How to Start Up an Enterprise in Croatia The legal framework in force and business organization available to a business start-up, the procedures to follow when registering a business and starting business operations, the list of CROATIAN business activities requiring CHAMBER OF approval prior to company ECONOMY registration and other matters of interest to a Zagreb, February 2012 foreign investor in Croatia How to Start Up an Enterprise in Croatia 2 How to Start Up an Enterprise in Croatia TABLE.OF.CONTENTS Companies............................................................................. 7 Private.limited.company.(d.o.o.).......................................... 9 Public.limited.company.(d.d.)............................................. 11 General.partnership.(j.t.d.)................................................. 15 Limited.partnership.(k.d.)................................................... 16 Economic.interest.association.(GIU)................................. 16 Branch.office........................................................................ 17 Starting.a.business.activitiy............................................... 19 Representative.office.......................................................... 24 Crafts.................................................................................... 26 Sole.trader............................................................................ 27 Business.activities.requiring.special.licenses.................. 28 Important.institutions.and.ministries.in.the.Republic.of. Croatia.................................................................................. 36 3 How to Start Up an Enterprise in Croatia 4 How to Start Up an Enterprise in Croatia The Croatian legal framework governing foreign investment has been de- signed 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 enter- prise 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 or other assets of interest to Croatia ■ participate in build-operate-transfer (BOT) and build-own-operate-transfer (BOOT) operations. 5 How to Start Up an Enterprise in Croatia 6 How to Start Up an Enterprise in Croatia I..COMPANIES A company is a legal entity estab- status of a legal entity is acquired lished and organized in accordance by being entered in a court register. with the Companies Act. All compa- Company.liability nies are registered in a court regis- A company is liable to settle its ter following the Court Register Act debts with all its assets. Owners/ and the Rules of Court Register En- shareholders in private and public try Procedures. Under the Companies limited companies are not person- Act, it is possible to start a company ally liable for the obligations of the as a company based on capital or as a company, unless the Companies Act partnership*, which is an association provides otherwise. of persons. Partners in general partnerships Companies.based.on. and general partners in limited part- capital.include: nerships have unlimited liability to cover the debts of their partnership ■ private limited companies jointly, severally and with all their ■ public limited companies personal assets. Partnerships.include: Company.name A company name is the name used ■ general partnerships by a company in business transac- ■ limited partnerships tions and legal affairs. The name is ■ economic interest associations. specified by a statement on company The law also regulates the estab- formation or by company agreements lishment of branch offices and the i.e. articles of association. A company position of sole traders. may own a shortened company name A.number.of.general. which is entered in the Court register principles.apply.to.any. together with the full company name. company.start-up: It must be clearly different from the Founders name of any other company entered A domestic or foreign legal entity in the court register of the same reg- or natural person may establish a ister court. The company name must company. consist of a proper name and an in- Legal.entity.status dication of the company’s business A company is a legal entity. The activity as well as abbreviation which clearly indicates the legal form of a specific company, for example Ltd or * Note: The Croatian Companies Act regulates business entities as including Inc. It must be written in the Croatian also categories that, due to their different language and Latin script, Arabic nu- legal properties, are not always regarded merals may also be used, and it may corporate in some other legal systems (e.g. partnerships, as defined by Croatian law). contain foreign words if these are 7 How to Start Up an Enterprise in Croatia part of the name/company name of business activity of the company a partner/owner/shareholder, or the (company’s object) is specified in the trade-/service mark, (protected in statement on establishment, articles the Republic of Croatia) of a partner/ of association i.e. company constitu- owner/shareholder or their company tion. It is also entered in a court reg- registered in Croatia, and in cases ister with an activity code as specified when such words are common in the in the National Classification of Eco- Croatian language or where there is nomic Activities. In the case of ac- no appropriate corresponding word tivities that require consent, a permit in the Croatian language, or where or other document issued by a gov- words of a dead language are used. ernmental authority or an institution, The company name may be entered entry into the court register can only in a court register also in a translation be made after obtaining such consent in one or more foreign languages. If or permit from the relevant body or the word Croatia or any word form institution. derived from it is to be used in the Registered.office company name, special consent from A company’s registered office is the Central State Administrative Of- the premises used by the company fice is a requirement. management and from which the A company must use the company company is run or the premises where name and its abbreviated version in a company permanently performs its the form and with the content as sub- business activities. It is indicated in mitted for the court register. The sta- the statement on establishment or ar- tionery used by the company (letters, ticles of association. The company invoices, letterheads etc.) must show may only have one registered office the company name, the company’s entered in the court register. registered office, the court of regis- Representation tration, number of registration entry, The authority to represent a com- company name and address of the in- pany is given to persons as specified stitution where the company holds its in the Companies Act for the respec- account and the account number. The tive company type. The persons rep- same applies to corporate websites. resenting the company and restric- Business.activity. tions of their representative powers A company may be registered to towards third parties are entered in the engage in any permitted business court register. The law distinguishes activity i.e. any activity which is not between legal representatives, rep- banned by law or which does not of- resentatives by proxy, attorneys by fend morals of the community. The employment and procurators. 8 How to Start Up an Enterprise in Croatia COMPANY.FORMS PRIVATE.LIMITED.COMPANY.. (Croatian.abbreviation:.d.o.o.) Private limited companies are the initial authorized capital may not most frequent type of company in be below HRK 20,000. The mini- Croatia. A private limited company mum amount of an initial author- is one in which one or more legal en- ized stake must be expressed with a tities or natural persons invest stakes whole number that is a multiple of in the total authorized capital as 100. The nominal amounts sum of contractually set beforehand. Stakes all business stakes must be equal to need not be of the same amount. In the total amount of authorized capi- the process of company formation, a tal. Before entry into a court register, founder may acquire multiple busi- each founder must pay for at least one ness stakes. The total amount of all quarter of an authorized stake that is stakes must correspond to the amount to be paid for in cash, while the to- of the company’s authorized capital tal amount of payments in cash may (Art. 385.). Stakes may not take the not be lower than HRK 10.000, i.e. form of securities. at least one half of authorized capital Founders must be provided in cash. The initial Owners may be either domestic authorized stake may also be provid- or foreign legal entities and natural ed by investing tangibles