According to the provisions of Article 69 of the Law on Commercial Companies, Law 31/1990, if a loss of shareholders’ equity is recognized, the subscribed share capital must be replenished or reduced before any distribution or distribution of profits can be made.
In addition, Article 153 index 24 specifies the following in the case at hand i.e. Losses that erode the Share Capital:
– If the governing body, finds that, as a result of certain losses, determined by the annual budget approved in accordance with the law, the company’s net worth has determined that the difference between total assets and total debts has decreased to less than half the value of the subscribed share capital, it shall immediately convene an extraordinary general meeting of the shareholders to decide whether the company should be dissolved.
– the articles of incorporation it may be stipulated that an extraordinary general meeting of Shareholders be convened even in the event of a less significant reduction in net assets than that provided for in par. (1), establishing this minimum level of net assets by reference to subscribed share capital.
– the administrative body, shall submit to the extraordinary general meeting of shareholders convened in accordance with Paragraph (1) a report on the financial position of the company, accompanied by comments from the auditors or, as the case may be, the internal auditors. Such report shall be submitted to the registered office of the company at least one week prior to the date of the general meeting in order to be consulted by any interested shareholder/members. At the extraordinary general meeting of shareholders, the administrative body shall inform the shareholders/members of all material events that have occurred since the written report was prepared.
– If the extraordinary general meeting of shareholders does not decide on the dissolution of the company, the company is obligated to do so, at the latest until the end of the fiscal year following the one in which the losses were recognized and subject to the provisions of Article 10, to reduce the share capital by an amount at least equal to the amount of the losses that could not be covered by reserves, if the normative conditions of financial and economic failure persist.
– If the extraordinary general meeting fails to meet in accordance with par. (1) or if the extraordinary general meeting cannot be validly constituted for deliberation even on the second call, the penalty for the company may be exertive.
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