CROATIA Law and Practice Contributed by: Marko Paulinović and Dino Vukoša, Buterin & Partneri
lenders. Likewise, there are no restrictions regarding the repayment of loans to foreign lenders under a security document or loan agreement. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security When creating and enforcing security over real estate, certain fees may apply. • Notarial fees: The security arrangements (eg, a mortgage agreement) must generally be notarised, and the amount of the notarial fee depends on the amount of the secured claim. • Registration in the land register: The registration of security in the land register generally does not attract additional court fees if the agreement is executed in the form of a notarial deed. Otherwise, there is a small registration fee. • Administrative fees: A court fee must be paid when initiating enforcement proceedings, and additional costs may arise during judicial proceedings. No taxes are payable upon the creation of security over real estate. However, if ownership of the property is acquired through the enforcement of the security, the relevant taxes may apply (see 2.10 Taxes Appli- cable to a Transaction ). 3.5 Legal Requirements Before an Entity Can Give Valid Security Before an entity may validly grant security (eg, a mort - gage) over its real estate, certain legal requirements must be complied with, depending on the type of entity involved. • Joint-stock company ( dioničko društvo – d.d.): Such companies are prohibited from providing financial assistance for the acquisition of their own shares or from returning contributions to shareholders. Such transactions are null and void. Accordingly, a joint-stock company may not grant guarantees or security for the acquisition of its own shares. Although other types of security are not explicitly prohibited, the “corporate benefit” princi - ple applies, meaning that the management board must demonstrate that the transaction benefits the company and is economically justified.
• Limited liability company ( društvo s ograničenom odgovornošću – d.o.o . ): There is no explicit prohi - bition on financial assistance comparable to that applicable to joint-stock companies. However, capital maintenance rules, solvency requirements and the corporate benefit principle still apply. • Other entities (eg, sole proprietors, co-operatives): Such entities may generally grant security if permit - ted by applicable regulations and their internal rules. 3.6 Formalities When a Borrower Is in Default In the event of a borrower’s default, the lender may enforce its security over the real estate if it holds an enforceable instrument (eg, a notarised mortgage agreement containing an enforcement clause). If the lender does not possess such an enforceable instru - ment, it must first obtain a binding and enforceable court judgment. In any event, the first procedural step is obtaining a certificate of enforceability on the enforcement instru - ment, after which enforcement proceedings may be initiated directly before the competent municipal court in accordance with the Enforcement Act. The sale of the real estate is carried out by the Finan - cial Agency ( Financijska agencija – FINA) through an electronic public auction following the determination of the property’s market value. The priority of security rights/pledges is determined according to the order of registration in the land reg - ister in accordance with the principle of priority. In enforcement proceedings, only creditors whose rights are registered in the land register are entitled to sat - isfaction. In practice, enforcement against real estate typically takes between two and three years for commercial real estate, and generally longer when enforcement is carried out against property owned by individuals. In recent years, a decrease in the number of enforce - ment proceedings has been observed as a result of the overall reduction in non-performing loan (NPL) portfolios. Consequently, the market for NPLs has also declined and largely relies on portfolios originat - ing from earlier periods.
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