NIS PROPERTY CROATIA

The Croatian legal framework governing foreign investment has been designed in a way that does not make any difference between domestic and foreign investors. All possibilities in relations between domestic investors are also open to foreigners investing capital in Croatia. Moreover, foreign investors enjoy additional guarantees that are not given to domestic investors. The Croatian Constitution provides that no law or other legal document shall reduce the rights granted to a foreign investor at the time of investment in Croatia. It also guarantees the free repatriation of profits or capital upon fulfillment of all legal obligations. When foreign investors start up or participate in the start-up of an enterprise in Croatia, their rights, obligations and position are identical to those of domestic investors, provided the condition of reciprocity is met.

Foreign legal entities and persons may:

• invest capital on a contractual basis
• invest in a company
• invest in a bank or insurance company
• set up as craftspeople or do business as sole traders
• obtain a concession to exploit natural resources
• participate in build-operate-transfer (BOT) operations.

Starting up a company in Croatia requires registration with the Commercial Court, Central Bureau of Statistics, Tax Administration,Croatian Pension Insurance Institute and Croatian Institute for Health Insurance. It is customary to hire a domestic lawyer or some other legal representative to oversee the procedure of company establishment. Prior to registration, it is necessary to check with the Commercial Court if the desired company name already exists in the court register. To use the word Croatia or any of its derived forms in the company name, founders must obtain special approval from the Central State Administrative Office for Public Administration.

Authorized capital (HRK 20,000 for a private limited company and HRK 200,000 for a public limited company) must be paid into a bank account, and the receipt of deposit should be enclosed when registering a company. Accounts used by legal entities and natural persons to conduct payment transactions are opened and managed by banks on a contractual basis and in line with relevant regulations (National Payment System Act NN 117/01). A business entity may hold accounts with several banks of its own choice. Only one account per bank may be used for regular transactions, one for each organizational unit and several accounts for special purposes. If a business entity has more than one account for regular transactions, it must specify which account will be used for the payment of legally imposed contributions and public dues, for collection on the basis of securities and instruments guaranteeing payment, for the execution of courts writs of execution and other documents of this kind as well as keep record of payment orders not executed.

Entry into a court register is the responsibility of the register court with jurisdiction over the area in which the entity to be registered is based. The registration procedure starts by submitting to the relevant register court an application for entry into the court register. The application, certified by a notary public, contains a request for the entry of data and is submitted by an authorized person in a number of copies sufficient for the court and participants in the procedure. List of legal requirements can be found at the web site of Croatian Chamber of Economy.

A representative office may be established in Croatia by any foreign entity engaging in business and by any national or international business association. A representative office may be established for the purpose of market research, promotion, provision of information and representation. A representative office is not a legal entity and is considered part of the entity that has established it. It may not carry out operations that the founder naturally performs, but may only carry out activities as ordered by the founder. As an exception, air carriers representative offices may sell transport documents in line with Croatian international agreements and with international treaties. A representative office operates under the name of its founder with the indication of its status as a representative office. A foreign entity with a representative office in Croatia may establish one or several branches of its representative office. A representative office is entered in the Croatian Register of Foreign Entities Representative Offices kept by the Ministry of the Economy, Labor and Entrepreneurship, and it may start operation only upon entry into the Register.

A company is a legal entity established and organized in accordance with the Companies Act. All companies are registered in a court register following the Court Register Act and the Rules of Court Register Entry Procedures. Under the Companies Act, it is possible to start a company as a company based on capital or as a partnership, which is an association of persons. Companies based on capital include: private limited company, public limited company and economic interest association.

A domestic or foreign legal entity or natural person may establish a company. A company is a legal entity. The status of a legal entity is acquired by being entered in a court register. A company is liable to settle its debts with all its assets. Owners/shareholders in private and public limited companies are not personally liable for the obligations of the company, unless the Companies Act provides otherwise. Partners in general partnerships and general partners in limited partnerships have unlimited liability to cover the debts of their partnership jointly, severally and with all their personal assets. A company may be registered to engage in any permitted business activity.

The business activity of the company is specified in the statement on establishment, articles of association i.e. company constitution. It is also entered in a court register with an activity code as specified in the National Classification of Economic Activities. In the case of activities that require consent, a permit or other document issued by a governmental authority or an institution, entry into the court register can only be made after obtaining such consent or permit from the relevant body or institution.

Private limited companies are the most frequent type of company in Croatia. A private limited company is one in which one or more legal entities or natural persons invest in initial authorized stakes, with which they participate in the total authorized capital as contractually set beforehand. Authorized stakes are not necessarily of the same amount. In the process of company formation, no founder may acquire multiple authorized stakes. However, their subsequent acquisition is possible. The stakes may not take the form of securities.

A private limited company is established on the basis of articles of association, which must be signed by all founders in the form of a notarized document. If the company is established by just one person, the founding document is a statement on establishment submitted by the company founder in the form of a notarized document. The totality of each individual owners rights and obligations constitutes his/her stake in the company. As a rule, the size of a stake is proportional to the size of authorized capital paid up. The costs of preparatory procedures or establishment may not be refunded to the founders from authorized capital. In particular, it is not permitted to add such costs to the capital as a stake. Compensation for company establishment costs may be approved only to the amount specified in the articles of association. Unless otherwise agreed in a contractual form, the founders bear the costs of company establishment proportionally to the size of their authorized stakes.

The company management board may have one or more members (directors). A foreign national may also be a member of the management board. Members of the management board are appointed and released from duty by company owners. The management board is responsible for company management, company representation, the orderly keeping of the companys business records, preparation of financial reports and for the records of ownership stakes in the company. A company must have a supervisory board only if the average number of employees in a year exceeds 300, if law explicitly requires so for a particular business activity, if the initial authorized capital of the company exceeds HRK 600,000 and the company has more than 50 owners, if the company has a single management that runs public and private limited companies that have a mandatory supervisory board, or if the company is a general partner in a limited partnership with the total average number of employees in the company and limited partnership together exceeding 300. The supervisory board must have at least three members, and if there are more members, their number should be an odd one. A foreigner may also be a member of the supervisory board. Company owners elect members of supervisory boards.