Starting business in Croatia - Process of establishing and registering a limited liability company in the Republic of Croatia

Introductory

In the Republic of Croatia the matter of the establishment, organization, termination and status changes of companies and affiliated companies is regulated by Croatian Company act (Official gazette nr.: 111/93 and others hereinafter: “Company Act”).

According to the Company Act in the Republic of Croatia you can establish different types of companies such as: general partnership company, limited partnership company, joint stock company, limited liability company (of which there are two subtypes – regular limited liability company and simple limited liability company) and an economic interest association.

General partnership companies, limited partnership companies and economic interest associations are defined as association of persons while joint stock companies and limited liability companies are defined as association of capital.

According to the last available data of the Croatian Central Bureau of Statistics as of 30. June 2021. there are 223.975 registered companies in Republic of Croatia of which 58.869 are simple limited liability companies (of which 36.219 active ones), 162.212 are limited liability companies (with 99.940 active ones) and 2.894 other types of companies (with 1.605 active ones).

This shows that limited liability companies were markedly predominant in the structure of companies by legal organisational forms, with a share of 72.4% of registered and 72.5% of active ones. Simple limited liability companies followed, with a share of 26.3% of registered and 26.3% of active ones. Other legal forms of trade companies constituted the remaining share of 1.3%.

Since limited liability companies are markedly predominant in Croatia the purpose of this article is to summarize the procedure of establishing a limited liability company in Croatia.

Procedure

The Company Act defines a limited liability company as a company in which one or more legal or natural persons contribute to the pre-agreed share capital which has to be at least 20.000,00 HRK.

The procedure itself is primary regulated by the Company Act and also in small part by Croatian Court Registry Act (Official gazette nr.: 1/95 and others) and other applicable laws and bylaws (accounting, tax, regulatory and etc.).

According to Company Act there are a basically two ways to establish a limited liability company (hereinafter referred to as: “LLC”). An LLC can be established remotely via the court registry system website using an authentication system (limited possibility) or it can be established with a public notary. This article will briefly summarize how an LLC is established in regular way.

The procedure of LLC establishment can be summarized by three phases: 1. Preparatory stage, 2. Application for entry in the court register, 3. Phase after the company is registered with the court registry.

Preparatory stage

The first step which needs to be undertaken be in order to establish an LLC is for the founder(s) to draft a statement on the establishment of the LLC or sign the articles of incorporation.

If the company is founded by more than one founder then the company is established on the basis of a contract concluded by the founders (Articles of Incorporation). All founders must sign the contract which has to be concluded in the form of a notarial act or a private document certified by a public notary. If the company is founded by only one founder, the contract (articles of incorporation) is replaced by the founder's statement on the establishment of the LLC which is given to the public notary.

If the founder(s) are represented by an Attorney in Croatia, then the Power of Attorney has to be certified by a public notary (in the country of the founder), translated and with apostille (if required).

The Articles of Association or the statement on the establishment of the company must contain the following: 1. name, surname, residence and PIN of the founder (if it is a natural person) or company name, company seat and company’s registration number (if the founder is a legal person), or such relevant data if it is a foreign person, 2. name of the company and its registered seat, 3. the amount of share capital, the amount of each individual contribution of the founders (if te contribution is consisted of things or rights they must be described in detail and indicate their value) and the number and nominal amounts of business shares assumed by each founder, 4. a provision on whether the company is established for a definite or indefinite period of time, 5. rights and obligations that members have towards the company in addition to the payment of their contributions, and rights and obligations that the company has towards its members.

Other documents

Aside from the Articles of Incorporation (or founder’s Statement of Establishment) the founder(s) need to procure other documents.

1. Decision on determining the company’s business activities,
2. Decision on the appointment of company’s board of directors,
3. Statements of the members that were appointed to the board of directors that they accept their appointments,
4. Statement of non-existence of outstanding debts,
5. Decision on determining the business address of the company – the business address is a detailed description of the company's registered seat (street and house number),
6. List of company founders,
7. List of persons authorized to represent the company,
8. List of business activities of the company,
9. Proof that the share capital is paid,
10. Proof of payment of court fees,
11. Power of Attorney.

The list of company founders must contain their name, surname, residence and PIN (if the founder is a natural person) or company name, company seat and company’s registration number (if the founder is a legal person), amount of share capital of the company, number and nominal amounts of business shares assumed by each founder and made payments.

The list of persons authorized to represent the company must contain their names and surnames, PIN, residence, scope of their powers and statements that they accept appointments given before a public notary.

If the company has a supervisory board, then also a list containing the name of the chairman and members of that board, indicating the date of birth and residence is needed.

A special permission issued by a competent state authority is also needed if a regulation dictates that such permission is needed for the establishment and registration of a company or registration of a business activity.

If the company is founded by only one founder, he must provide adequate assurance before the public notary submits the application to the registry court that the part of his monetary contribution that has not been paid will be duly paid. In that case the founder has to obtain proof of insurance which have to be attached with the aforementioned documents before filing the registry application.

If the share capital of the LLC consists of things and rights or if special benefits are given, then the following documents are also needed: report on the establishment of the company and the audit report of the establishment and other documents explicitly stated in the Company act.

Registry application

The court registry application with its attachments (aforementioned documents, decisions and statements) has to be notarized by a public notary. To certify the documentation with a notary public, the founders must bring an identity card or passport (which is mandatory if the founders are foreign nationals). All documentation in a foreign language must be translated by a local court interpreter.

Before the registry application can be submitted to the competent registry (commercial) court: a) contributions have to be paid in accordance with the Company Act and the Articles of Incorporation, b) if contributions are consisted of things and rights, they have to be submitted in a way that the company can dispose of them after it is registered with the court registry, c) one or more members of the company's board of directors have to be appointed, d) and the supervisory board has to be elected (only in the case if the supervisory board is required by the Company act).

In the registry application form, the following information has to be explicitly stated:

1. Company name, registered seat, address of the company in the Republic of Croatia, and business activities (if the activities require consent, permit or other act of the competent authority),
2. The amount of share capital,
3. Statement by members of the board of directors that they are aware of their obligation to report to the court and that there are no legal circumstances preventing them to be appointed to the board of directors,
4. Names and surnames of members of board of directors, president and members of the supervisory board (if there is a supervisory board), their residence and PIN,
5. Name, surname, residence and PIN of the company members (if it is a natural person) or company name, company seat and company’s registration number (if the company member is a legal person), or such relevant data if it is a foreign person.

If everything is in order, the Registry court will accept the application and register the company in the national court registry.

The registry court will then enter the following information in the court registry: 1. Company name, registered seat, address of the company in the Republic of Croatia and business activities, 2. Amount of share capital, 3. The duration for which the company is established, 4. Names and surnames of members of board of directors, president and members of the supervisory board (if there is a supervisory board), their residence and PIN, 5. Representation authorities, 6. If a person is authorized to receive statements of will and written statements on behalf of the company with the address in the Republic of Croatia, this information shall also be entered, 7. Name, surname, residence and PIN of the only founder (if it is a natural person) and other company’s member or company name and company seat (if they are legal persons).

After completed registration, the Decision on Registration a new company in Croatia shall be taken over from the competent court.

Costs of establishment

In addition to the attorney fees, average notary costs and court fees for establishing an LLC and its registration are between 350 and 450 EUR. In particular, costs depends on the share capital amount and circumstances of the particular case.

Musulin and Associates Law Firm Ltd. provides legal assistance and represent foreign legal entities, families or individuals when coming to Croatian market and starting a business in Croatia. We cooperate and coordinate with public notaries and bookkeepers, all in order to help our clients and to provide them full one stop support.

If you need legal assistance and help in the Republic of Croatia, feel free to contact us anytime.