The transformation process in Croatia follows a strict legal procedure centered around a key document: the Transformation Project (in Croatian called “Joint merger plan”). This project must be comprehensive, detailing all participating companies, the proposed share exchange ratio, and the legal and economic consequences for employees and creditors and be made in notarized form. According to the requirements of the EU Directive, this project must typically be published or made available through the court register at least one month before the general meeting that is scheduled to approve it. The transformation must then be approved by a resolution of the company’s shareholders. For both limited liability companies (d.o.o.) and joint-stock companies (d.d.), such a significant decision generally requires a qualified majority, typically at least three-quarters of the votes represented at the general meeting, unless the articles of association require a higher threshold.

In the Croatian legal system, the competent Commercial Court (Trgovački sud) and its Court Register (Sudski registar) play a crucial gatekeeping role in the cross-border transformation process. Before a transformation can be registered in the destination country, the Croatian Commercial Court must issue a pre-transformation certificate. To do so, the court conducts a thorough verification to confirm that all requirements under Croatian law have been met. This includes examining the transformation project, confirming that stakeholder protection rules have been followed, and ensuring the general meeting’s approval was validly obtained. A critical part of this review is an anti-abuse check, where the court assesses whether the transformation is being carried out for abusive or fraudulent purposes, such as circumventing national or EU law. Without this certificate, the foreign commercial register will not complete the transformation, effectively halting the entire procedure.

Croatian law, in line with EU directives, provides robust safeguards for stakeholders who may be affected by a transformation. Creditors whose claims may be endangered by the transformation have the right to demand adequate security within a legally prescribed deadline following the publication of the transformation project. Companies also have a duty to inform their employees or their representatives about the transformation, detailing the reasons and the legal, economic, and social consequences. This information must be provided in a timely manner to allow for consultation. Shareholders who dissent from the transformation have the right to vote against it and are typically entitled to a fair cash compensation for their shares through a buyout right, ensuring their interests are protected.

Failing to adhere to the strict procedural requirements of the Companies Act can lead to severe consequences. The most immediate risk is the refusal of the Commercial Court to issue the pre-transformation certificate, which prevents the transformation from proceeding. Furthermore, a court can declare the entire transformation invalid, even after it has been registered, if fundamental legal requirements were violated, such as a failure to obtain the necessary shareholder approvals. Such an outcome can reverse all changes and create significant legal and financial disruption, underscoring the importance of precise legal execution from the outset.

Correctly navigating a cross-border transformation is a critical legal and administrative challenge. Our team of experts provides a comprehensive service that covers everything from drafting the Transformation Project to representing you before courts and authorities, ensuring your compliance with both Croatian and EU regulations. By entrusting this task to us, you can be confident that your cross-border restructuring will be managed efficiently, correctly, and without costly errors. Contact our team for personalized advice.