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LEGAL FORMS OF COMPANIES IN CROATIA

Introduction
There are no restrictions on foreign ownership of Croatian business enterprises. The primary legislation governing the form and regulation of companies in Croatia is the Croatian Companies Law ("the CCL"). The CCL is based on the German Companies Law. The following forms of commercial enterprise are most commonly used in Croatia.

Company forms in Croatia:
- Private limited company (d.o.o.)

- Simple limited company (j.d.o.o.)

- Public limited company (d.d.)

- General partnership (j.t.d)
- Limited partnership (k.d.)

- Sole proprietorship (Obrt)

- Economic interest association
- Branch office

1. Private limited company (d.o.o)
A private limited company is one in which one or more legal entities or natural persons invest stakes (not necessarily of the same amount) in the total authorized capital as contractually set beforehand. The total amount of all stakes must correspond to the amount of the company’s authorized capital.

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. The initial authorized capital of a private limited company must be shown in Croatian currency – kuna (HRK), and the minimum amount of initial authorized capital may not be below HRK 20,000.

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.

2. Simple limited company (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.

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.

3. Public limited company (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. The company is liable for its debts with all its assets. Shareholders are not liable for the debts of the company.

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.

4. General partnership (j.t.d)
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.

Any legal entity or individual, both domestic or foreign, may become a partner.

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.

5. Limited partnership (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).

Both domestic and foreign individuals and legal entities may be partners in a limited partnership. A limited partnership does not have authorized capital.

6. Sole proprietorship (Obrt)
In Croatia, business activity is regulated by two laws: Companies Act and Handicraft Act. Both individual persons and legal entities are entitled to under take and conduct business.

Those who wish to establish a commercial company must obey provisions of Companies Act and have to register the company at a court register (Sudski registar) at a competent business court. Individuals wishing to start business shall be subject to regulastions of Handicraft Act (Zakon o obrtu); they are obliged to register business at a Register of Craftsmen (Obrtni register).

Both these laws (Companies and Handicraft) give foreign entities the same terms and conditions of business as Croatian subjects. However, two special privileges apply to foreign investors in Croatia - protection of business when law is changed and free transfer of profits.

7. Economic interest association
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.

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.

8. 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.

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