Limited Liability Companies in Croatia

Abstract

This article aims to provide an overview of the main features of the limited liability company (hereinafter: LLC) in Croatia. LLCs are the most common company type in Croatian business practices. This is because of low amounts of minimum share capital, limited liability of shareholders, freedom of shareholders to regulate own internal relations and the LLC’s internal organization, which is regulated by the articles of association and holds fewer formalities to function. Interestingly, most LLCs are established as a single shareholder LLC, followed by two and three shareholders LLCs. This supports the finding that Croatian LLCs are often closely held companies, whose founders also act as directors and employees of the company. Since 2012, it is possible to form a simple LLC for a minimum share capital of 10 KN (cca. 1.32 EUR), and as of 2020, LLCs can even be established online. Thus, the simplicity and cost effectiveness to establish an LLC remain its primary advantage. Mandatory provisions that shareholders must respect are inter alia capital requirements and capital maintenance, formation, and competencies of the management board and shareholders’ meeting. The shareholders’ meeting is superordinate to other LLC bodies, allowing directors to be appointed and dismissed at any time. Shares are alienable and inheritable, but their transfer may be limited by the LLC’s articles of association. In certain cases, shareholders can be held personally liable for the LLC’s obligations (e.g., in the event of abuse of limited liability, partial payment of capital contributions, and the LLC’s dissolution without liquidation). Further specifics and current challenges of LLCs in Croatia will be analysed in detail.