Serving as a director or board member of a company carries more than strategic responsibility. It also involves legal duties defined by corporate and insolvency law, which may expose directors to personal liability in certain circumstances.
Although Romanian companies benefit from separate legal personality and limited liability, this protection does not automatically shield directors from accountability. Where misconduct, negligence, or breach of statutory duties occurs, directors may face civil, administrative, or even criminal consequences.
Understanding when and how liability arises is essential for executives, shareholders, and foreign investors operating in Romania.
Core legal duties of directors under Romanian corporate law
The primary legal framework governing directors’ duties is Law No. 31/1990 on companies, as amended. Directors of both limited liability companies (SRL) and joint-stock companies (SA) must act in the interest of the company, exercising loyalty, diligence, and prudence.
These duties generally include acting in good faith and in the best interests of the company, avoiding conflicts of interest, refraining from competing activities without authorization, ensuring compliance with accounting, reporting, and corporate governance requirements, and preserving company assets and avoiding abusive transactions
Romanian law recognises the duty of care and duty of loyalty, similar to other European jurisdictions. Directors are expected to act as a reasonably prudent businessperson would in comparable circumstances. Poor business results alone do not automatically trigger liability; however, decisions taken without proper analysis, documentation, or legal basis may lead to claims.
Civil liability towards the company and shareholders
Directors may be held personally liable for damage caused to the company through breach of their duties. Liability may arise, for example, where a director approves unlawful dividend distributions, concludes transactions clearly detrimental to the company, fails to convene shareholders’ meetings when legally required or ignores statutory filing or accounting obligations.
Claims can be initiated by the company itself, by shareholders acting on its behalf, or, in insolvency, by a court-appointed administrator or liquidator.
Romanian courts typically examine whether the director acted negligently or intentionally and whether there is a direct causal link between the conduct and the damage suffered. Proper documentation of board decisions is often decisive in such cases.
Insolvency-related liability under Article 169 of Law no. 85/2014
The exposure of directors increases significantly when a company enters insolvency proceedings. In Romania, personal liability in this context is governed by Article 169 of Law no. 85/2014 on insolvency prevention and insolvency proceedings, which regulates liability for contributing to the company’s insolvency.
This is a form of civil, tort-based liability, not automatic liability for all company debts. A court may order directors or other members of management to cover part of the company’s liabilities only to the extent that their conduct contributed to the insolvency and caused specific damage, and subject to proof of causation.
Article 169 lists a series of acts that may trigger such liability, including: continuing an activity that clearly led the company to cessation of payments, using company assets or credit for personal benefit, disposing of assets in the interest of one creditor to the detriment of others, keeping fictitious accounting records, or concealing assets.
In practice, the insolvency practitioner or liquidator may initiate an action against directors if there are indications that management conduct materially contributed to the financial collapse. The court will assess whether the statutory conditions are met, including fault, damage, and a direct causal link between the conduct and the insolvency-related shortfall.
Importantly, directors are not automatically liable for all outstanding debts of the company. Any financial exposure is limited to the damage proven to have been caused by the unlawful conduct identified by the court.
Given these risks, directors should exercise diligence when a company shows signs of financial distress. Early restructuring measures, transparent financial reporting, and documented board decisions can significantly reduce the likelihood of personal liability under Article 169.
Liability towards third parties and regulatory authorities
In addition to internal corporate liability, directors can also be subject to liability from third parties and regulatory bodies.
For instance, the taxman can come after directors in the case of unpaid taxes, the environment department can come after directors in the case of regulatory offenses, competition offenses can lead to the prosecution of directors in specific circumstances, and fraud, tax evasion, and abuse of office can also lead to the prosecution of directors.
Although not every corporate violation automatically results in personal exposure, regulators increasingly scrutinise management decisions, particularly in regulated sectors such as finance, energy, pharmaceuticals, and gambling.
The business judgment rule and its limits
Romanian courts generally recognise that directors must be allowed a degree of discretion in making business decisions. The so-called business judgment rule protects directors who act in good faith, on an informed basis, and in the company’s best interests.
This means that a commercially unsuccessful decision does not automatically result in liability. However, the protection is lost if the decision was taken without proper due diligence, involved a conflict of interest, or breached mandatory legal provisions.
In practice, maintaining thorough internal documentation, including risk assessments, legal opinions, and financial analyses, is one of the most effective ways to demonstrate compliance with the duty of care.
Risk management strategies for directors and executives
To mitigate personal liability exposure, directors should adopt structured governance practices.
Key preventive measures include ensuring accurate and timely accounting and statutory reporting, maintaining clear records of board and shareholder resolutions, seeking external legal or financial advice for complex transactions, implementing internal compliance and whistleblowing mechanisms, and monitoring solvency indicators and acting early in cases of financial distress.
Directors’ and officers’ (D&O) liability insurance may also provide financial protection, although it does not cover intentional misconduct or criminal acts.
Foreign executives managing Romanian subsidiaries should pay particular attention to local compliance requirements, as Romanian corporate formalities differ from those in other EU jurisdictions.
Practical examples of when liability arises
In practice, director liability cases often arise, for example, where directors have approved loans from shareholders without adequate safeguards, failed to take action where insolvency was apparent, ignored tax inspection reports, or entered into contracts that were clearly beyond the company’s financial capabilities.
On the other hand, where directors are transparent with shareholders, document their processes, and rely on expert advice, it is much less likely that liability will arise.
Managing exposure in a changing regulatory landscape
As corporate governance standards continue to evolve in Romania and across the EU, scrutiny of directors’ conduct is increasing. Shareholders, creditors, and regulators are more willing to pursue claims where mismanagement is suspected.
Executives should therefore treat compliance and governance as strategic priorities, not administrative formalities. Legal audits, restructuring, and separating personal and company assets are critical.
Balancing leadership with legal responsibility
Directors operate under a framework that combines managerial autonomy with clear legal accountability. While limited liability protects shareholders, directors themselves may face personal exposure if they breach statutory duties or contribute to financial harm.
By understanding their obligations under corporate and insolvency law, documenting decisions carefully, and seeking timely professional advice, executives can reduce risk while maintaining effective leadership.
In a business environment where governance standards are steadily rising, prudent management is not only good practice: it is essential protection.