Public limited company

Public limited company

A public limited company is based on capital, with owners (shareholders) investing in authorized capital divided into shares. A public limited company may be started by a single owner, i.e. it may have only one shareholder. 
A public limited company is a legal entity. This legal status is established by entry into a court register. The company is liable for its debts with all its assets. Shareholders are not liable for the debts of the company.
The basic document for a public limited company are the articles of association, as they specify the internal organization of the company.

Authorized capital 
Authorized capital and shares must show par value in the currency of the Republic of Croatia. The minimum amount of authorized capital is HRK 200,000. The company may issue shares with an indication of their par value or shares without such indication. The par value of a share may not be below HRK 10. Par values higher than this minimum amount must show amounts that are multiples of HRK 10. In the case of shares indicating par value, the portion of authorized capital held is determined by the ratio of the par values of authorized capital and shares, whereas in the case of shares without par value the portion of capital held is based on the number of shares. 
Shares may be registered shares or bearer shares. As a rule, shares are freely negotiable. Bearer shares are transferred when handed over, while registered shares are transferred by endorsement or assignment (cession). 
In terms of the rights they ensure, shares may be ordinary and preference shares. Ordinary shares ensure the right to vote in a general meeting, to receive dividend and the right to the respective portion of the bankruptcy estate. 
Preference shares give certain preferential rights, such as the right to a dividend in an amount or percentage of the par share value set in advance, priority in the disbursement of dividends or in receiving the remainder of the bankruptcy estate and other rights as provided by law and by the company’s articles of association.

Company establishment procedure 
The Companies Act provides for a simultaneous and a successive establishment of a public limited company. Company founders are the shareholders who have adopted the articles of association. 

A public limited company is established simultaneously when:

  • the company founders take possession of all company shares and make a notarized statement of this fact
  • accept and sign the company articles of association and make a notarized statement of this fact
  • make a notarized statement that they are establishing a public limited company.

A public limited company is established successively when:

  • the company founders adopt the articles of association
  • the company founders take possession of a certain number of shares
  • the company founders make a public call to subscribe for the remaining shares, with a subscription for such shares following the call.

The subscription period may not exceed three months after the be ginning of the subscription term. If, within this period, all the shares are not subscribed and paid for in accordance with the public call, the company founders are entitled to subscribe for or take possession of the unsubscribed shares within fifteen days. If they fail to do so, the company establishment is considered to have failed and the founders will ask the subscribers to take their payments back within fifteen days. 
If all the shares have been subscribed for, the founders shall give them to their owners within fifteen days after the subscription period has expired and call the first general meeting. 
Shares are paid in cash and by investing tangibles or proprietary rights where it is possible to determine the value of property. If shares are paid for in cash, at least one quarter of the par value of each share must be paid, and if the shares are sold at a price above par, the entire amount exceeding the par value must be paid. 
If a share is paid for partly in cash and partly in tangibles or rights, the amount not to be paid in tangibles or rights should also be paid fully before the company is entered in a court register. If shares are paid for in cash, the full amount is to be paid into a temporary account opened with a legal entity authorized to perform payment transactions. 
An investment in the company consisting of tangibles and rights must be completed in full before entry into a court register. If the investment in tangibles and rights is an undertaking to transfer an asset into the company, this should be completed not later than five years after company entry into the court register. All investments in the company should be made in full in order to make the capital freely available to the company. 
The founders should make a notarized statement appointing the first supervisory board of the company and the auditor for the first financial year. Following this, the supervisory board will decide on the appointment of management board members. 
The founders should then submit the first report on the completion of the company start-up procedure so that the management board and supervisory board members can subsequently review the completed procedure. Upon completion of the procedure, management and supervisory board members submit an application to enter the company in the court register.

The application should contain the following information:

  • company name, registered office and business activity
  • shareholders (name and surname, citizen’s personal ID number [MBG] or, if it is a foreign person or entity, passport number, issuing country, residence i.e. company name and registered office)
  • information about persons authorized to represent the company and their powers
  • legal form of the company
  • date of adoption of articles of association
  • if the legal entity is not a going concern, period of operation
  • reasons for company dissolution.

The application should also contain the following information:

  • amount of authorized capital
  • amount of capital represented by the shares issued
  • total amount paid for the shares issued and form of payment
  • statement made by management board members that they are aware of their obligation to report to the court and that they meet the criteria for management board membership
  • information about management board and supervisory board members.

In addition, the following should be enclosed with the application:

  • company’s articles of association, the documents submitted when the articles were adopted and documents evidencing that founders have taken possession of their shares
  • in the case that certain benefits are granted, as well as that tangibles or rights are invested or taken possession of, contracts with provisions to this effect
  • evidence of amount paid in, of investment made in the form of tangibles or rights and of the company’s right to freely use them
  • account of company establishment costs with their breakdown and total amount
  • documents on the appointment of management and supervisory board members
  • reports on company establishment and on the audit of establishment procedures together with accompanying documents
  • permit from a governmental body or institution if such a requirement arises from the nature of the provision specifying the business activity of the company or some other provision of the articles of association
  • notarized statement that neither the shareholders nor the companies in which they have interests or shares have overdue liabilities; a certificate issued by a legal entity authorized to conduct payment transactions showing that neither the shareholders nor the companies in which they hold interests or shares have a recorded unpaid payment order in their accounts and certificates from the Tax Administration, Croatian Pension Insurance Institute and Croatian Institute for Health Insurance evidencing that neither the shareholders nor the companies where they hold stakes or shares have overdue liabilities to these institutions.

Bodies of a public limited company

  • management board
  • supervisory board
  • general meeting

The management board consists of one or more members (directors), their number being defined by the articles of association. If the management board consists of several members, one must be appointed chair. At least one member of the management board of an active company must be the company’s employee. 
Any person of full legal capacity may be appointed management board member, unless s/he has been sentenced for specific criminal offences within a 5-year period from the date the sentence became effective. The latter restriction applies also to persons who have been served a protective measure prohibiting the performance of a profession included in the company business activity as long as the measure is in force. Both Croatian and foreign nationals may be members of a management board, and they are appointed by the supervisory board for a maximum period of five years.

The management board has the following rights and obligations:

  • company management
  • representation
  • drafting of decisions for general meetings
  • preparation of contracts
  • implementation of the general meeting’s decisions
  • reporting to the supervisory board on issues relating to company management.

The supervisory board has at least three members. Their number is defined in the articles of association and should be an odd number. A foreign national may be a member and there is no barrier to all members being foreign nationals. Members of the supervisory board are elected by the general meeting for a maximum term of office of four years, and they can be re-elected. 
The supervisory board supervises company management and has the right to examine the company’s business records and all other company documents. The board reports to the general meeting on the supervision carried out. 
The general meeting is a body consisting of all shareholders and it allows them to exercise their rights in company matters. All shareholders are entitled to participate in the general meeting. 
The responsibilities of the general meeting are set out in the articles of association. Decisions are generally taken by a simple majority of votes.