CAB: Selection of Transelectrica Board of Directors, illegal

The fate of the current Board of Directors of Transelectrica SA is uncertain, after the Bucharest Court of Appeal rejected yesterday as unfounded the appeal filed by Transelectrica SA against sentence no. 2704 of 23.12.2025 pronounced by the Bucharest Tribunal, by which the first instance decided to annul the decision by which the Supervisory Board triggered the selection procedure of the Transelectrica SA Board of Directors, as well as the annulment of the entire procedure organized subsequently, considering that the imperative provisions of the legislation on corporate governance of public enterprises were violated.

In practice, two of the three courts that can rule on the case have ruled in favor of the petitioner Bogdan Toncescu, former member of the Transelectrica Board, and now the only hope for the management of the company with majority state capital is to go to the High Court of Cassation and Justice, because it still has the right to appeal within 30 days from the communication of the decision of the Bucharest Court of Appeal, as stated at the end of the sentence issued yesterday.

At stake is not only the resolution of a dispute initiated by the former president of the Board, Bogdan Toncescu, but also the very validity of the procedure through which the current members of the executive management were selected and, implicitly, the stability of the management of one of Romania's most important strategic companies. The legal stakes of this case, however, far exceed the simple verification of the legality of an administrative procedure. At the heart of the dispute is the way in which Transelectrica applied the provisions of GEO no. 109/2011 on the corporate governance of public enterprises, a normative act adopted precisely to guarantee that the management of state-owned companies is selected through transparent, competitive procedures and free from arbitrary influences. In the motivation of the action, the plaintiff Bogdan Toncescu claimed that the recruitment process was affected by numerous irregularities, from the failure to comply with the legal deadlines to the lack of transparency regarding the evaluation criteria, the way the tests were conducted, the rules applicable to the candidates and the impossibility of contesting the results. According to the Bucharest Tribunal's ruling, one of the arguments considered well-founded concerns the failure to comply with the minimum 30-day period between the publication of the announcement and the deadline for submitting applications, a term qualified by the court as imperative. The court noted that the announcement was published on June 25, 2024, and the deadline for submitting the files was set for July 24, 2024, which, compared to the rules for calculating the deadlines provided for by the Civil Code, did not comply with the requirements imposed by GEO no. 109/2011. The file also contains other criticisms regarding the conduct of the procedure. The plaintiff invoked the lack of a clear regulation on the selection, the absence of rules communicated to the candidates for the evaluation of the questionnaires, the impossibility of contesting the scores, as well as the lack of information regarding the decisions of the Nomination and Remuneration Committee. The action claims that the entire process lacked transparency and that the external expert contracted for the recruitment had in practice taken over duties that belonged to the company's bodies, an aspect considered by the plaintiff to be contrary to the principle of assuming responsibility enshrined in the legislation on corporate governance. These claims were part of the set of arguments analyzed by the Bucharest Court of Appeal in pronouncing the substantive solution.

The importance of the decision of the Bucharest Court of Appeal was amplified by the existence of a contractual clause that expressly establishes the effects of a possible final decision. Article 8.3 letter i of the mandate contract of the members of the Board of Directors provides that the mandate ends in the event of a final court decision annulling the selection procedure of the members of the Board of Directors. The clause is drafted in a manner that links the termination of the mandate not to a discretionary decision of the shareholders or the Supervisory Board, but to the existence of a final decision annulling the selection procedure. However, although the appeal court rejected the appeal filed by Transelectrica and upheld the decision of the Court of Appeal, it is not final, according to Article 634 of the Code of Civil Procedure, because it gives Transelectrica the right to appeal within 30 days of notification.

From a corporate governance perspective, the case has a relevance that goes beyond the particular situation of Transelectrica. GEO no. 109/2011 represents one of the reforms undertaken by Romania in its relationship with the European Commission and through the National Plan for Recovery and Resilience, and compliance with selection procedures for the management of state-owned companies is an essential indicator of the professionalization of public management. The very motivation of the action invokes the obligations regarding compliance with the principles of transparency, real competition, non-discrimination and accountability, as well as the OECD standards on the administration of public enterprises, arguing that the selection of executive management must be verifiable and free from any suspicion of influencing the result.

Therefore, the appeal that is to be filed by the management of Transelectrica and judged by the High Court of Cassation and Justice will not only produce effects on the parties in the file, but will become a jurisprudential benchmark for all recruitment procedures organized in companies under the incidence of GEO no. 109/2011.

To the extent that the ÎCCJ confirms the analysis of the Bucharest Court of Appeal and implicitly of the Bucharest Tribunal, the message sent will be that the violation of apparently formal procedural requirements may result in the entire cancellation of the selection when it affects the guarantees of transparency and equal treatment imposed by law.