Croatia – Setting up a Limited Liability Company

Located between Central and Southeast Europe, Croatia is often considered a “small country for great vacation”, with its amazing Adriatic see beaches overlooking Mediterranean Sea. Ok, this is definitively true, but Croatia is also an interesting market for starting and developing a lucrative business. Its favorable location (Slovenia, Hungary, Austria and Italy are just short drive away from Zagreb, and Munich is only 5 hours by car away) and its legal framework, fully harmonized with the Community acquis after the entry into the European Union (July, 1^st, 2013) make Croatia an attractive “beach” not only for tourists, but for foreign investors too!

In this post we will try to explain in a nutshell how to establish a Limited Liability Company (in Croatian: društvo sa ograničenom odgovornošću), the easiest and most common way to do business in Croatia.

The most common form of company in Croatia

Croatian company law allows foreign investors to establish businesses in Croatia under the same conditions as Croatian citizens, and generally the Limited Liability is the company form most chosen due to its simplicity and flexibility, which make it attractive for almost all types of businesses.

Limited Liability Company needs to be established with an initial capital of at least 20.000,00 kn (approx. 2.700,00 EUR). The members of the company establish their relationship through a partnership agreement, or, if there is only one founder, through a foundation statement. This is the first step to set up the company.

Company name

The company – according to Croatian law – operates and participates in legal transactions only with its company name, which must be in Croatian language and in Latin alphabet. Some foreign words can be used only if: (i) they constitute the name of the member of the company; (ii) its trademark is protected in Croatia; (iii) those words are common in Croatian language (for example: “trade”, “consulting”, “investment”…); (iv) there is no corresponding word in Croatian language; (v) or it is about Latin language. This means that English words can be inserted in the company name only if they are common in Croatian language. Other limitations regarding the name are exclusiveness (in one Court Register there can be only one company with the same name) and clarity (the name shall not create confusion about: the corporate purpose, the corporate identity or the relations with other companies). Lastly, it is not allowed to use denomination of countries, international organizations and personal names.

The necessary documentation

Hereinafter the list of documents required to set-up a Limited Liability Company:

• articles of association, which can be signed through a power of attorney;
• photocopy of the shareholders passport;
• specimen signatures of legal representatives;
• some additional documents required by the registration office (e.g.: acceptance of office).

Please note that businesses in Croatia are officially classified on the base of the corporate purpose, which needs to be explicit in the article of association.

Registration

The last step before the company can begin its commercial activity is the inclusion in the Register of Companies, kept by the competent Commercial Court.

It is finally good to specify that all the activity necessary for the establishment of a company in Croatia must be carried out with the help of a public notary and, after the registration, all limited liability companies in Croatia must submit annual financial statements regarding their commercial activity and all their transactions.