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Relocation of activity – the path from fleeing the war to saving your business

Adelina Iordache
Adelina Iordache

As war days go by, military conflict in Ukraine seems to escalade, jeopardising 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 serios chunk of unforeseeable events.

Adelina Iordache, Bucharest Bar lawyer

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