Find out about company forms in Croatia

Company forms in 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.

  • PRIVATE LIMITED COMPANY (CRO: D.O.O.)
  • SIMPLE PRIVATE LIMITED COMPANY (CRO: J.D.O.O.)
  • PUBLIC LIMITED COMPANY (CRO: D.D.)
  • GENERAL PARTNERSHIP (CRO: J.T.D.)
  • LIMITED PARTNERSHIP (CRO: K.D.)
  • ECONOMIC INTEREST ASSOCIATION (CRO: GIU)
  • BRANCH OFFICE
PRIVATE LIMITED COMPANY (CRO: D.O.O.)

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 stakes in the total authorized capital as contractually set beforehand. Stakes need not be of the same amount. In the process of company formation, a founder may acquire multiple business stakes. The total amount of all stakes must correspond to the amount of the company’s authorized capital (Art. 385.). Stakes may not take the form of securities.

Founders

Owners may be either domestic or foreign legal entities and natural persons. Just one owner may also establish this type of company. A private limited company is a legal entity. This status is established by entry into a court register. Company assets are strictly separated from the property of owners. The company is liable for its debts with all its assets. Owners are not liable for company debts. Exceptionally, they may be held liable for company debts if they abuse the principle of their nonliability

Authorized capital

The initial authorized capital of a private limited company must be shown in Croatian currency – kuna (HRK). The minimum amount of COMPANY FORMS PRIVATE LIMITED COMPANY (Croatian abbreviation: d.o.o.) initial authorized capital may not be below HRK 20,000. The minimum amount of an initial authorized stake must be expressed with a whole number that is a multiple of 100. The nominal amounts sum of all business stakes must be equal to the total amount of authorized capital. Before entry into a court register, each founder must pay for at least one quarter of an authorized stake that is to be paid for in cash, while the total amount of payments in cash may not be lower than HRK 10,000, i.e. at least one half of authorized capital must be provided in cash. The initial authorized stake may also be provided by investing tangibles or rights, which is to be done completely prior to company entry into a court register. Stakes in cash are to be paid into a company account held with a financial institution in Croatia.

Company start-up procedure

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 or a notarized private document. If the company is established by just one founder, the founding document is a statement on establishment submitted by the company founder in the form of a notarized document.

The articles of association or statement on establishment should contain the following:

  • information about the founder (name and surname or company name, founder’s residence or registered office, and, if the founder is a natural person, personal identification number)
  • company name and registered office
  • business activity of the company
  • total amount of authorized capital
  • amount of each investor’s individual ownership stake (if investment has been made in tangibles and intangibles, their detailed description and valuation is required)
  • indication whether or not the company is established as a going concern
  • the rights and obligations that the owners have with respect to the company, in addition to the obligation to pay for the ownership stake, as well as the rights and obligations of the company with respect its founders.

The totality of each individual owner’s 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.

Costs of establishment

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.

Company bodies

A company must have a management board and a general meeting. 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 company’s 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 200, 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 must have supervisory boards under the law, or if it directly participates in them through direct shares in the authorized capital exceeding 50% (whilst in both cases the number of employees in one of the companies or all of them together exceeds 200), or if the company is a general partner in a limited How to Start Up an Enterprise in Croatia 11 partnership and the total number of employees in the company and limited partnership together exceeds 200 (Art. 434.). 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.

A company general meeting is a mandatory body to be established by a private limited company. Company owners must vote in a general meeting to decide on issues that are their responsibility pursuant to the Companies Act and to the company’s articles of association.

SIMPLE PRIVATE LIMITED COMPANY (CRO: J.D.O.O.)

A simple private limited company is a subtype of the private limited company as the most frequent type of company in Croatia. A simple private limited company can be founded in a simplified manner and it can consist of a maximum of three members and one member of the management board.

Founders

Members of the company may be either domestic or foreign legal entities and natural persons. The founder or a member of the company can be one or up to a maximum of three persons, while only one person can be the member of the management board.

Authorized capital

The initial authorized capital of a private limited company must be shown in Croatian currency – kuna (HRK). The minimum amount of initial authorized capital may not be below HRK 10.00, and the lowest nominal amount of the stake amounts to HRK 1.00. Stakes must be provided in cash only. Each amount of HRK 1.00 of the nominal stake gives the right to one vote, until the company’s initial authorized capital increases to a minimum amount of HRK 20,000 and the provisions of the Act pertaining to the classic private limited company start applying to it.

Company start-up procedure

A simple private limited company is established through a simplified procedure. Minute forms, which constitute annexes to the Act on Amendments to the Companies Act (Official Gazette 111/2012), drawn up by a notary public must be used for such establishment of a company. The filled-in minute form is valid as a list of the members of the company, a list of persons authorized to conduct company business and it contains a statement by which the member of the management board accepts the appointment as well as the signature of the member of the management board which is filed in the court register. If the company is established by just one founder, it is established on the basis of a Statement on establishment of a simple private limited company which is given in the form of a minute on the establishment of a simple private limited company with one member. If the company is established by more members, it is established through the conclusion of articles of association in the form of a minute on the establishment of a simple private limited company with a maximum of three members.

Company’s business activities

The company must have legal reserves in which it must deposit one fourth of the company’s profit expressed in the annual financial reports minus the amount of loss from the previous year. The legal reserves can be used:

  1. for the increase of the authorized capital by turning the reserves into the company’s authorized capital,
  2. for the payment of loss expressed for the year for which the annual financial reports are filed if it was not covered from the profit from the previous year and
  3. for the payment of loss expressed for the previous year if it was not covered from the profit expressed in the annual financial reports for the year they are filed for.

If the company is under threat of insolvency, the company general meeting must be held immediately. If the company increases its authorized capital so that it reaches or exceeds the amount of HRK 20,000, the provisions pertaining to the classic private limited company apply to the company

PUBLIC LIMITED COMPANY (CRO: D.D.)

A public limited company is based on capital, with owners (shareholders) investing in authorized capital divided into shares. A public limited company may be started by a single owner, i.e. it may have only one shareholder.

A public limited company is a legal entity. This legal status is established by entry into a court register. The company is liable for its debts with all its assets. Shareholders are not liable for the debts of the company. The basic document for a public limited company are the articles of association, as they specify the internal organization of the company.

Authorized capital

Authorized capital and shares must show par value in kunas (HRK). The minimum amount of authorized capital is HRK 200,000. The company may issue shares with an indication of their par value or shares without such indication. The par value of a share may not be below HRK 10. Par values higher than this minimum amount must show amounts that are multiples of HRK 10. In the case of shares indicating par value, the portion of authorized capital held is determined by the ratio of the par values of authorized capital and shares, whereas in the case of shares without par value the portion of capital held is based on the number of shares.

Shares may be registered shares (Art. 165.). The transfer of shares, except of those issued in dematerialised form, is effected by endorsement. The form of endorsement, legal identification of the holder and his/ her obligation to turn shares over are regulated by the respective provisions of the Bill of Exchange Act. Shares issued in dematerialised form are transferred as regulated by the law governing dematerialised securities (Art. 227.).

In terms of the rights they ensure, shares may be ordinary and preference shares. Ordinary shares ensure the right to vote in a general meeting, to receive dividend and the right to the respective portion of the liquidation, i.e. bankruptcy estate.

Preference shares give certain preferential rights, such as the right to a dividend in an amount or percentage of the par share value set in advance, priority in the disbursement of dividends or in receiving the remainder of the bankruptcy estate and other rights as provided by law and by the company’s articles of association.

Company establishment procedure

The Companies Act provides for a simultaneous and a successive establishment of a public limited company. Company founders are the shareholders who have adopted the articles of association.

A public limited company is established simultaneously when:

  • the company founders take possession of all company shares and make a notarized statement of this fact
  • accept and sign the company articles of association and make a notarized statement of this fact
  • make a notarized statement that they are establishing a public limited company

A public limited company is established successively when:

  • the company founders adopt the articles of association
  • the company founders take possession of a certain number of shares
  • the company founders make a public call (prospectus) to subscribe for shares, with subscription for such shares following the call.

The subscription period may not exceed three months after the beginning of the subscription term. If, within this period, all the shares are not subscribed and paid for in accordance with the public call, the company founders are entitled to subscribe for or take possession of the unsubscribed shares within fifteen days. If they fail to do so, the company establishment is considered to have failed and the founders will ask the subscribers to take their payments back within fifteen days. If all the shares have been subscribed for, the founders shall give them to their owners within fifteen days after the subscription period has expired and call the first general meeting.

Application to enter a public limited company in a court register

Application to enter the company in the court register is submitted by all members of the management and supervisory boards, that is, by all executive officers and management board members.

The application for entry in a court register should contain the following:

  1. Company name, registered office and business activity
  2. Amount representing the issued shares
  3. Total amount of payments for the issued shares and means of payment
  4. Statement given by management members, i.e. executive officers, that they are aware of the obligation to notify the court and that the respective board member has not been sentenced for offenses involving the abuse of bankruptcy, favoring creditors, or failure to comply with the obligation to keep account books and business records as defined by the Penal Code of the Republic of Croatia; and that s/he has not been served a protective measure prohibiting the performance of a profession fully or partially covered by the company business activity (applies so far as the measure is in force)
  5. Members of the management and supervisory boards, i.e. executive officers and company management board members and their permanent address, and personal identification numbers
  6. Where a company has a single shareholder who is a natural person, his/her first name and surname, permanent residence, number and personal identification number (in the case of foreigners, also issuing country of the document); in the case of a legal entity, company/business name and company number

The following should be enclosed with the application:

  1. Company’s articles of association and the documents serving as the basis for the adoption of articles of association, as well as underlying documents used by founders to take possession of their shares
  2. Where special benefits are granted in the process of company establishment, or tangibles are invested or taken over, contracts establishing these facts and allowing implementation
  3. Evidence of amount paid in, of investment made in the form of tangibles or rights and of the company’s right to freely use them
  4. Itemised account of company establishment costs showing also the total amount of costs
  5. Documents on the appointment of the management and supervisory boards, i.e. of executive officers and management board members
  6. Reports on company establishment and on the audit of establishment procedures, including accompanying documents
  7. Appropriate document from a governmental body or institution (consent, permit or similar) if such a requirement arises from the nature of the provision specifying the business activity of the company or some other provision of the articles of association.

The following is entered in the court register:

  1. Company name
  2. Registered office (address)
  3. Business activity
  4. Amount of authorized (i.e. approved) capital
  5. Date of adoption of articles of association
  6. Names and surnames of management members, the chairman and members of the supervisory board, their personal identification numbers and permanent residence
  7. Period of operation
  8. Representation powers of management board members
  9. Where a company has a single shareholder who is a natural person, his/her first name and surname, permanent residence, number and personal identification number (in the case of foreigners, also issuing country of the document); in the case of a legal entity, company/business name and company number

Bodies of a public limited company

  • management
  • supervisory board
  • management board
  • general meeting

The management consists of one or more persons (“directors”), their number being defined by the articles of association. If the management consists of several persons, one must be appointed chair.

Any natural person of full legal capacity may be appointed management board member. A person who has been sentenced for offenses involving the abuse of bankruptcy, abuse in the course of bankruptcy procedure, favoring creditors, or failure to comply with the obligation to keep account books and business records as defined by the Penal Code of the Republic of Croatia; or who has not been served a protective measure prohibiting the performance of a profession fully or partially covered by the company business activity (applies so far as the measure is in force).

Croatian or foreign nationals may be management members, and they are appointed by the supervisory board for a maximum period of five years

Rights and obligations:

  • company management
  • representation
  • drafting of decisions for general meetings
  • preparation of contracts
  • implementation of the general meeting’s decisions
  • reporting to the supervisory board on issues relating to company management.

The supervisory board must have at least three members. Their number is defined in the articles of association and should be an odd number. A foreign national may be a member and there is no barrier to all members being foreign nationals. Members of the supervisory board are elected by the general meeting for a maximum term of office of four years, and they can be re-elected.

The supervisory board supervises company management and has the right to examine the company’s business records and all other company documents. The board reports to the general meeting on the supervision carried out.

Management board – Under the articles of association, it can be defined that the company shall have a management board instead of a management and supervisory board. A management board consists of a minimum of three members. However, provisions can be laid down for more than three members on the management board. Management board members are appointed for a maximum period of six years and they can be reelected and reappointed.

The general meeting is a body consisting of all shareholders and it allows them to exercise their rights in company matters. All shareholders are entitled to participate in the general meeting.

The responsibilities of the general meeting are set out in the articles of association. Decisions are generally taken by a simple majority of votes.

GENERAL PARTNERSHIP (CRO: J.T.D.)

A general partnership is a business entity where two or more individuals join in order to conduct business as a going concern and under a common company name. Every partner has unlimited and joint liability to cover the partnership’s debts with all his/ her assets. A partner may not dispose of his/her ownership stake without consent from other partners.

Founders

Any legal entity or individual, both domestic or foreign, may become a partner. The articles of association define the relations between partners. The partners enjoy maximum freedom in this respect, because the Companies Act applies only in cases when the articles of association do not regulate certain matters otherwise.

Authorized capital

A general partnership does not have authorized capital. Unless otherwise provided by the articles of association, partners should bring equal stakes into the company. The stakes may consist of cash, tangibles, rights, labor and other services and goods. Partnership management is the responsibility of all partners. The articles of association may stipulate that only one or just a number of partners run the company. Each partner is authorized to represent the company.

Start-up procedure

A general partnership is established by adopting the articles of association, which need not be a notarized document. A notarized application for entry into a court register is then submitted.

The application for entry in the court register should contain the following information:

  • company name, registered office and business activity
  • partners (name and surname, personal identification number and residence i.e. company name and registered office/address for each partner)
  • persons authorized for company representation and their powers
  • legal and organizational form.

Articles of association need to be enclosed with the application.

LIMITED PARTNERSHIP (CRO: K.D.)

A limited partnership is a company where two or more individuals associate together in order to conduct business as a going concern under the same company name. At least one partner has unlimited and joint liability for company debts with all his/her assets (general partner), and at least one partner has limited liability proportional to the assets invested (limited partner).

Founders

Both domestic and foreign individuals and legal entities may be partners in a limited partnership. A limited partnership is a legal entity that achieves such legal status by being entered in a court register.

Authorized capital

A limited partnership does not have authorized capital.

Establishment procedure

The company is established by adopting the articles of association, which need not be a notarized document. They should specify who among the partners are the general ones and who is a limited partner.

The application for entry of partnership in the court register should contain the following:

  • company name, registered office and business activity
  • name, surname, personal identification number and registered address, or company name and registered office of each partner
  • information about the limited partners
  • amount of investment contracted for and paid by each limited partner
  • persons authorized for company representation and their powers.

Company management and representation are entrusted to general partners.

ECONOMIC INTEREST ASSOCIATION (CRO: GIU)

An economic interest association is a legal entity established by two or more natural persons or legal entities for the purpose of facilitating and promoting their business activities, but in a way that the legal entity earns no profit for itself. Members of the association may be persons who perform any economic activity as well as free-lance employed persons.

Authorized capital

An economic interest association is established without authorized capital, and the rights of members may not take the form of securities. The business activity of the association must be related to members’ business activities as an activity that supports them.

Establishment procedure

An economic interest association is started up by concluding an agreement on the establishment that must be notarized and entered in a court register.

The agreement should contain the following:

  • company name, registered office and business activity
  • information on the partners (company name, first name and surname, legal form, registered office or permanent address of partners, register and association’s entry number in the register)
  • unless established as a going concern, period of operation.

The association is entered in a court register and so becomes a legal entity. The application for entry and all changes to the information entered (Art. 588) should be submitted by all members of the new management board.

Along with the association being liable itself, the members of the association have secondary unlimited liability that includes all their assets. The management board of the association runs its operations and represents it. The board may consist of one or more natural persons appointed by association members.

BRANCH OFFICE

Under Croatian legislation, foreign companies and sole traders may conduct business in Croatia by setting up a branch office (Art. 612). The start-up and operation of branch offices owned by foreign companies are governed by the same regulations that apply to the establishment of branches by domestic companies. A branch office is not a legal entity. The liabilities and rights stemming from its operation do not belong to the branch office but to the founder. The branch office operates under its own name. The name should also indicate both the branch’s and the founder’s registered office.

To register a branch office, it is necessary to apply for registration and enclose the following original documents and certified translations in Croatian:

  1. Excerpt from the register in which the founder is entered showing the legal form and the date when the foreign founder of the branch was established, and information on the persons authorised for representation and scope of their powers (Art. 613.)
  2. Founder’s decision on the establishment of the branch
  3. Certified transcript of the statement on establishment in accordance with the legislation of the country where the founder has its registered office (articles of association or company constitution of the founder)
  4. Founder’s certified abridged financial report for the previous year.

The Founder submits the application for registration with the register court located in the district where the future branch will have its registered office. In addition, the following original documents and their certified translations should be enclosed:

  1. Evidence that the founder is registered in the country of its registered office (showing the legal form and date of entry in the register)
  2. Names of persons authorised for representation and scope of their powers
  3. Founder’s decision on the establishment of the branch
  4. transcript of the statement on establishment, articles of association or company constitution, certified according to the regulations of the country where the founder has its registered office
  5. Founder’s certified abridged financial report for the previous year.

The register court may approve entry if the founder has proved:

  • that it has been legally established and that it exists in the country of its registered office
  • that Croatian persons are allowed to establish branch offices in the founder’s country under the same conditions as those that apply to the founder in Croatia.

The founder is required to report all data changes to the register court.

In the case that the same founder intends to establish several branch offices, the establishment procedure is carried out separately for each branch. The entry application should specify which is the main branch, while marking the others with ordinal numbers. The founder is obliged to authorize for representation one or more individuals in each branch, with the possibility of authorizing the same person for several branch offices.

As they are not legal entities, branch offices may not independently hold legal rights and obligations. The founder legally holds all rights and obligations of branch offices. In case of dispute with third parties, the branch is not a party to it, but the company or sole trader that owns the branch.

Branch offices are required to keep business records in compliance with applicable regulations in Croatia, which includes the Accounting Act, International Accounting Standards and tax regulations.

Regulations governing company establishment: Regulations in force are available at the Official Gazette’s official website: http://narodne-novine.nn.hr/default.aspx

  • Companies Act (Narodne novine [Official Gazette; abbreviated: NN] 152/11, 111/12)
  • Court Register Act (NN 1/95, 57/96, 45/99, 54/05, 40/07, 91/10, 90/11)
  • Rules of Procedure for Entry into a Court Register (NN 22/12)
  • Decision on the Procedure and Requirements for Access to Court Register Information (NN 138/02)
  • National Classification of Economic Activities Act (NN 98/94, 4/95)
  • Decision on the National Classification of Economic Activities (NN 58/07, 72/07)
  • Classification Rules for Business Entities according to the National Classification of Economic Activities – NKD 2007 (NN 80/07, 45/09, 16/12)

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