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Relocation of Activity – the Path from Fleeing the War to Saving Your Business

Relocation of Activity – the Path from Fleeing the War to Saving Your Business

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As war days go by, military conflict in Ukraine seems to escalade, jeopardizing the upcoming fate of the country on so many levels. Under such circumstances, it is impossible to envisage when the (post-war) normality will be reinstated, and when economics will follow their course once again. As a consequence, multiple companies have already announced their intention to cease activity not only from Russia, but also from Ukraine.

While trying to preserve whatever a war left out of a business, relocation of activity in the proximity seems a reasonable option for the affected entrepreneurs. But what is to be expected when it comes to moving a business in Romania?

1. Real crisis – real challenges

Although the idea of relocation of business sounds clear as a principle, wide series of challenges arise from different angles.

First of all, Ukraine is not a Member State of European Union at this moment, therefore many legal tools, rights and cooperation procedures are not available. Of course, to some extent these shortcomings will be overpassed by derogatory and exceptional legal provisions with respect to Ukrainian people (in particular on residency, health services, employment, etc.), but not so much for Ukrainian companies.

For example, a proper relocation of business, legally preserving most of its substance (permits, agreements, ownership rights, IP rights, etc.) is usually performed by means of a cross-border merger. Such operation, beside the extended implementation terms, documentation and procedure it requires, is inaccessible from the first place in relation with Ukrainian companies.

2. Bigger the company, more difficult the relocation

Moving a business to another country certainly involves all sorts of challenges: new country, unknown culture, different workforce, unfamiliar market, new competitors, new laws, new taxes, maybe different business practices. Linguistic barriers should not be disregarded neither.

Of course, the activity of the company makes a big difference by itself. While an IT developer company should be able to move more easily and implement a remote working programme, manufacture industries will face a new set of difficulties deriving from logistic and infrastructure. Also, most likely the new employees, although qualified, will need trainings. All of the above are multiplied considering the amplitude of the business and the specificity of the activity. For example, companies active in domains that require various permits will need more time before recommencing the activity, to deal with the regulatory constrains first.

3. Who’s taking the big shot

The multi-national companies enjoy the most favourable business position under this context. If they already have a subsidiary into a different country nearby, most of the relocation work should come to forcedly increase such capabilities to incorporate what can be saved from the other company. It will still involve assignment and review of countless agreements, importing or recruiting local workforce and an accounting marathon, but the group itself is at least familiar with the destination.

The multi-national companies that do not have a branch in the welcoming state should still take advantage of their previous know-how on the expansion process and maybe some regional common background.

Ultimately, there are the national companies, either small to medium or large, that are likely to struggle the most with relocation. Such business will need more local support and advice to reach milestone by milestone while keep running towards getting the activity rolling again.

4. Is it feasible then?

Although many pitfalls seem to wait under this picture, the business can be successfully relocated in Romania, saving as much as possible under this scenario. Nonetheless, businessmen are to expect extensive workload, plenty of paperwork and a serious chunk of unforeseeable events.

By Adelina Iordache, Associate, PeliPartners

Peli Partners at a Glance

PeliPartners is a full service business law firm based in Romania.

A team specialising in complex projects that require innovative approaches, the PeliPartners lawyers have a wealth of experience in a variety of fields, including corporate, mergers and acquisitions, financing, competition, infrastructure & concessions, energy, real estate and corporate law – being involved in some of the most important transactions on the Romanian market for the past 20 years.

Areas of practice

Corporate M&A: With a reputation gained in complex transactions across many sectors (such as financial services, healthcare, energy, IT&C and others), the PeliPartners lawyers are regularly called to assist strategic clients, as well as investment funds or entrepreneurs in relation to various corporate projects, including M&A, structuring or restructuring of groups of companies or corporate governance matters. The firm regularly works in cross-border projects and in collaboration with international law firms.

Finance & banking is a strong practice at PeliPartners, whose lawyers advise across various matters, including financing / refinancing, restructuring, performing and non-performing portfolio acquisitions, regulatory. PeliPartners has a well established reputation with banks and debtors alike. The firm is included in the panel of some of the largest banks present in Romania. PeliPartners advises as well on cross-border financing and restructuring transactions.

Competition & Commercial: PeliPartners’ antitrust practice enjoys a fantastic reputation among international and local clients. The firm’s lawyers are thought leaders and have advised in some of the most complex transactions and projects related to this jurisdiction. They advise on investigations, merger clearance procedures, as well as on various compliance matters, helping clients design and implement distribution, franchise and pricing systems and policies. The firm currently assists clients in sectors such as financial services, IT, telecom, retail, healthcare & pharma.

Real Estate & PPP: With a stellar reputation among local and institutional developers and investors, PeliPartners is called to assist in some of the largest transactions or projects on the Romanian market.

Dispute Resolution: This firm’s clients want to be assisted and represented by PeliPartners when disputes arise in relation to their activity. PeliPartners will put together mixed teams of practice experts and litigation lawyers, that can bring an innovative but thorough approach of each matter.

Firm's website: https://pelipartners.com/