CROATIA Law and Practice Contributed by: Iva Basarić, Marija Gregorić and Matija Skender, Babic & Partners
4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework The LLC and JSC are the most frequently used types of corporate vehicles in Croatia. Both forms provide a limited liability benefit to their shareholders. LLCs In practice, LLCs are the preferred and predominantly used corporate form for foreign investors setting up their operations in Croatia. An LLC can only be estab - lished as a private company. Ownership in the LLC is not represented by equity securities (ie, stock), but rather by business quotas that constitute a share in the share capital of the LLC. The LLC may have one or more founders (foreign or domestic), and its mini - mum share capital must amount to EUR2,500 (which is significantly less than what is required for a JSC). The overall corporate governance is in principle less complex, and the management is less independent of the shareholders than the management of a JSC. The mandatory corporate bodies of an LLC are the management board and the shareholders’ meeting, while the supervisory board is generally optional (with only a few exceptions, where even an LLC is required to have a supervisory board in place). JSCs Shares in JSCs are represented by equity securi - ties, that is, stock (nowadays predominantly issued as non-materialised stock, registered with the central securities depository and a registry of non-material - ised securities operated by the Central Depository & Clearing Company Inc ( Središnje klirinško depozitarno društv o; SKDD). The minimum share capital of a JSC is set at EUR25,000. A JSC may be either a private or a public company (any investor considering an IPO down the line may be more interested in establish- ing/acquiring a JSC, although Croatian corporate law rules also provide for the possibility of converting an LLC into a JSC). JSCs have a choice between estab - lishing a one- or two-tier corporate governance sys - tem. In the two-tier governance system, the compa - ny’s corporate bodies are the management board (ie, the directors), the supervisory board (which is man - datory for JSCs) and the general assembly (consist - ing of shareholders), while in the one-tier system the
company has executive directors, a board of directors and a general assembly. In addition, foreign investors may also establish local branch offices, whose activities must be limited to those of its foreign founder and which are not regard - ed as separate entities from a corporate law perspec - tive, but rather form part of the foreign founder (and accrue liabilities for the founder). From an FDI perspective, the local company’s form does not play a role. 4.2 Relationship Between Companies and Minority Investors Croatian corporate laws provide for instances where qualified majorities are required to adopt certain shareholders’ resolutions, which may be viewed as one of the mechanisms of minority investor protection. For example, a qualified majority of at least 75% is required for amendments to the articles of association, mergers and de-mergers, an increase and decrease in share capital, and dissolution of the company, while a 95% majority is required for squeeze-out procedures. Furthermore, under a specific company’s articles of association, a qualified majority may also be required for issues for which a simple majority is required under the law. In addition, minority shareholders are afforded certain rights, including but not limited to the right to convene the shareholders’ meeting/general assembly (the mini - mum shareholding required for this is 10% in an LLC and 5% in a JSC), and the right to claim damages from the management board/supervisory board on behalf of the company (by the 10% shareholding in an LLC) or to request that the company claim damages from the management board/supervisory board (by a 10% shareholding in a JSC). 4.3 Disclosure and Reporting Obligations In addition to the disclosure and reporting obligations discussed in 3.1 Transaction Structures , and any obli- gations that may arise from the FDI screening regime, local companies are also required to report the follow - ing foreign investments or divestitures to the Croatian National Bank for statistical purposes:
182 CHAMBERS.COM
Powered by FlippingBook