The fate of the Transelectrica Board of Directors, in the hands of the Bucharest Court of Appeal

The Bucharest Court of Appeal postponed, at the end of last week, until July 9, the ruling in a case with major implications for Transelectrica SA, in which the legality of the selection procedure of the current Board of Directors is analyzed, the final decision may have consequences on the mandates of all members of the management team.

At stake is not only the resolution of a dispute initiated by the former chairman of the Board of Directors, Bogdan Toncescu, but 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 Bucharest Court of Appeal has already ruled in favor of the plaintiff and ordered, by sentence 2704 of 23.12.2025, the annulment of the decision by which the Supervisory Board initiated the selection procedure, as well as the annulment of the entire procedure organized subsequently, considering that the mandatory provisions of the legislation on the corporate governance of public enterprises were violated. The first instance decision was appealed by Transelectrica, and the Bucharest Court of Appeal, after debates, considered that it needed additional time for deliberation, which is why it postponed the ruling to July 9.

The legal stakes of this case, however, go far beyond 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.

However, 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 appeal now pending before the Bucharest Court of Appeal is 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 Management Board provides that the mandate shall terminate in the event of a final court decision annulling the selection procedure of the members of the Management Board. 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. If the appeal court admits the appeal filed by Transelectrica and changes the solution of the Bucharest Court of Appeal, the selection procedure will remain valid, and this contractual clause will not become incidental. However, if the Court of Appeal rejects the appeal and upholds the Tribunal's decision, and this becomes final, the issue of applying the provisions of art. 8.3 letter i of the mandate contracts will arise, since the contract itself establishes that such a decision represents a case of termination of the mandate.

From the perspective of corporate governance, 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 Recovery and Resilience Plan, and compliance with the selection procedures for the management of state-owned companies constitutes an essential indicator of the professionalization of public management. In the very motivation of the action, 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 are invoked, arguing that the selection of executive management must be verifiable and free from any suspicion of influencing the result.

Therefore, the decision to be pronounced by the Bucharest Court of Appeal will not only produce effects on the parties in the file. It may become a jurisprudential benchmark for all recruitment procedures organized in companies under the incidence of GEO no. 109/2011. To the extent that the Court of Appeal confirms the analysis of the Bucharest Tribunal, the message sent will be that the violation of apparently formal procedural requirements may entail the full annulment of the selection when it affects the guarantees of transparency and equal treatment imposed by law. If, on the contrary, the appeal is accepted, the court will have to explain why the alleged irregularities do not justify the sanction of annulling the procedure.

Until then, the decision of the Bucharest Court of Appeal remains one of the most anticipated decisions in the field of corporate governance of state-owned companies. The postponement of the ruling shows that the court is analyzing a file with complex legal and institutional implications, and the final solution will clarify not only the legality of the selection of the current Transelectrica Board of Directors, but also whether the conditions for producing the effects provided for in the mandate contracts of the members of the executive management are met. Consequently, July 9 may become a decisive moment both for the stability of Transelectrica's management and for the way in which the standards of legality and transparency in the recruitment of the management of strategic state companies will be viewed from now on.