Corporate Benefit and Groups of Companies: Whose Interest Comes First?

Rotten apple and the sword of Damocles

A subsidiary is told by its parent to sign a guarantee it gets nothing from or maybe it signs it directly for the subsidiary (and with no knowledge of the latter), a director approves an intra-group loan on terms no bank would offer. Formally, everything is in order. In the end, it’s all in accordance with the articles, it’s in accordance with the PoAs, it’s in accordance with the group benefit. But is it for the benefit of the company itself?

Corporate benefit is a concept generally understood in European legal systems as being the interest of the company as a distinct legal entity, separate from and independent of the interests of its shareholders, directors, or the wider group to which it may belong.[1] The concept is relevant, because the company’s directors’ failure to act in the company’s interests and with its corporate benefit in mind likely exposes them to personal liability and may also trigger consequences such as the annulment of legal acts (such as transactions carried out with the company’s involvement).

Corporate benefit is a pragmatic concept; it basically asks: what’s in it for the company itself? This question becomes ever more relevant in the context of transactions within a group of companies.

1. What Does "Corporate Benefit" Actually Mean?

Under Romanian law (specifically under the Companies Law[2]), this concept is not explicitly defined. However, it is generally accepted as the direct benefit of the company resulting from a specific transaction, act etc. Unlike other jurisdictions, Romania does not have specific legislation or clear jurisprudence covering the topic of group interests and clearly indicating that either group interests prevail or those of shareholders or creditors of each company.[3] Therefore, the question of whether the requirements of corporate benefit has actually been observed in a specific situation needs to be assessed on a case by case basis in light of existing legal provisions, usually in the context where the directors’ liability is brought to discussion.

The Companies Law mentions corporate interest in various instances, such as the following:

• Art. 144¹ [paragraphs (1), (2) and (4) specifically] provides the following: “(1) Members of the board of directors shall exercise their duties with the prudence and diligence of a prudent manager. (2) A director does not breach the obligation set forth in paragraph (1) if, at the time of making a business decision he is reasonably entitled to believe that he is acting in the company’s best interests and based on adequate information. (4) Members of the board of directors shall exercise their mandate with loyalty, in the company’s best interests.[4]

• Art. 144³ (1) requires directors to abstain from acting, in case their interest conflicts that of the company in a certain case.[5]

  
  

2. Where This Comes Up Most Often

The question of whether corporate benefit exists usually comes up when it appears not to be very clear whether the company itself benefits from the envisaged operation and when, quite obviously, some other company (such as a parent, an affiliate or a natural person) takes the advantage.

Real life examples of this situation include the less obvious cases where (a) a subsidiary guarantees a parent's debt for no clear business reason; (b) management fees are charged by a parent with no clear service in return (or maybe with services being documented later on by made-up time sheets and activity reports) or the more obvious ones such as (c) a company sells an asset to a related party at undervalue. Many (if not all of these) situations also trigger tax liabilities for breach of transfer pricing rules etc.

3. The Group Structure Problem

Group interest is oftentimes the justification used in many cases where corporate benefit is not really clear for the company. Even though the law provides for the concept of “group of companies” [6], "group interest" is not automatically accepted as justification, given that each company has its own creditors, minority shareholders, employees and other obligations.

The company in question still needs to act in its own interest and such interest need to be balanced with those of the group.

4. What Happens When Corporate Benefit Is Missing

If corporate benefit is missing, the consequences will likely be significant. Directors who have been appointed “by the group” and who acted “because the group told them to” will likely face personal liability in case of insolvency/bankruptcy.

Under Romanian law, in the case of insolvency/bankruptcy, the judicial administrator/liquidator is actually subject to the obligation to pursue the liability of natural persons which are responsible for bringing the company in insolvency.[7]

5. Corporate benefit as desired conduct

Corporate benefit is not just a legal formality, it is (or should translate to) a type of conduct that leads to better decisions of local management. Having liability like the sword of Damocles hanging over them likely leads to more considered management decisions and fewer negative consequences.

In practice, this could translate into: (i) getting legal advice on a specific transaction, legal act etc. before proceeding to signing; (ii) documenting all decisions in writing and having corporate bodies properly approve of material transactions, while also documenting the business rationale and benefit of the involved entity/ies; (iii) always document all acts beforehand.

In brief, let this sink in: the director who signs without asking the question is the one who ends up in trouble so better reflect on that corporate benefit.

[1] See for example the conclusions drawn in European Commission: Directorate-General for Justice and Consumers and EY, [Directorate-General for Justice and Consumers, EY], Study on directors’ duties and sustainable corporate governance – Final report, Publications Office, 2020, https://data.europa.eu/doi/10.2838/472901, last accessed on 8 June 2026.

[2] Companies Law No. 31/1990.

[3] Universul Juridic Premium nr. 10/2022, S. Bodu “Răspunderea administratorilor societăţilor comerciale. Natură juridică”, 3 octombrie 2022.

[4] The original text of Art. 144¹ (1), (2) and (4) (in Romanian) reads as follows: “(1) Membrii consiliului de administraţie îşi vor exercita mandatul cu prudenţa şi diligenţa unui bun administrator. (2) Administratorul nu încalcă obligaţia prevăzută la alin. (1), dacă în momentul luării unei decizii de afaceri el este în mod rezonabil îndreptăţit să considere că acţionează în interesul societăţii şi pe baza unor informaţii adecvate. (4) Membrii consiliului de administraţie îşi vor exercita mandatul cu loialitate, în interesul societăţii.”

[5] The original text of Art. 144³ (1)(in Romanian) reads as follows: “Administratorul care are într-o anumită operaţiune, direct sau indirect, interese contrare intereselor societăţii trebuie să îi înştiinţeze despre aceasta pe ceilalţi administratori şi pe cenzori sau auditori interni şi să nu ia parte la nicio deliberare privitoare la această operaţiune.”)

[6] See for instance Art. 5 para. 35 of the Insolvency Law No. 85/2014. In Romanian, the text reads: “grup de societăţi înseamnă două sau mai multe societăţi interconectate prin control şi/sau deţinerea participaţiilor calificate” – in English translation “group of companies means two or more companies interconnected by control and/or holding of qualifying holdings.”

[7] Art. 169 of the Insolvency Law No. 85/2014 provides for this.

The Roles of Manufacturer, Importer, Authorised Representative, and Distributor under EU’s General Product Safety Regulation (GPSR)

The General Product Safety Regulation (EU) 2023/988 (GPSR) applies across the European Union since 13 December 2024, replacing the old 2001 directive. We have discussed it in October last year here. In brief, the GPSR reshapes how companies must handle product safety, traceability, and labeling for all non-food consumer products.

The provisions of the GPSR refer to several key operators throughout the supply chain, amongst which the four main players: manufacturers, importers, authorised representatives, and distributors. The aim of this article is to discuss the meaning that the GPSR gives to each of these concepts and the attributes/responsibilities attached to each of them. In practice, knowing one’s legal responsibilities (and attached liabilities) makes a real difference and could mean the difference between compliance and non-compliance (with all ancillary consequences).

1. Manufacturer

As per the GPSR, the manufacturer is “any natural or legal person who manufactures a product or has a product designed or manufactured, and markets that product under that person’s name or trademark”.[1] 

The manufacturer has the following key obligations:[2]

• To ensure the product is safe and complies with all applicable EU rules.

• To carry out (or have carried out) a risk assessment and, if required, testing.

• To label the product with: (i) a product identifier (type, batch, or serial number); (ii) the manufacturer’s name, registered trade name or trademark, and contact address (postal and electronic); (iii) to provide instructions and safety information in a language understood by consumers in the target EU country; (iv) to keep technical documentation and records of complaints or recalls for 10 years; (v) to take corrective action — including recalls — if a product is unsafe.

  
  

Note that if an economic operator (such as a distributor – see below) rebrands or substantially modifies a product made by someone else, they legally become its manufacturer under the GPSR.[3]

2. Importer

An importer is “any natural or legal person established within the Union who places a product from a third country on the Union market.”[4]

The importer has the following key obligations:[5]

• To verify that the manufacturer has done their job: risk assessment, labeling, safety information, and documentation.

• To place their own name, trade name or trademark, and contact address (postal and email) on the product, its packaging, or accompanying documents.

• To ensure the product can be safely used and that it complies with the GPSR and any specific product legislation.

• To cooperate with market surveillance authorities and keep documentation for at least 10 years.

  
  

If the manufacturer is located outside the EU, the importer becomes the main contact point for authorities and consumers inside the EU.

3. The Authorised Representative — The Local Contact for Non-EU Manufacturers

The authorised representative is “any natural or legal person established within the Union who has received a written mandate from a manufacturer to act on that manufacturer’s behalf in relation to specified tasks with regard to the manufacturer’s obligations under [the GPSR].”[6]

In other words, a manufacturer outside the EU can appoint an authorised representative within the EU to act on their behalf. This is common when non-EU companies want to sell directly into the European market without setting up a legal entity.

The authorized representative has the following key obligations:[7]

• To hold the EU declaration of conformity or technical documentation for inspection.

• To cooperate with authorities on safety matters.

• To communicate with market surveillance bodies on behalf of the manufacturer.

  
  

However, the authorised representative cannot replace the manufacturer’s core responsibilities — they assist, but they don’t assume full product liability unless they also act as importer or distributor.

4. Distributor — The Link in the Chain

The distributor is “any natural or legal person in the supply chain, other than the manufacturer or the importer, who makes a product available on the market.”[8]

In other words, a distributor is any operator in the supply chain who makes a product available on the market — for example, a retailer or wholesaler — without being the manufacturer or importer.

The distributor’s key obligations are the following:[9]

• To check that the product bears all required labeling, including manufacturer/importer details and instructions.

• To ensure the product is not clearly unsafe before sale.

• To keep records of suppliers and customers to ensure traceability.

• To cooperate with authorities in case of safety investigations or recalls.

  
  

5. Why These Distinctions Matter

The definitions and concepts referred to above aren’t just labels — they essentially allocate liability to various operators throughout the supply chain. In plan words, they indicate who’s accountable when something goes wrong with respect to a non-food product.

Examples of this allocation of liability may include the following situations:

• If a product lacks contact details or traceability, authorities will hold the importer responsible.

• If an unsafe product is found, the manufacturer must initiate corrective actions.

• If the manufacturer is a company located outside the EU, and there’s no EU importer, the authorised representative may be treated as the responsible person.

  
  

Also, gaps in compliance, may lead to a product being stopped from being legally sold in the EU.

Conclusion

For businesses, understanding the concepts outlined by the GPSR means knowing exactly which role they play, ensuring the right information is on product labels, and keeping the proper documentation in place. In real life, reaching such conclusion often starts with a simple question: “what should the label contain?” Hopefully, this question is addressed to a lawyer.

[1] GPSR, Art. 3 para. (8).

[2] Ibid, Art. 9.

[3] Ibid, Art. 13.

[4] Ibid, Art. 3 para. (10).

[5] Ibid, Art. 11.

[6] Ibid, Art. 3 para. (9).

[7] Ibid, Art. 10.

[8] Ibid, para (11).

[9] Ibid, Art. 12.

The “Simple” Agency Agreement and Its Pitfalls

Truth is agency agreements are used very often in a business context, as if these are the simplest agreements in the world. In a sense they are, in another – they hide some pitfalls which should probably be flagged more often. The more popular they are, the more people think “it’s no big deal”, just go ahead and sign already.

First of all, with the risk of sounding a bit silly, agency agreements need to be agency agreement, namely: (i) the agent needs to act upon the direction and instruction of the principal; (ii) the agent needn’t bear any financial or commercial risk resulting from their activity with the principal; (iii) there needs to be dependency between the two. Any deviation from these key points leads to the so-called “agency-washing”[1] hybrid models; in other words, agreements that are not really agency agreement, but actually distribution agreements or alike.

Why does this matter anyway?

It matters at least from a competition law perspective. Given the dependency between the agent and the principal, agency agreements are not considered to be agreements which may trigger the distortion of competition – the principal and agent act as one. Hence, they are not caught by Art. 101(1) TFEU (or the relevant national law provisions covering the same scope) which forbid agreements between undertakings  which would harm competition.

The EC Guidelines on the topic provide that “(12) An agent is a legal or physical person vested with the power to negotiate and/or conclude contracts on behalf of another person (the principal), either in the agent's own name or in the name of the principal, for the: purchase of goods or services by the principal, or sale of goods or services supplied by the principal. (13) The determining factor in defining an agency agreement for the application of Article 101(1) is the financial or commercial risk borne by the agent in relation to the activities for which it has been appointed as an agent by the principal. In this respect it is not material for the assessment whether the agent acts for one or several principals. Neither is material for this assessment the qualification given to their agreement by the parties or national legislation.”[2]

Adopting hybrid models, whereby the agent is acting more like an independent distributor brings about the need to assess whether in fact the hybrid agency agreement contains some provisions which may trigger competition law issues such as market sharing aspects, prohibition of sales, non-compete etc. This is because, if an agreement fails to meet the features of a genuine agency agreement, it will likely be considered to be a distribution agreement, subject to the prohibition included in Art. 101(1) TFEU (and the national provisions covering the same scope).

One additional practical question: what if the agent/distributor is a freelance natural person? Then there are some tax/labour related considerations for which you would want the guy or girl to be considered independent. Well then – they need to be independent in terms of working hours, leave etc., but they need to follow the principal’s instructions should they want to be qualified as agents.

In this case, business needs to decide: do we want an agent (in the real sense of the word) or do we want a distributor (that may sometimes follow our direction)? Who knows? Please only be compliant when deciding

[1] “Agency washing” is a term not used officially by the European Commission, but it appears as such in less formal discussions.

[2] EC Guidelines on Vertical Restraints, OJ C 130, 19.5.2010, pp. 1–46.