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Bucharest
December 1, 2020
BUSINESS

Issue of the Day: DNA and Fondul Proprietatea

The National Anticorruption Directorate’s (DNA) forceful actions bring to light shady businesses in many sectors of the Romanian economy.

We find very interesting the revelations that appear in relation to the restitution of properties that belonged to physical or juridical persons and that were confiscated by the communist regime.

Let us underscore that Romania is the only former Communist Bloc state that applied the “restitutio in integrum” principle. No other former communist state has implemented such a regulation. Based on hastily-drafted legislation, the Property Fund/Fondul Proprietatea (FP) was set up in 2005. The reason behind the creation of this entity, transformed into a stock company, was that of ensuring the financial resources necessary for paying damages to the persons that were abusively expropriated. Since 2011, FP shares have been traded on the stock exchange.

It is important to emphasize that in its initial form the law stipulated that the shares could be traded only on the regulated market. Later on, this legal clause was removed so that third parties became FP shareholders by buying so-called litigation rights.

A long chain of illegalities started to form from that moment on. A veritable mafia structure that was buying and selling the rights of persons that juggled with legal or fictitious restitution rights was created in a few years’ time.

We do not know and it is not our prerogative to find out whether there is any connection between this change brought to the legal framework and the fundamental change in the structure of FP’s shareholders. Thus, in January 2011 the structure of FP shareholders consisted of: Public Finance Ministry – 36.79 per cent; Romanian physical persons – 33.16 per cent; foreign institutional shareholders – 14.98 per cent; non-residential physical persons – 9.48 per cent; Romanian institutional shareholders – 5.59 per cent. On 28 February 2015 the structure of the shareholders was: foreign institutional shareholders – 51.81 per cent; Romanian physical persons – 20.13 per cent; Romanian institutional shareholders – 11.21 per cent; Property Fund – 8.30 per cent; non-residential physical persons – 5.53 per cent; Public Finance Ministry – 3.02 per cent.

Maybe the DNA’s actions will lead to a better knowledge of these fundamental changes that took place in the structure of FP’s shareholders.

 

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