Category: Moldova

Efrim, Rosca & Associates has advised the Moldovan Government, acting through the Agency for Public Property, on its sale of 63.8865% of the authorized capital of Moldindconbank to Bulgaria’s Doverie United-Holding AD. Gladei & Partners and Cobzac & Partners advised Doverie-Invest on the deal, which had received preliminary approval on January 22 from the National Bank of Moldova.

Efrim, Rosca & Associates describes Moldindconbank, which has a 19% market share, as “a systemically important bank [that is] the second largest bank in the Moldovan market.”

According to Gladei & Partners, “this was not an ordinary share transfer; the buyer has acquired new shares issued in replacement of the cancelled shares, previously owned by the non-compliant shareholders.”

The Gladei & Partners team was led by Managing Partner Roger Gladei, working with Associates Valeriu Cernei, Dan Nicoara, and Irina Sugoneaco.

The Cobzac & Partners team was led by Managing Partner Daniel Cobzac, assisted with Senior Lawyer Ana Iovu and Lawyer Elena Vintea.

According to Oleg Efrim, the Managing Partner at Moldova’s Efrim Rosca Asociatii law firm, the primary topic of interest at the moment in the Moldovan legal community is the country’s newly modernized Civil Code which will become effective on March 1, 2019. According to Efrim, the new Code will be a significant upgrade to the existing law, which entered into force in 2003 as the country’s first following the fall of the Soviet Union. “It’s a substantial amendment,” Efrim reports, pointing out that the number of articles is increasing from the existing 1624 to 2671, and he says that “it is, indeed, a modernization of the Code.”

Efrim, who, in 2013, as the Minister of Justice in Moldova at the time, initiated the four-year working group that put the new Code together, concedes it will be “a real challenge for the entire legal community in Moldova.” Still, he insists, “the importance resides not only in the volume of the amendment, but in its quality,” and he claims that “my opinion is that Moldova will have one of the most modern Civil Codes in Europe.” According to him, in drafting of the law, the working group reviewed and drew from not only the judicial practices of the European Union and the EU directives of Consumer Law and Consumer Protection, but also to the Civil Codes of France, Germany, the Netherlands, and Italy. “After these past 15 years, experts and lawyers in Moldova had the opportunity to assess what we need conceptually, and the various amendments have been approved in a conscientious manner, instead of just being taken at random from other jurisdictions.”

“Some of the institutions are excellently regulated, from my point of view,” Efrim says, “including, in particular, the freedom of contract area (which will now allow us to use the regulations and rules from other jurisdictions, which are commonly used for M&A transactions), and the means of obligation performance, and a new institution: Trusts.” And he believes the results will be immediate. “Without going into too much detail, these amendments will make our jurisdiction very attractive for foreign investment.”

Ultimately, Efrim says, things are better in Moldova than they were five years ago — in part because of actions taken five years ago. “One of these actions was the EU Association Agreement signing,” he says, “which led to an increase in investment and business with EU countries.”

CMS and Turzan Cazac have advised the OTP Bank Group on the acquisition of 87.85% of shares in Mobiasbanca from the Societe Generale group. Schoenherr, working with lead counsel Jones Day, advised Societe Generale on the sale. 

Mobiasbanca is the fourth largest bank in Moldova with a market share of 13.3%. The transaction is expected to close in the coming months pending regulatory and merger clearance approvals.

According to CMS, this transaction is the continuation of OTP’s strategic expansion in Southeast Europe by acquiring Societe Generale’s interests in the region. So far, CMS has advised on the acquisition of the bank’s Serbian, Albanian, Bulgarian, and Croatian subsidiaries (as reported by CEE Legal Matters on January 23, 2017, August 29, 2018, and December 28, 2018). 

CMS’s cross-border team was led by a Budapest-based team led by Partner Eva Talmacsi and including Partner Dora Petranyi, Senior Associates Zoltan Poronyi, Dora Czegledi, and Szabolcs Szendro, Associate Adam Takacs, and Trainee Lawyer Dora Altziebler. The team also included Partner Rodica Manea and Horea Popescu and Senior Associate Mircea Moraru from CMS’s Bucharest office. 

The Schoenherr Chisinau team was led by Partner Vladimir Iurkovski and included Associates Andrian Guzun and Denis Lefter.

Editor’s Note: After this article was published, Jones Day informed CEE Legal Matters that its team had been led by Partner Alexandre de Verdun, working with Partners lorent Bouyer, Nick Burguess, Eric Barbier de La Serre, Philippe Goutay, Olivier Haas, and Emmanuel de La Rochethulon, Counsel Eileen Lagathu, and Associates Delphine Sauvebois-Brunel, Jonas Van den Bossche, Sylvain Kabeya, Adrien Starck, Gillan Saleh, Olga Goncharska, David Aumain, Pierre Larcher, Yann Davie, and Edouard Fortunet.

In addition, additional lawyers have been added to Schoenherr’s team on the deal.

Mariana Stratan, Iulia Furtuna, Ana Galus, and Vadim Taigorba have been promoted Partner at Moldova’s Turcan Cazac.

All four new partners started their legal careers with the firm. Stratan has been with the firm since 2006 and focuses on M&A/corporate, financing, and secured transactions work. Furtuna joined Turcan Cazac in 2007 and coordinates the firm’s litigation practice. Galus has been with the firm in 2011 and specializes in commercial, corporate, and competition law. Taigorba joined in 2012 and specializes in aviation law and secured financing. 

Managing Partner Alexander Turcan commented: “Our firm is turning 20 years in the coming months. It is an important age for a firm that is only a few years younger than the country where it was established. This promotions come at an important time for our firm, and they emphasize how great our colleagues are. We are very happy for them.”

Partner and co-founder Octavian Cazac added: “We pride ourselves that all four new partners are pure “home bred” in that they started their legal careers in our law firm. They were exposed to a myriad of interesting and challenging projects, and demanding partners and clients – and they made it to the top. Each new partner of our gender-balanced partnership is outstanding in its respective area of expertise and provides valuable assistance to our clients.”

CMS Kyiv has advised a consortium consisting of the EBRD and private equity firms AB Invalda INVL and Horizon Capital on their acquisition of a 41.09% stake in B.C. Moldova Agroindbank S.A, Moldova’s largest commercial bank, at an auction held by Moldova’s Public Property Agency.

According to an EBRD press release, the consortium is expected to “bring the highest standards of corporate governance, new technologies and effective structures to strengthen the performance of Moldova’s leading bank, improve lending services for small businesses and support the wider economy.”

The CMS team was led by Partner Graham Conlon and Counsel Tetyana Dovgan, with support from lawyer Diana Pysarenko, Associate Jamie Burgess, and Trainee Solicitors Julian Goering and Kirsten Mansfield.

Gladei & Partners has advised the EBRD and private equity firms AB Invalda INVL and Horizon Capital on Moldovan law matters related to their acquisition of a 41.09% stake in B.C. Moldova Agroindbank S.A. at an auction held by Moldova’s Public Property Agency. The EBRD was advised on English-law matters by CMS. Moldova Agroindbank and Moldova’s Government was represented by Efrim, Rosca & Associates.

Vilnius-based Invalda INVL is an asset management group in the Baltic States. The group’s companies have more than EUR 650 million of assets under management, entrusted to them by more than 190,000 clients in Lithuania and Latvia as well as international investors.

Horizon Capital is a private equity firm investing in Ukraine and Moldova through funds with a tenure of 25 years in the region. Backed by over 40 institutional investors from US and Europe, the firm has over USD 800 million under management. Horizon Capital is an active value-added investor, backing visionary entrepreneurs transforming the business landscape in the region.

On the MAIB investment, the partners paid EUR 23.031 million.

According to an EBRD press release, “the new shareholders, operating through UK-based company HEIM Partners, will bring the highest standards of corporate governance, new technologies and effective structures to strengthen the performance of Moldova’s leading bank, improve lending services for small businesses and support the wider economy.”

HEIM Partners is owned by the EBRD and Invalda INVL, with 37.5 per cent of shares each, and Horizon Capital, which holds the remaining 25 per cent and is responsible for strategic direction and management of the MAIB stake on behalf of the consortium.

“HEIM Partners has acquired the stake in MAIB in response to the Moldovan government’s search for a reputable investor, as the authorities and the regulator are working to re-establish a well-governed and commercially oriented banking sector,” the EBRD press release stated.

Francis Malige, EBRD Managing Director for Financial Institutions, commented: “The government showed strong political will and resolve to clean up the banking sector. It took a brave decision to support the sale process of MAIB, which – no doubt – will contribute to better banking services and stronger investments in the Moldovan economy as a whole. By doing that, the government backed the National Bank of Moldova in its massive effort to consolidate the banking system and make it more transparent.”

MAIB CEO Serghei Cebotari aded: “Today we are reaching one of the most important moments in Moldova Agroindbank’s history. The bank is happy to enter a new stage of its steady development, which will bring benefits to its customers, shareholders and society at large. MAIB welcomes the new shareholders – international financial institutions that will strengthen the bank’s position and the Moldovan financial sector. Despite difficult periods, MAIB has managed to achieve strong performance and continuous growth. As an institution, we will continue to embrace the highest standards of openness and governance and a corporate culture that is centered on integrity and sustainability.”

The Gladei & Partners team included Managing Partner Roger Gladei and Associates Dan Nicoara, Valeriu Cernei, Patricia Handraman, and Irina Sugoneaco. 

The CMS team was led by Managing Partner Graham Conlon, supported by Counsel Tetyana Dovgan, Associate Jamie Burgess, Lawyer Diana Pysarenko, and trainee solicitors Julian Goering and Kirsten Mansfield. 

The Efrim, Rosca & Associates team included Partner Oleg Efrim, Senior Consultant Ilona Panurco, and Associate Tinca Bodiu.

“This fall Moldova is facing parliamentary elections and so, for the moment, we are just coping with the current political reality and trying to keep a record of all the new legislation – which the Parliament is passing at quite a fast pace,” reports Vladimir Iurkovski, Managing Attorney at Law at Schoenherr Moldova.

In Iurkovski’s opinion, this accelerated rhythm may rise from parliamentarians’ fear of not getting reelected in November.

“Some laws are actually negative for the existing investor community,” Iurkovski says. “One example that I could give you is connected to the recent changes to the Customs Code. The state basically wants to create special zones on the borders, in addition to the already-existing duty free shops, where operators can retail their products without being subject to taxes. The list of such products will likely be very broad.” He adds that this is likely going to be detrimental to the companies already operating inside the country. “Petroleum companies, for example, will face competition from new operators appearing now in such zones, as petroleum products retailed there will be exempted from VAT and excise tax. It will be like a bigger duty-free area, but besides alcohol and sweets, now you will find petroleum products and other stuff as well.”

“Another good example would be the recent changes to our insolvency legislation,” Iurkovski notes. “Until recently the Courts of Appeal was the competent body to examine matters relating to companies’ insolvency. But they have now shifted down the competence to first instance courts, even though the judges there, professionally speaking, are not sufficiently prepared and don’t have the required experience to make these kinds of decisions in an expedited and professional manner.”  As a result, Schoenherr’s Moldovan Managing Attorney says, “insolvency cases are lasting longer and are more often resulting in deadlock.”

However, he insists, not all is bleak. “I must also emphasize that some of the recent legislative initiatives are doing good things for the business market and are serving the country’s EU commitments,” he says. Recent changes to the country’s Code of Civil Procedure serve as an example. “The main goal is to expedite the civil processes and to bring the parties to an agreement or judgment in a shorter time,” he says. “They implemented the changes to make sure that there are fewer delaying possibilities from the parties, especially those acting in bad faith.”

“The government has also made voluntary dissolution processes easier,” he continues. “If someone wants to close down a business, they can do it in a more transparent and much easier way than one year ago. Back then the tax audit could prolong the process, but now there are clear deadlines in the Tax Code as to when the audit has to be performed, and in absence of such, the dissolution process can continue,” he explains, going on to describe these amendments as definite pro-business changes which will significantly help the activity of local companies. 

Finally, Iurkovski notes that, this being an election year, the country is seeing the inevitable decrease in the number of deals, as investors are waiting for the new parliament to be elected. As a result, firms are trying to find new clients in this period of stagnation. “Still, from what I see, there are plenty of M&A deals on the market and quite a lot of assistance projects to get the country in line with EU’s acquis.” 

Although Moldova is not part of the European Union, the country strives to stay in-line with EU regulations, Andrei Caciurenco, Partner at ACI Partners says, so the GDPR is as hot a topic there as it is elsewhere.

According to Caciurenco, in recent years many companies have started to pay more attention to personal data protection, data management, and storage, and many of them have registered as personal data operators. “Both the business and the legal community is taking this very seriously, and I think that companies are more aware and more cautions today in this sense,” he says.

The GDPR is not the only field where Moldova is trying to harmonize its legislation with EU principles and expectations, Caciurenco says. He explains that “we have a new law on banking activity, which came into force on January 1, 2018, and it aims to strengthen the regulation, supervision, and risk management of banks. Banks are stricter on bank capital adequacy, stress testing, and market liquidity risk. Moldova is really trying to stay in-line with EU norms, especially when it comes to the financial sector, which is the backbone of the country’s economy.”

Caciurenco thinks these changes will, ultimately, be good for business. “It should definitely be a positive change, for it reflects a commitment to create more transparent and stable banking legislation, and to become an active member of the international financial community.”

Caciurenco reports that M&A activity is quite high in Moldova at the moment, with foreign investors making serious investments and acquisitions, especially in mobile networks, energy distribution networks, and the IT sector.

“At the end of last year, and the beginning of 2018, the first (and so far only) park for information technology was created here, called the ‘Moldova IT Park,’ Caciurenco says. “Companies [in the park] — or residents, as we call them — benefit from a very good tax regime in the park. The government combined several taxes, so now they pay a single tax of 7% of monthly sales revenue (but not less than 30% of the average monthly wage in the economy, predicted for the fiscal year, per one employee). This tax includes the income tax on entrepreneurial activity, income tax on salary, compulsory social insurance contributions, compulsory medical insurance payment (by the employee and employer), local taxes, real estate tax, and road usage tax.” According to him, these benefits make it “very attractive,” for foreign companies to register in the park. “The initial target was to attract around 40 companies,” he says, “but now there are more than 180 residents, and this number is increasing every single day.”

“Due to a very sudden and controversial parliamentarian decision that changed the competence of the Courts of Appeal on solving insolvency cases, all work concerning insolvency has stopped recently in Moldova,” reports Cobzac & Partners Partner Daniel Cobzac, “with most of the transactions being suspended.” Simultaneously, to advance the country’s EU-integration plans, a lot of new reforms are being made in order to harmonize the country’s legislation with European norms.

“A really big thing happened just a few weeks ago, without any consultation or approval from state authorities, or professionals from this domain,” Cobzac says. “In one session the Parliament passed some changes to the Code of Civil Procedure — and it changed one part of an article that refers to the competence of the Courts of Appeal on solving insolvency cases. From this moment on, the courts of appeal are no longer competent to solve or examine insolvency cases, which is quite a big thing for us, because in the past few years quite a lot of large companies went into bankruptcy due to their inability to solve their debt problems with the banks.” Daniel admits to some frustration with Parliament’s action. “Due to this change, which I say again, was very unexpected, now everything is suspended, the courts cannot make any decisions, and we cannot help our clients for the moment.”

Another problem, according to Cobzac, is the lack of trained judges in the regional (first grade) courts. “This is a very specific kind of litigation, and judges must be instructed accordingly, and currently there are only a few who really know the procedures. The Superior Court of Magistrates, which is the body that regulates the activity of the judges, is making the effort to instruct some new judges quickly, now, but they are very young, and they have no experience — many of them are freshly appointed judges.”

Under these circumstances, Cobzac explains, lawyers from Moldova expect that for the next six months, at least, almost everything concerning insolvency will be blocked, and it will be impossible to conclude bigger transactions. “It will be impossible for creditors to pay their debts and for debtors to restructure properly, and it will also be impossible to sell goods because the decisions of creditors in sale/purchase agreements has to be approved in some case by judges.” As a result, he says, the upcoming period may be fairly discouraging for major creditors.

Still, Cobzac says, “the situation is not hopeless.” He says that the current government, despite all its blunders, has managed to implement laws in the past couple of years which forbid non-transparent share-holders from investing in the country. Pushing out shady, offshore investors, has attracted new international players — mostly banks — to the market. According to him, “39.2% of the third biggest bank of Moldova, Victoriabank, was recently bought by a Romanian bank, Banca Transilvania, which together with the EBRD owns 66.7% of shares. And Banca Intesa Sanpaolo has also acquired shares of Eximbank, which were previously owned by Gruppo Veneto Banca. The fact that all these powerful international banks are entering our market sends a good signal for other players that it is safe to invest in Moldova.” As evidence, Cobzac notes that last year German supermarket giant Kaufland announced plans to open up ten new stores in Moldova, and now it wants to acquire more properties.

Moldova’s government is pro-EU, Cobzac says, despite the fact that the country’s President is pro-Russia, and to further advance the country’s potential for eventual accession to the European Union the government is doing everything it can to harmonize its legislation with current EU expectations. “We have witnessed lots of reforms lately, and our legislation is changing on a weekly basis. Recently, for instance, the Law of Interior Commerce was adjusted to EU regulations, the Civil Code was amended, and the Mortgage Law and Insolvency Law changed as well.”