Introduction
Establishing a Limited Liability Company (LLC) in Croatia is a process that involves a series of legal steps to ensure compliance with the country’s commercial laws.
This article provides a comprehensive guide to the procedure, highlighting the essential legal considerations and requirements for both local and foreign investors.
- Founders
An LLC in Croatia can be founded by one or more individuals or legal entities. If the founders are individuals, they must be of legal age and fully competent to conduct business. This inclusivity allows both domestic and international investors to participate in the Croatian market.
OIB:
If the founders are foreigners, both natural persons and legal entitites, first step for them would be to obtain Croatian Personal Identification Number (OIB) for them, which is obtained before the competent Tax Authority of the Ministry of Finance, pursuant to the location of the planned business activity. OIB can be obtained personally, but also by the legal representatives (attorneys) based on the Special Power of Attorney (PoA). In case the person, respectively director of the legal entity obtains OIB in person, he/she must file an apllication (which can be found on this link (https://porezna-uprava.hr/HR_obrasci/Documents/OSOBNI%20IDENTIFIKACIJSKI%20BROJ/zahtjev-OIB.pdf) and submit its valid passport or ID. On the other hand, if the legal entity is bound to obtain OIB, valid excerpt from the competent court registry (not older than 30 days) must be submitted, translated in Croatian language by the authorized court interpreter, together with the abovementioned application. Once complete documentation is submitted, this process does not take too long and in general OIB number can be obtained within couple of days. Also, once such OIB number is obtained, it remains the same always and for all future actions so such person (natural person or legal entity) shall during its entire existence (life) in Croatia have respective OIB number and it cannot be amended or changed.
On the other hand, if the OIB number is obtained by the PoA, such PoA must be signed and stamped (in case of legal entities) and it is not required to have it notarized.
- Company Name
The futher step in forming an LLC is choosing an unique company name (referred to as ‘’Tvrtka‘’ in Croatian). This name must be distinct and distinguishable from existing company names registered in Croatia. The name should be written in Latin script, in Croatian language or an official language of any EU member state. Arabic numerals can also be used. Special permission from the Ministry of Justice is required for using the word “Hrvatska, Croatia” or its derivatives in the company name. It is important to avoid names containing national emblems or flags of other countries unless expressly permitted by the concerned authority. Such regulation is quite new to the Croatian companies law, since previously company name had to be either in Croatian language or in Latin language, and no other languages were allowed to be used when determining the name of the company, which is now allowed.
- Business Activity
The next step is defining the company’s business activity, aligned with the Croatian National Classification of Activities (NKD). This classification guides the company in outlining its primary and ancillary business activities, essential for legal and tax purposes. Usually, most companies try to determine as much activities as possible since in that case they allow themselves to conduct various business activities, while it does represent any additional cost for them (costs are the same, regardless of the number of registered activities).
- Registered Office
Founders must establish a registered office in Croatia, which serves as the company’s official address and administrative center. This location is crucial for legal correspondences and governance. Just to have in mind, it is possible and allowed to have multiple companies registered at the same address.
- Minimum Capital Requirement
The LLC must have a minimum capital of 2,500.00 EUR. This capital can be contributed in cash or in kind and is fundamental in ensuring the company’s financial stability at its inception. On the other hand, if the capital is determined in some other, higher amount, such number must be multiple of number 10 (so for example, it can be 2,560.00 EUR but it cannot be 2,555.00 EUR).
- Founding Act
The LLC is established through a founding act, which can be either an Incorporation Statement (in Croatian Izjava o osnivanju, for single-member LLCs) or an Article of Assoctiaton (in Croatian Društveni ugovor, for multi-member LLCs). This documents must be notarized and include:
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- The name, surname (company name), residence (headquarters) of the founder(s), personal identification number OIB.
- The company’s name and registered office.
- The company’s business activity.
- The total amount of capital and the individual contributions of each member.
- The duration of the company (fixed or indefinite).
- The rights and obligations of the members towards the company and vice versa.
- Appointment of Management
The LLC requires the appointment of a management board or executive director(s). These appointments are crucial for the operational and strategic decisions of the company. Number of such individiuals (directors, members of management board) is not determined by the law, so it is possible to have multiple directors (multiple members of the management board) within the same company.
Procurator
According to the Croatian law, it is possible to have appointed a procurator in the LLC. Procura is a type of representation, that allows such person to undertake legal actions in the name and on behalf of a company and to represent the company in procedures with direct legal effect for the represented party. In other words, it is a form of trading power of attorney by which a company authorizes a natural person to carry out certain legal actions. According to the Croatian Companies Act (Official Gazette, NN 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09, 125/11, 152/11, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22, 18/23, 130/23; hereinafter referred to as: the ZTD), respectively pursuant to the Article 47 of the ZTD, the procurator is entitled to conclude all contracts and undertake all legal actions in the name and on behalf of the company and to represent it in proceedings before administrative and other state bodies, institutions with public law powers, and state and elected courts. On the other hand, the procurator is not entitled or allowed to alienate or encumber the company’s real estate without special authority and cannot make statements or undertake legal actions that initiate bankruptcy proceedings or other proceedings that lead to the termination of the company. The procurator cannot give a power of attorney to other persons to conclude transactions.
- Capital Contribution
After the notarization of the founding act, the minimum capital must be deposited. Respective documentation is generally signed before the notary public in Croatia (according to one’s own choice) and then notary public sends and submits all required documentation to the competent court registry of the Commercial court.
Contributions can be in cash or in kind, but cash contributions must be paid up to at least 25% of the subscribed capital at the time of registration. The cash contribution must be entered in full within one year from the date of the company’s registration in the court registry.
- Registration
The company must be registered with the competent Commercial court’s registry. This process includes submitting the founding documents and proof of capital contribution. This process can take from couple of days, up to couple of weeks, depending on the court which deals with respective establishment.
- Company Seal and Statistical Registration
Following registration, the company should create an official seal and register with the Croatian Bureau of Statistics for classification according to its business activities. This process can also be conducted by the attorney-at-law via Special PoA, so personal attendance by the founder(s) is not required.
- Real Owner Register
Companies are required to register the details of their real owners with the Real Owner Register, managed by the Financial Agency (FINA) for anti-money laundering purposes, pursuant to the EU requirements and regulations. This process can also be conducted by the attorney-at-law via Special PoA, so personal attendance by the founder(s) is not required.
- Bank Account and Tax Registration
Opening a corporate bank account and registering with the Tax Authority, Croatian Pension Insurance Institute, and Croatian Health Insurance Fund are the final steps.
- Legal Representation
Founders may appoint an attorney-at-law to sign the founding documents, as well as other abovestated activites and to conduct other required actions, provided they have a notarized power of attorney. It must be pointed out that for some countries, respectively for its citizens and legal entities, not only notarized power of attorney is required, but also an Apostille notarization. List of countries for which notarization of documents (Apostille) is not required can be found on this link (https://mpu.gov.hr/nadovjera-legalizacija-isprava/25282).
Conclusion
This article provides a general legal framework for establishing an LLC in Croatia. It is crucial to seek specific legal advice for individual circumstances. Establishing an LLC in Croatia requires careful planning and understanding of local legal requirements, making it important for potential founders to seek expert guidance.