CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
mission’s forecast, headline inflation is expected to decline to 3.4% in 2025, and to 2.0% in 2026. The areas that have traditionally been dominant in terms of (foreign) investment in Croatia are tourism, telecommunications, healthcare and life sciences, but recent years have also brought about increased investment opportunities in the IT and clean energy sectors. Croatia is a parliamentary democracy with legisla - tive powers entrusted to the Croatian Parliament, the body of people’s representatives elected for a term of four years. Executive powers are vested with the government, which is responsible to the parliament. Judicial powers are vested in the judiciary, with the Supreme Court of Croatia ultimately ensuring uniform application of the law and the equality of all citizens. The President, who is elected for a term of five years, is the chief of state and represents Croatia at home and abroad. The Constitutional Court supervises the constitutionality of the country’s laws and protects the constitutional rights of its citizens. In Croatia, M&A transactions are most commonly structured either as share deals or asset deals. In addition, mergers and de-mergers are also used for corporate restructuring transactions. Share Deals Share deals are typically more straightforward to implement and require registration with a single, appropriate registry. In practice, the transaction docu - ments most often consist of a lengthier share pur - chase agreement, which sets out in detail all the terms of the transaction, and a separate, short-form transfer agreement for registration purposes. Share transfer issues are regulated under the Croatian Companies Act and Croatian Capital Markets Act. Share deals are also a more appropriate structure for acquisition of a minority interest. The downside of the share deal is that the acquirer acquires the company together with all its liabilities (noting that shareholders of Croa - tian joint stock companies (JSCs) and limited liability 3. Mergers and Acquisitions 3.1 Transaction Structures
companies (LLCs) may generally benefit from the cor - porate veil protection mechanism). A natural person or legal entity that has directly or indi - rectly (and solely or jointly) acquired more than 25% of the voting shares of a JSC seated in Croatia, and traded on a regulated market in Croatia or another EU member state (if not traded on a regulated market in Croatia), is required to publish a mandatory takeover bid and undertake the mandatory takeover procedure in accordance with the Croatian Act on Takeover of Joint Stock Companies (the “Croatian Takeover Act”). In addition, when a natural person or a legal entity directly or indirectly reaches, exceeds or falls below the thresholds of 5%, 10%, 15%, 20%, 25%, 30%, 50% and 75% of voting rights in a public issuer of shares, the relevant person/entity is required to simul - taneously notify the issuer and the Croatian Financial Services Supervisory Agency of this fact. Asset Deals Asset deals are in principle less regulated under Croa - tian law than share deals (ie, unlike share deals, asset deals are in principle not regulated by the Croatian Companies Act). From a corporate law perspective, they tend to be preferred when an acquirer is not inter - ested in buying the entire company together with its liabilities, but rather only particular assets of the com - pany (or business/part of the business as a going con - cern). Asset deals are more complex to implement, as each asset needs to be transferred individually (and if the transfer of certain assets, such as real estate or vehicles, needs to be registered in a public registry, then each registration needs to be performed sepa - rately). On the other hand, the acquirer’s liability is limited to the value of the acquired assets. 3.2 Regulation of Domestic M&A Transactions Other than the registration, disclosure and takeover requirements listed in 3.1 Transaction Structures , a transaction may be subject to merger control, as described in more detail in 6. Antitrust/Competition , and to an FDI screening process, as described in more detail in 7. Foreign Investment/National Security .
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