for the NGOs are:
- Member subscription fee;
- Interests and dividends resulting from the placing of the available amounts in bank accounts or other investments allowed by the law;
- Dividends issued by the commercial companies set up by the NGOs;
- Revenues realized through direct economical activities;
- Donations, sponsorships and wills;
- Resources obtained from the state budged or from the budget of local authorities;
- Other resources allowed by the law.
There exists a difference between the associations and the foundations in the funding resources available, which is that the foundations are not allowed to obtain member subscription fees.
Another financing resource for the Romanian NGOs is the possibility to obtain resources from the Romanian state budged or from the budget of the local authorities.
Also, we mention that Romanian NGOs are allowed to pay salaries to their staff. Thus, if the funding is adequate the NGO can develop its activity and benefit from the services of in house staff or third party contractors.
Presently, due to Romanias accession to the European Union there are many programs which can be developed by NGOs and which benefit from the EU funding.
The incorporation of a NGO is very straight forward and can be done even without the physical presence in Romania of the persons who are setting up the NGO. It is necessary to contact Romanian specialists in incorporating NGOs and they will instruct on the documents and funding necessary to incorporate the said NGOs. The incorporation of the commercial company having as shareholder the NGO can only be done after the finalization of the incorporation procedure for the respective NGO.
ABOUT THE AUTHOR: Ion Florin Chivu
Ion Florin Chivu graduated at the Faculty of Law of the "Nicolae Titulescu" University in Bucharest. He has also obtained a Master of Business Law degree from the Faculty of Law at the "Nicolae Titulescu" University in Bucharest. In his capacity of attorney at law, Ion Florin Chivu specializes in business consultancy and counseling and in the assistance and representation of clients in international and internal arbitration proceedings. In this regard, Ion Florin Chivu has been involved in numerous commercial transactions concluded between Romania and foreign entities.
Ion Florin Chivu has also been involved in international and internal arbitration proceedings based on the arbitration rules of ICC Paris, UNCITRAL or LCIA London in forums from Europe and Romania.