The legal framework for foreign investment in the Republic of Croatia is designed so as not to make a difference between domestic and foreign investment. All that is possible with respect to domestic investors is also possible where capital is invested by foreign nationals. Moreover, foreign investors enjoy additional guarantees that are not given to domestic investors. The Croatian Constitution provides that the rights acquired through the investment of capital shall not be infringed by law or any other legal act and that foreign investors are guaranteed free transfer and repatriation of profits and invested capital from the country following the termination of investment activity and after having fulfilled all statutory obligations.
When foreign investors form or participate in the formation of companies in the Republic of Croatia, their position, rights and obligations are equal under the principle of reciprocity which is presumed to apply to those of domestic investors.
In the Republic of Croatia foreign nationals may invest capital:
■ on a contractual basis;
■ in a company;
■ in a bank or insurance;
■ by starting a crafts business or by acting as sole traders.
A company is a legal person whose formation and organisation are governed by the Companies Act. The registration of a company in the court register is regulated by the Court Register Act and the Ordinance on the manner of registration in the court register. Under the Companies Act, in the Republic of Croatia it is possible to form either a corporation, i.e., a company based on capital, or a partnership*.
* Note: The Croatian Companies Act regulates business entities as including also categories that, due to their different legal properties, are not always regarded corporate in some other legal systems (e.g. partnerships, as defined by Croatian law).
■ limited liability companies;
■ simple limited liability companies;
■ joint stock companies
■ general partnerships;
■ limited partnerships;
■ economic interest groupings.
The Act also regulates the setting up of branch offices and the position of the sole trader.
Certain general principles apply to the formation of all forms of companies:
A company may be formed by any domestic or foreign legal or natural person.
Company’s legal personality
All companies are legal persons. A company acquires legal personality upon its registration in the court register.
Liability for the company’s obligations
A company is liable for its obligations with its entire assets. Members of a limited liability company, shareholders of a joint stock company and limited partners in a limited partnership are not liable for the obligations of the company unless otherwise provided in this Act.
Members of a general partnership and general partners in a limited partnership shall have unlimited personal joint and several liability for company obligations with their entire assets.
Firm name is the name under which the company conducts business and under which it takes part in legal transactions. A company’s firm name is specified in the deed of formation, the company agreement, or the company’s articles of association. A company may also use the abbreviated firm name which must be registered in the court register together with the company’s firm name. A company’s firm name must be clearly distinguishable from the firm names of other companies registered in the court register with the same court of registration. In addition to specifying a company’s name, the firm name of a company must indicate the company’s object legal form, e.g., a joint stock company or “d.d.”. The firm name of a company shall be in the Croatian language, expressed in the Latin alphabet, or in the official language of a member state of the European Union, expressed in the Latin alphabet, with Arabic numerals also being possible. Other parts of the firm name shall be in the Croatian language and shall be expressed in the Latin alphabet. The firm name of a company may include individual foreign words where these constitute the name or the firm name of a company member or a member’s trademark or service mark registered in the Republic of Croatia or the trademark or service mark of a member’s company registered in the Republic of Croatia, or if these are customary in the Croatian language, or if there is no appropriate substitute for them in the Croatian language, or if these are words of a dead language. A translation or translations of the firm name into one or more languages may also be registered in the commercial register. The word «Croatia» and its derivatives, as well as the flag and the national coat of arms of the Republic of Croatia, including their imitations, may be included in a firm name only with the approval of the Government of the Republic of Croatia or a public body authorized by it, The firm name and the abbreviated firm name used by a company must correspond in form and content to the firm name registered in the court register. A merchant’s letterhead (letters, invoices, etc.) must indicate his/her firm name, seat, court of registration and number under which he/she is registered in the commercial register, firm name and seat of the legal persons holding his/her accounts and the numbers of these accounts printed on it. The same applies to the contents of a company’s website.
A company’s object may be the undertaking of any allowed activity. Allowed activity means any activity that is not forbidden by law or contrary to the society’s morality. A company’s object is specified in the deed of formation, or the company agreement, or the company’s articles of association and is registered in the court register. Where law provides that certain activities may be undertaken only subject to the approval, authorisation or some other act of a state body or an institution, such activities shall be registered in the commercial register only subject to prior approval from or authorisation of the said body or institution.
A company’s registered office is any place in the Republic of Croatia in which the company’s management board is located and from which the company’s business is run or any place in which the company is permanently undertaking its activity. It is indicated in the deed of formation, the company agreement, or the articles of association. The company may have only one registered office which must be registered in the court register.
The authority to represent a company pursuant to law is vested with the persons defined by the Companies Act as having such authority with respect to each of the company forms. The names of the persons representing the company and the restrictions to their authority in their dealings with third parties are registered in the court register. The law distinguishes between statutory representatives, representatives by power of attorney, representatives by employment and procurators.