Here is a set of useful guidelines for small business owners who are encountering the process of buying or selling a “company” (or part of a “company”) for the first time in Croatia, especially when navigating a transfer of business shares.
And they may also be helpful for the more experienced players.
More details below:
- When do you need a “transfer of business shares”?
- 1. Start from scratch
- 2. Prepare the company’s valid documentation for the consultation
- 3. Check the rights of existing members regarding the transfer
- 4. In practice, two agreements are usually concluded during a transfer of business shares – here’s why
- 5. Resolve the “director issue” in advance
- 6. If I am selling and transferring a business share – do I have to pay tax?
- 7. More on the importance of submitting documentation to the court
- 8. Notify your partners as soon as possible
These sections form the core structure of understanding and navigating a transfer of business shares in Croatia.
IMPORTANT NOTICE: all texts published on lucija.legal – although written by a legal professional with several years of experience – are written in simple, conversational language. Legal terminology is intentionally omitted for easier understanding, and certain legal concepts are described in a very simplified manner – while their essential meaning is preserved. All texts and examples are provided solely for the purpose of educating readers and informing the public. None of the texts contain individualized or specific legal advice, including matters related to a transfer of business shares in Croatia. For resolving concrete legal issues, it is expressly recommended that you consult your attorney.
When do you need a “transfer of business shares”?
When you buy or sell a company or part of a company (in legal terminology, instead of the term “firma” we use the term “company”) – you cannot do it without a transfer of business shares.
But – let me start with the basics.
So you can follow along more easily.
Namely, the persons who are registered in the court registry of the company as members of the company are actually the holders of the company’s business shares.
In simple terms – this means that these persons are the “owners” of that company.
So members = holders of business shares = company owners.
Let’s also clarify right away that the position of a “company member” has nothing to do with the position of a “company director”.
These are two completely different things.
Company director ≠ company owner.
Who the current member/“owner” of a company is – you can check on the website of the court registry – here.
For all companies in Croatia.
Therefore – for you to become the “owner” of that company, you need to become the holder of its business share.
For that, you need a transfer of business shares – a procedure commonly referred to as transfer of business shares in Croatia when dealing with company ownership changes.
So here are a few useful things and recommendations you need to think about in practice when handling the transfer of business shares in Croatia.
1. Start from scratch
Before you even make the effort to seek legal consultation for the transfer of business shares – negotiate extensively with the other party.
Because there are many components you need to discuss.
Here are just a few examples:
- How much is the company truly worth? The registered share capital is one thing, but the company’s actual market value is something completely different. Will you request a professional valuation or assess it yourselves? And if you seek assistance – who will bear those costs?
- What is the financial health of the company? In addition to checking financial statements and balance sheets, it is wise for the buyer to analyse profitability, receivables, debts, real estate, taxes …
- Legal review of the business (so-called due diligence) – it is always useful to have a legal team assess legal risks, disputes, validity of signed contracts, obligations toward employees, tax liabilities, licences, and the duration and importance of permits …
- Clearly define what you are actually buying – is only the share and material assets being sold, or also the “intangible assets”, such as brand, reputation, trademarks, intellectual property, social media profiles …
All of these elements are crucial to align before initiating a formal transfer of business shares in Croatia.
2. Prepare the company’s valid documentation for the consultation
Before you even begin consulting a professional regarding the transfer of business shares – prepare the company’s valid documentation.
It will save you time (and probably money).
Because – if you do not bring the currently valid Statement of Company Formation or the Articles of Association – no one will be able to tell you anything meaningful.
It’s roughly like going to a specialist doctor without being able to explain where it hurts or provide the results of previous examinations.
In addition to the mandatory Statement/Articles of Association, be sure to bring all previous share transfer agreements and lists of members that have occurred since the last amendment of the Articles.
And it’s also a good idea to prepare all adopted decisions, financial statements, and contracts concluded by the company, as these documents are often essential when navigating a transfer of business shares in Croatia.
3. Check the rights of existing members regarding the transfer
Very often, the Articles of Association “hide” provisions that protect the other members of the company from the possibility of business shares being transferred “without control” to third parties.
And that is completely logical – if you think about it.
Because – whether you have a healthy business or not – you do not want the decisions of the general assembly to depend, tomorrow, on someone you do not know and/or someone who doesn’t care, to whom your “former colleague” transferred their business share without your knowledge.
That is why, before any transfer of business shares, carefully check whether the Articles of Association contain provisions on the pre-emption right of other members.
Or – is there a provision requiring other members’ “consent to the transfer”?
Or is there a prohibition on inheritance?
Or perhaps even a complete prohibition of transfer?
Being aware of these clauses is essential when planning a transfer of business shares in Croatia.
4. In practice, two agreements are usually concluded during a transfer of business shares – here’s why
The first agreement is the share transfer agreement – which must be solemnized before a notary public.
Once solemnized, the notary will send this agreement to the court registry, where the change of the company member will be officially recorded.
This agreement will also remain stored at the commercial court and will be “public”.
What does “public” mean?
It means that anyone can request access to the agreements stored in the court registry.
However, people often do not want the transfer of business shares and everything related to it to be visible to “everyone”:
Especially when the company is larger and the transaction more complex – which then includes various conditions, deadlines, warranties, securities, and determinations.
This is why, in practice, a second agreement is concluded for all these specific provisions – one that is merely “notarized” (verified) before the notary.
Most commonly, this is a Business Share Purchase Agreement, but it may also be an agreement on gifting, exchange, settlement of claims, etc.
This second agreement generally contains everything.
And when I say everything – I truly mean everything.
So, if you are transferring a business share for a certain price, then that price, the method of payment, instalments, interest, and deadlines are all included and written into this second agreement.
The same applies to all obligations of the company, rights of the members, existing contracts, property-related matters, permits, taxes, insurance, loans, guarantees …
However, this second agreement remains hidden from public view.
GOOD TO KNOW: The notary is obliged to charge the solemnization of the share transfer agreement based on the amount of the “purchase price of the share”. Meaning, a high price = high solemnization cost. However, if you structured the transaction wisely by using two agreements, the notary does not need to know the actual price you paid or received for the business share.
This two-agreement structure is a very common and practical approach when handling a transfer of business shares in Croatia.
5. Resolve the “director issue” in advance
If you are becoming or remaining a member of the company, it is in your best interest that the person who stays or comes into the director’s position is someone you trust.
Why?
Because the director is (most often) authorised to represent the company in dealings with third parties.
In other words – they can conclude contracts that legally bind the company.
However, you certainly do not want the company entering into transactions that you consider unprofitable, suspicious, pointless …
That is why it is wise to resolve the issue of the “director” before buying or selling a business share, in a way that satisfies everyone – both new and existing members.
This is an important step in preparing for any transfer of business shares in Croatia.
6. If I am selling and transferring a business share – do I have to pay tax?*
*(for Croatian citizens)
It depends.
But before explaining when you do and when you don’t have to pay this tax, let’s first define how to calculate the capital gains tax.
So, the amount on which you will apply the 12% tax rate is calculated as follows:
(Amount for which you sold the business share) – (amount for which you purchased the business share) = tax base.
Tax base × 0.12 (tax rate) = the amount of tax you must pay.
When you do NOT have to pay this tax:
if you acquired the business share before 1 January 2016;
if more than two years have passed since you acquired the business share;
if the sale is carried out between spouses, direct relatives, or other close family members;
if the sale is carried out between divorced spouses (in connection with the divorce);
in connection with the inheritance of financial assets.
GOOD TO KNOW: the disposal of business shares must be reported to the tax administration within a short deadline. More information is available here.
Understanding these rules is essential for anyone planning a transfer of business shares in Croatia.
7. More on the importance of submitting documentation to the court
Although the buyer becomes a member of the company immediately at the moment the share transfer agreement is concluded, it is extremely important to enter this information into the company’s Shareholders’ Register and to report the change to the competent commercial court, thereby making it visible to everyone.
However, since a notary public participates in the transfer, they will promptly report the change to the registry court and submit all the required accompanying documentation.
The notary is also obliged to deliver one copy of the share transfer agreement to the tax administration.
GOOD TO KNOW: If the transaction involves only the legal act of transferring a business share, you generally will not need an amendment to the Articles of Association.
GOOD TO KNOW 2: Once the documentation is sent to the registry court, it is necessary to monitor when the court will issue its decision and, if corrections or additions are required, to act within the prescribed deadlines.
8. Notify your partners as soon as possible
It is advisable to inform as soon as possible the partners associated with the company about the change of members – banks, suppliers, long-term clients, other contracting parties (e.g., lease agreements), accountants, insurance companies, leasing companies …
It is better to notify them immediately after the transfer of business shares in Croatia than to deal with inconveniences later and create an impression of unreliability…
Don’t rush – careful planning is key
The transfer of business shares is a process that requires great care.
This applies both at the level of the buyer and seller, as well as for the notary public and lawyer preparing the documentation.
Therefore, the recommendation is not to do it “at the last minute” or “under tight deadlines” – as this most often leads to mistakes, oversights, omissions, or in the worst case – legal disputes.
P.S. If you are a foreigner looking for comprehensive legal support with real estate and business matters in Croatia, you can find more information about collaboration opportunities here.