Croatia: Corporate law update
Croatia implemented substantial revisions to the Companies Act and Court Register Act on April 20, 2019, designed to streamline the creation of limited liability companies (“ltd companies”). These entities represent the dominant business structure, comprising 98.5% of registered and 98.7% of active companies.
The reforms introduce a simplified electronic procedure to replace the traditionally expensive and time-consuming business registration process, reflecting the legislature’s goal to enhance system efficiency and boost competitiveness.
The amendments also transpose Directive (EU) 2017/828, which modifies the EU Shareholder Rights Directive.
Primary Modifications
- Fully online establishment of ltd companies
- Elimination of business activities from articles of association
- Removal of signature deposit requirements for authorized personnel
- Condensed registration timelines for new companies
- Elimination of mandatory company name reservation
- Streamlined closure procedures for ltd companies
- Bankruptcy estate registration with the court register
- Implementation of shareholder identification, remuneration policies, related-party transaction oversight, information transmission, shareholder rights facilitation, and institutional investor transparency measures
Online Establishment
While electronic registration previously existed in Croatia, physical presence at notary offices or hitro.hr service locations was required. The new framework permits complete online formation without physical attendance or document submission.
Beginning September 1, 2019, the e-osnivanje app will facilitate online establishment through the START system of the Croatian Ministry of Economy, Entrepreneurship and Crafts, utilizing credentials from the National Identification and Authentication System.
Founders utilizing online establishment must adopt standard articles of association prescribed by statute, limiting customization. Those requiring detailed provisions may continue establishing companies through traditional notary procedures.
Simplified Business Establishment
Founders now deposit only HRK 5,000 of the required HRK 20,000 share capital initially, with the remainder payable within one year of registration.
Business activities no longer require inclusion in articles of association (except for joint stock companies). Companies submit a separate decision identifying intended activities to the court register, enabling easier subsequent modifications without amending articles of association—requiring only majority voting threshold changes.
Authorized person signatures need not be submitted to the court register. However, all registered entities must provide email addresses within three months of registration and report subsequent changes.
Simple ltd companies may now establish with five founders instead of three.
Company name uniqueness must be maintained nationwide rather than within individual court jurisdictions. Company name reservation prior to establishment is eliminated.
Court registration deadlines have been reduced from 15 to five business days following complete application submission.
Shortened Closure Procedure
Addressing widespread concerns regarding liquidation expenses and resulting company abandonment, legislators introduced cessation procedures without liquidation.
All members must unanimously approve cessation, confirming the company possesses no employee liabilities (current or former), no creditor obligations, and accepting joint and several personal liability for subsequently discovered debts.
The cessation decision requires notarial certification or public notarization and immediate court register submission. Courts may demand supporting evidence regarding liability claims and additional insurance instruments.
Following prerequisites fulfillment, the court issues cessation resolution. Members, creditors, or state bodies may lodge justified objections within 30 days of publication. Absent filed or dismissed complaints, the court deletes the company and publishes the decision.
Members maintain joint and several liability for all debts. Creditors retain two-year claim periods from publication of company removal.
The Court Register Act now addresses previously problematic situations involving subsequently discovered assets from deleted companies. Bankruptcy estates are now registerable using previously assigned identification numbers.
Directive 2017/828 Implementation
The Directive creates enhanced shareholder environments and strengthens corporate governance for companies whose shares trade on EU regulated markets. Implementation affects only joint stock companies under Croatian law.
Shareholder Identification
From January 1, 2021, shareholders must furnish company email addresses. Investment funds holding registered shares without exclusively institutional shareholders qualify as shareholders themselves.
Company statutes may authorize registered share representation by others, though registered persons forfeit voting rights upon violating disclosure obligations regarding beneficial ownership.
Companies may request the Central Depository & Clearing Company notify them regarding share ownership immediately. The legislature established no minimum shareholding thresholds for such inquiries.
Remuneration Policy
Supervisory or executive boards of listed joint stock companies determine management remuneration policies, subject to shareholder approval minimally every four years or upon significant modifications. From May 1, 2020, supervisory board remuneration policies require approval similarly.
Exceptional circumstances permit temporary derogations when necessary for long-term company interests and sustainability, provided the policy encompasses procedural conditions and specifies eligible derogation elements.
From May 1, 2020, management and supervisory boards must publish annual remuneration reports detailing all compensation paid to incumbent or former board members and executive directors. Published reports undergo auditor review and remain website-accessible for 10 years, though commercially sensitive information may be excluded.
Joint stock companies trading on regulated markets must appoint at least one supervisory board member possessing accounting or financial report auditing expertise.
Related-Party Transactions
Supervisory boards of regulated market-traded companies must preapprove related-party transactions exceeding 2.5% of combined long-term and short-term assets per latest financial reports. Management boards may appeal supervisory board rejections to shareholders’ meetings.
Companies must promptly publish related-party transactions on websites or equivalent public channels unless Market Abuse Regulation compliance already applies. Notices must include information enabling shareholders to assess transaction fairness and reasonableness.
Generally, ordinary business transactions concluded at normal market terms escape related-party classification—unless company statutes establish otherwise, applying approval and publication obligations.
Excepted Transactions
- Wholly owned subsidiary transactions or subsidiaries where no other related party holds interest
- Transactions requiring shareholder meeting consent or approval
- All shareholder-approved transactions and actions (capital increases, entrepreneurship contracts, mergers, acquisitions)
- Director or supervisory board member remuneration transactions
- Credit institution transactions pursuant to competent authority stability measures under Union law
- Transactions offered uniformly to all shareholders
The supervisory board may delegate preparation and execution oversight to appointed commissions, which possess no independent decision authority.
Information and Shareholder Rights Exercise
From January 1, 2021, shareholders’ meeting notifications, exchangeable bond rights, preemption rights, share capital decrease payments, new share registration following increases, and dividend information transmit directly to shareholders or electronically through intermediaries.
Regulated market-listed companies may request intermediary shareholder information. Non-listed companies may establish this right through statutes.
Transparency Requirements
Institutional investors and asset managers must report annually regarding engagement policies, voting procedures, important decision voting records, and proxy advisor utilization. Voting disclosure applies unless votes prove insignificant or shareholdings negligible.
Institutional investors must disclose contributions toward portfolio mid-term and long-term value advancement.