Flying the Moldovan Flag: Registration of ships and yachts in Moldova

For a long period of time ships flying the Moldovan flag were seen as something exceptional. The country was landlocked, and the task of developing the area of maritime law was not a priority. However, certain agreements reached with Ukraine, under which Moldova has got the access to the portion of the Danube river allowing to start building the Giurgiulesti sea port, have changed the situation. In August 2007 the first sea vessel moored at the Giurgiulesti International Sea Port.

The registration of ships under the Moldovan Flag had been carried out even before, but only recently there were clearly elaborated and adopted legal acts setting forth the regulations for the respective  procedure. There have been approved the regulations on the procedure of sea vessels registration in Moldova and the activity of the Giurgiulesti Port Harbour Master’s Service.

There is a number of benefits in registering the vessel in Moldova. Here I will just list some of them:

- International recognition of the Republic of Moldova as a member of the International Maritime Organization and a party to multiple international conventions on sea navigation.

- A de facto flag of convenience without being listed as such.

- Lower costs of registration.

- Less bureaucratic, flexible and speedy registration procedure. 

- No limitation on the age of registered ships.

In recent years the number of see vessels registered in Moldova has significantly increased. More details about the registration procedures, necessary documents and the way of calculating the costs of the registration you can learn from the respective page on our firm's web-site.

The new Law on the status of foreigners in the Republic of Moldova

The law determines the order of entry and stay of foreigners in the territory of the Republic of Moldova, general conditions for issuing residence permits and visas for the entry to Moldova. This Law shall become effective from 24 December 2010

Here we are going to pay attention just to some aspects of the new law. Contact us for more details or any clarifications.

Article 19 of the new Law provides for the cases in which it is possible to issue long-term visas to foreigner. They can be issued for the following purposes:

-         carrying out entrepreneurial activities - for foreigners investing into the national economy which are or have the intention to become stock or shareholders with the right to conduct or manage commercial undertakings in the Republic of Moldova;

-         employment (however, in this case getting a working permit should be considered additionally);

-         studying;

-         family reunification (an application for a visa for this purpose must be accompanied by a confirmation from the Bureau for Migration and Refugees);

-         for carrying out humanitarian or religious activities;

-         for diplomatic or official purposes;

-         for medical treatment.

Long-term stay visas are granted for a period of not more than 12 months for one or more visits each of them not exceeding 90 days within the 6 months period from the date of the first entry into the country, and allow foreigners to apply for granting the right to reside in Moldova. 

The right to temporary residence in the Republic of Moldova, given to a foreigner may be extended by the competent authority for foreigners, if:

a) they continue to meet the conditions for the entry into the Republic of Moldova;

b) during the foreigner's stay in the Republic of Moldova there was not registered any of the circumstances that would not allow to enter the territory of the Republic of Moldova;

c) s/he has the documents for crossing the border, valid for the period for which an extension of the right to stay in the Republic of Moldova is sought;

d) they seek to extend the right to stay for the same purpose for which the visa was initially issued and the right to    stay granted;

e) the purpose for which the right to stay in the Republic of Moldova requested was observed;

f) the evidence of having living premises to stay at for the whole period for which the extension is requested and medical insurance is presented.

In general, the same aims are also provided for granting the right to temporary stay in the country with the issuance of a temporary residence permit. That is for in order to obtain a temporary residence permit the same requirements are set.

The right to permanent residence in the Republic of Moldova may be granted to a foreigner - the holder of the right to temporary residence if s/he meets all of the following conditions:

a) has stayed legally and continuously in the Republic of Moldova under the right of temporary residence for at least 3 years - for foreigners married to Moldovan citizens (or 5 years, if the duration of the marriage is less than 3 years);

b) has stayed legally and continuously in the territory of the Republic of Moldova for at least 5 years - for other categories of foreigners;

c) confirms availability of sufficient livelihood; this provision does not apply to persons married to citizens of the Republic of Moldova;

d) possesses living premises;

e) can speak the state language at a satisfactory level;

f) continues to meet the conditions for entry into the territory of the Republic of Moldova;

g) during the foreigner's stay in the Republic of Moldova there has not been registered any of the circumstances that do not allow to enter the territory of the Republic of Moldova;

h) did not had any criminal records over the past 3 years.

We should also indicate here the time periods for which foreigners are not allowed to enter Moldova in case they previously breached the time limits for staying in Moldova:

1 year - in the case of illegal residence for the period of 3 months to 1 year;

2 years - in the case of illegal residence for the period of 1 to 2 years;

3 years - in the case of illegal residence for the period of 2 to 3 years;

5 years - in the case of illegal residence for more than 3 years;

3 years - in the case of illegal employment;

5 years - for providing false personal information;

5 years - in the event of previous expulsion.

This post is part of the newsletter prepared by our law firm. You can download its full text in .pdf from here.

New conditions for obtaining construction documentation

On 3 September 2010 the new Law no. 163 of 09 July 2010 on permitting construction works came into force. The new law stipulates the procedure for permitting, coordinating and verifying design works, construction or demolition of buildings and elements of amenities in accordance with the documentation on urban planning and area development. A significant part of the provisions of the new law covers the procedures of issuing documents for construction, in particular, urban planning certificates and construction permits.

Until recently the issuance of these documents was regulated by the Regulation on urban planning certificate and construction permit or demolition of buildings and amenities (approved by the Government Decision no. 360 of 18 April 1997). And even though that Regulation has not been quashed yet, in fact the rules of the new Law that differ from the previous rules should apply.

As a general rule urban planning certificate and construction permit are issued by city halls of municipalities, towns, communes and villages. They are to be signed by mayors, as well as by local councils' secretaries and chief architects.

Urban Planning Certificate

Urban Planning Certificate used to be the basic document for elaborating construction design documentation. It contained information on real estate's regime at the respective address. The new law introduced the new notion of information urban planning certificate that differs from urban planning certificate for design purposes.

Information urban planning certificate is issued for familiarization with the regimes of the real estate/land plot established in the urban planning and territory development documentation in cases of selling, renting, splitting, consolidating, separating, inheriting real estate, etc. In other words, it is issued for information purposes only.

Urban planning certificate for design purposes is a regulation document permitting to start the elaboration of design documentation.

The new law provides for a limited number of documents that should be submitted in order to obtain an urban planning certificate for design purposes. The following documents should be attached to the application:

-         The extract from the real estate registry together with the cadastral plan and/or plan of the property;

-         Identity card (for natural persons) or certificate of registration (for legal entities);

-     Technical expertise report (in the case of reconstruction, restoration, alteration, or reinforcement of existing real estate objects);

-         Notarized consent of co-owners of the real estate property/land plot whose interests can be directly affected;

-         The draft design coordinated with the chief architect (in case of placing construction of buildings in the areas of special treatment).

The new law does not allow to demand from applicants to submit any other documents except for above mentioned. Thus, the new Law relieved applicants of the obligation to prepare and gather most of the documents necessary for the development of the urban planning certificate as it used to be before. That duty has now been entrusted to local public authorities themselves. They must, within the short period of time, to coordinate all necessary documentation on urban planning with all respective institutions and public bodies. The applicant should only submit certain basic documents proving his identity and lack of disputes with real estate's co-owners and a document from the cadastral office confirming the registration of his property rights.

The 20-working days term was clearly stipulated for issuing an urban planning certificate (30 working days in certain cases).

With regard to information urban planning certificate, it may be requested by any person upon presenting personal identity documents (or documents on legal entity’s registration).

The cost of urban planning certificate shall not exceed 50 lei.

Elaboration of design documentation

In order to elaborate design documentation it is necessary to obtain a set of documents and carry out certain works, which are issued and performed on the basis of the urban planning certificate:

• Conclusion on the connection to utility networks (issued free of charge by network owners within 20 working days);
• Plan of the networks laying (provided free of charge by local architecture and urban planning authorities within 10 working days);
• Topographic surveying;
• Geotechnical surveying.

On the basis of the above documents and works the elaboration of design documentation is carried out, which must then be coordinated with the chief architect and certified inspectors or inspection agencies.

Construction permit

For obtaining a construction permit an application together with the following documents should be submitted:

-         an extract from the real estate registry with the cadastral plan and/or real estate's plan;

-         the urban planning certificate for the design;

-         extract from the design documents;

-         findings on the project documentation verification;

-         identity documents - for individuals or certificate of registration - for legal entities;

-         field supervision contract between the applicant and the designer.

Requiring presentation of any other documents is not allowed.

The construction permit must be issued within 10 working days from the moment of filing all the above mentioned documents. Moreover, in cases when within the aforementioned period of time it has not been issued without providing any denial notices, the construction permit is deemed to be automatically granted. In this case, the applicant has the right to begin performing the respective works after having notified the official body that should have issued the permit and the State Inspectorate in Construction. After that, the permit must be issued within 3 working days.

The price for construction permit shall not exceed 100 lei.

Works that can be performed without an urban planning certificate and a construction permit

Article 14 of the new Law provides for a list of works that can be performed without an urban planning certificate and construction permit. These works are as follows:

• repairing fences, roofs, surfaces or terraces if their form is not changed;
• replacement and repair of floors, internal and external joinery items, if the shape and size of apertures is retained;
• internal finishing works;
• external finishing works in case the elements of the facade and the colour are not changed;
• replacement or repair of furnaces, structures, systems, technical and sanitary equipment and devices inside the building;
• repair or replacement of the points of connection of utility networks with the object with the property;
• current repairs of communication lines, access roads, parking lots, pavements and stares;
• works on maintenance, current repair of the communication lines infrastructure if the tracing, functions, areas and volumes are kept unchanged;
• surface and underground burial works at cemeteries;
• installation of small architectural forms;
• arrangement of areas adjacent to existing buildings;
• auxiliary and accessory buildings of private houses with the built-up area up to 15 square metres situated on the land plots that are privately owned.

Meeting deadlines for beginning and performing construction works

The start of construction works is stipulated in the construction permit and cannot be more than 6 months from the date the permit is issued. If the construction works do not start within the respective period the permit is considered void and getting a new construction permit is required.

In addition to the moment for starting the works the construction permit also states their duration. It is determined basing on the construction works design and the regulatory documents.

The public authorities that have issued the construction permit and the State Inspectorate in Construction should be notified 10 days in advance before the start of construction works. If a respective notice is not submitted then the works are considered to have started on the next day after receiving the construction permit.

Conclusions

The new Law on permitting construction works should streamline the procedure for issuing documents for construction. There has been introduced the notion of information urban planning certificate which can be obtained by any person to familiarize with the urban planning regime of particular real estate properties.

An important feature of the law is that it simplifies the procedure for coordinating necessary documentation for construction and shifts most of the respective obligation onto local public authorities.

In addition to that, it is now clearly provided that if a respective application was submitted for obtaining a construction permit and no answer is received within the due period of time than the construction permit is deemed granted automatically. Thus, local authorities will either have to provide, within the limited time frame, a motivated denial that can be subject to a judicial contest or the applicant will have the right to start the works as the permit will be deemed granted.

This post is part of the newsletter prepared by our law firm. You can download its full text in .pdf from here.

Modifications into the Labour Code of the Republic of Moldova

A number of modifications were introduced into the Labour Code aiming to eliminate discrimination in the workplace by various criteria.

Besides, there was extended the confidentiality period, that is employees' and employers' obligation not to disclose the information acquired while the individual employment contract between them was effective from three months up to one year.

There have been increased the allowed periods of suspension of employment contracts with persons engaged in long-term care for sick children and children with disabilities. Likewise, the period of possible technical idle time during which the employment contract may be suspended has been increased up to 6 months.

From para. (1) art. 85 of the Labour Code, which provides for the right of employees to resign on their own volition, has been excluded the mention of contract concluded for an indefinite period. Thus, the right to terminate at any time the employment contract was also given to employees with whom fixed-term contracts are concluded.

There have been lifted the restrictions to get women with children under three years involved in overtime work, work on weekends and holidays and shift work.

The obligation of employees who have undergone professional training or internship to work for a certain period of time for the respective undertaking has been excluded from the Labour Code.

One of the most significant modifications concerns the possibility of dismissals of pregnant women. It is worth reminding that previously dismissals of pregnant women were forbidden, except for the cases of liquidation of the enterprise. On the one hand, it gave them an additional safeguard against possible abuses by employers who were trying to get rid of them. On the other hand, it has often served as the ground for multiple abuses (sometimes quite serious) on the part of pregnant women themselves who neglected their duties and lacked discipline being under protection of the labor legislation provisions. This situation was decided to be changed. Now, pregnant women can also be dismissed on common grounds in case of infringements committed by them that relate to the discipline and observance of law in the workplace.

Finally, some significant changes have been made with respect to the time limit within which an employee can lodge a claim with the court in case of violations of his rights. This term has been reduced from one year to three months. Now the employee, in case of dismissal, will not be able to wait for the whole year before applying to the court with a claim regarding reinstatement in the position.

This post is part of the newsletter prepared by our law firm. You can download its full text in .pdf from here.

Access of law enforcement bodies to commercial and banking secret limited

Certain modifications have been introduced into a number of normative acts, in particular, the Law on Financial Institutions, the Law on Police, the Law on the Centre for Combating Economic Crimes and Corruption, the Law on the Prosecutor's Office with respect to the access by the law enforcement bodies to commercial and banking secret.

The adopted amendments have limited the access to commercial and banking secret for police officers, the Centre for Combating Economic Crimes and Corruption and the Prosecutor's Office. Previously, the access by these bodies to the information that constituted the secret of banking institutions and commercial companies was virtually unlimited and could be obtained even in the course of ordinary police inspections on matters not directly related to the subject-matter of the inspection. However, from now on they will only be able to request and receive such information in case of criminal investigation proceedings launched and with the permission of a criminal prosecution judge.

There have been increased the penalties for disclosure of commercial and banking secret. In particular, the penalty imposed on public officials that disclose commercial, banking or tax secret will now amount to 8,000 to 10,000 lei.

Article 22 of the Law on Financial Institutions has been adopted in the new version and now provides for a clear list of cases in which the bank must provide the information constituting banking secret, as well as situations in which the provision of information by the bank does not infringe its duty to preserve banking secret.

This post is part of the newsletter prepared by our law firm. You can download its full text in .pdf from here. 

Joint-Stock Companies - a basic outline

Recently I wrote about registering a limited liability company in Moldova. It was said then that LLC is the most common form of companies in Moldova. Today’s post is dedicated to another form of companies that are less spread, however, very important - joint-stock companies (JSC).

Under art. 2-(1) of the Law on Joint-Stock Companies JSC (societate pe actiuni, or SA) is a company whose share capital is divided up into stock shares and whose obligations are secured with its property. The main peculiarity of joint-stock companies comparing to other types of companies (limited liability companies in the first place) is the right to issue securities that can be traded at stock exchange - stock shares and bonds, though there is a number of other differences. Although JSCs are less spread than LLCs, certain types of companies can only be registered under this form like, for example, banks, insurance companies, investment funds. Likewise, limited liability companies that have more than 50 shareholders should be reorganized into JSCs within 6 months period (or consolidated to reduce the number of shareholders, or liquidated). 

A JSC can be founded by one or more natural persons or legal entities. Constituent documents are: constituent agreement (in case of founding by 2 or more persons; or declaration on the foundation of the company in case of one founder) and articles of association. The first document stipulates the conditions during the establishment of a new company whereas articles of association are company's basic document providing for all major conditions of company's activity and structure.

The minimum share capital of a JLC should not be less than 20 000 (twenty thousand) Moldovan lei (about 1270 euro), what determines the minimum volume of company's net assets.  

One of the most important stages in creating a joint-stock company is the initial stock placement. The stock shares of a newly created company is divided between its founders. The money paid for stock shares is introduced into the temporary bank account. After the money is introduced the constituent meeting may take place in which all founders should take part. During the meeting all necessary decisions on the company registration, election of its managing bodies, etc. should be taken. After the meeting the respective documents (bylaws, decision on the registration and so on) are submitted to the State Registration Chamber which adopts the decision on JSC's registration. 

The company is considered created from the moment of its registration. However, unlike in limited liability companies for which all major constituent proceedings are finished at the moment of its registration, in case of joint-stock companies some further actions are required.

Within 15 days a package of respective documents should be submitted to the National Commission on Financial Market for the state registration of stock shares placed when creating the company. Failure to perform this obligation gives rise to the right of any stockholder to lodge a claim with the court for the dissolution of the company. 

In case no inaccuracies are revealed the state registration of stocks is carried out, what includes declaring the stock subscription valid, conferring a state registration number to each class of stocks placed and introducing the respective records into the state securities registry. 

After that, within 15 days from the state registration of stocks, the company must ensure the formation of stockholders registry, provide first records therein on stockholders, their legal representatives and nominal stockholders.

Cash payments allowed to companies increased

In the end of June a new law ammending the Law on Entrepreneurial Activity and Enterprises entered into force. It modified the provision of article 10 of the aforementioned Law setting the limits for cash payments (as opposed to bank transfers) allowed to companies. 

Before these modifications the maximum sum that a company had been allowed to pay to another company in cash was only 1 000 Moldovan lei for every single transaction. This provision set very significant boundaries to companies wishing to make cash payments as the violation of this rule entailed rather severe penalty of 10 per cent of the sums paid. 

After the modifications had been adopted and came into force the limits for cash payments were set at the threshold of 100 000 lei a month. So, right now regardless of whether it is a single transaction or a series of operations the overall sum of money paid in cash in a month by one company to another should not exceed 100 000 lei. 

Short introduction into the competition regulation in Moldova

It is not an overstatement to say that a complex competition regulation is usually a feature of a country with the developed market economy. So, it is not a surprise that the rules on competition and anti-monopoly regulations in Moldova are still at their initial stage of elaboration. However, for the last several years competition law has become more apparant and feasible for many Moldovan companies. And with the lapse of time more and more complicated competition rules are likely to gain ground as compared to other branches of economy regulation.

The first law in Moldova that governed the issues of monopolistic and anti-competitive behaviour was the Law no. 906-XII of 29 January 1992 "On the limitation of monopoly behaviour and the development of competition". It first introduced the definition of a dominant position in the market, provided for some rules designed to prevent the abuses of dominant position, etc. Though not formally anulled this law does not play any significant role in the market regulation any more since the Law on the Protection of Competition no. 1103-XIV of 30 June 2000 came into force in the end of 2000. 

Basic principles of the Law on the Protection of Competition:

The Law on the Protection of Competition is a basic legal act in the Republic of Moldova laying down the rules of competition between market participants in the Republic of Moldova. Competition as such is defined by this Law as a contest between undertakings in which their independent activities effectively limit each other's possibility to influence unilaterally the general conditions of goods turnover in the respective market.

Unfair competition is defined as any actions performed by undertakings to gain unfair benefits what causes or can cause damages to other undertakings or harm their business reputation. 

Articles 2 and 4 of the Law stipulate the principles of competition regulation in Moldova. They provide for the state to recognize fair competition as a key factor in developying the economy. The state implements the policy designed to ensure free entrepreneurship and protection of fair competition.

It is forbidden to use one's rights for the purpose of limiting competition, abuse dominant position and infringe legitimate consumers' interests. The state should contribute to developing and protecting fair competition and protect undertakings and citizens (consumers) from monopolistic activities and unfair competition.

The Law stipulates certain types of anti-competitive activities:

1. Monopolistic activity:

    - abuse of the dominant position in the market;

    - anti-competitive agreements.

2. Unfair competition.

3. Public authorities' activities limiting competition.

These types of anti-competitive activities will be explained and considered in other posts. However, it is worth mentioning here the definition of dominant position which plays a pivotal role in competition regulations in all countries. The dominant position in the market is considered (by virtue of art. 2 of the Law) as an exclusive position of an undertaking in the goods market that enables it to influence decisively (solely or together with other undertakings) the general conditions of goods turnover in the respective market or to hamper the access to the market for other undertakings. For a company to be declared as holding the dominant position it should have a market share of not less than 35 %. At the same time the term goods should be interpreted broadly as the same art. 2 of the Law includes works and services into its definition.

The main public authority created to implement the state's competition policy is the Agency for the Protection of Competition. And though the Law providing for the establishment of the Agency was adopted in 2000 it was only in 2007 when the Agency's board was approved and it started it activity.

The Agency is entitiled to control the functioning of the markets, their structural modifications and the creation of transnational corporations and financial and industrial groups. It carries out supervision of certain types of mergers and acquisitions and also may, under certain cicumstances, lodge applications with the court for undertakings division. And it is the Agency that should intervene in cases of violations of competition regulations committed by undertakings.

Coming back to the definition of the dominant position it is necessary to mention that beside the existence of the definition in the Law on the Protection of Competition, there has not been yet approved a clear methodology for determining it. The Agency elaborated the methodology and uses it, however, this methodology was not officially published as a legal act in the Official Monitor of the Republic of Moldova, and many lawyers claim it cannot have any enforceable legal power. In any case the methodology has been actively used by the Agency in order the dominant position of many companies in various markets. 

So far, the competition regulation in Moldova lacks clarity and foreseeability. Representatives of many companies claims that the Agency's policy is inconsistent. This mostly happens because of 2 reasons:

1 - insufficiency and lack of clarity of existing acts governong the rules of competition, and

2 - lack of necessary experience of the Agency, which only recently started to actively implement any competition regulations in Moldova.

However, the situation is likely to change in the future, particularly under the influence of the EC competition policy and regulations that would be implemented in the Republic of Moldova.

How does the 0 % income tax rate in Moldova work?

One of the topics that is very often discussed is the rate of the income tax for companies in Moldova. However, its applicability is often misunderstood. This is why I decided to dedicate today's post to the way the 0 % rate is applied.

The rate of 0 % is applied to incomes of companies that are Moldovan residents, individual entrepreneurs and farming entities (hereinafter - economic agents). 

However, this rate of the tax is less likely to bring the benefits that could be expected by some owners of small companies that are seen by them as one of the major sources of their personal incomes, as this tax rate is only applicable to the incomes of economic agents themselves. In case the net profits of the company is completely or partially distributed among its founders (shareholders)  in the form of dividends, than this company should pay the income tax at the rate of 15 % of the  amount of distributed profits.

So, the rate of 0 % should not be considered as an absolute exemption from the income tax. 

Moreover, even in cases when the 0 % rate is aplied that does not mean that companies are exempted from the obligation to ensure full accountability of all the incomes received. If a company fails to fulfill this fiscal obligation and declare all data on its incomes and if later on in the course of a fiscal inspection these incomes are revealed than an income tax of 15 % is applied to the difference between the incomes revealed and the incomes declared (and of course, certain penalties can be imposed additionally to that).

Basic notions of repatriation in foreign transactions

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An important issue that Moldovan companies (or their foreign partners) should take into consideration when carrying out international transactions is the existence of a number of rather strict rules on the repatriation of export proceeds, goods and services received as a result of foreign transactions. This issue is governed by the Law No. 1466-XIII of 29 January 1998 "On the regulation of the repatriation of money, goods and services received as a result of foreign transactions".

The Law stipulates the obligation of companies registered in Moldova:

• to ensure the receipt of export proceeds or the return of advance payments for non-delivered import to their accounts in the banks in the Republic of Moldova; 
• to fulfil the import of goods and services after the performance of import payments; and
• to repatriate the proceeds or the assets received as a result of other foreign transactions.

The general terms within wich the repatriation should be performed are stipulated as follows:

• in case of sales contracts, barter and export commission sales contracts - within the terms stipulated by the contracts, but not more than 1 year from the date of the goods dispatch or the date of the payment for goods or services (18 months for contracts of purchasing vine and fruit planting stock).
• for processing contracts - within 60 calendar days from the day of finishing the technological cycle indicated in the contract.
• for leasing contracts - within the terms established according to the contract but not less than once a year.

The repatriation is controlled by the fiscal and customs authorities.

The penalty for not complying with the rules on repatriation is 0.1 % of non-repatriated sums (costs) for every day of delay, but not more than the respective sum of money or the cost of goods or services that are due to be repatriated.