About

Babic & Partners hosted a Seminar Doing Business in Croatia – Insights and tips on investing in the EU’s newest member. The Seminar was held at the London Hilton on Park Lane on 14 October 2013 and it covered need-to-know legal issues when exploiting opportunities in Croatia.

Facilitator

Sarah Hutchinson, Vice President (Business Development), The University of Law, London

Speakers

Boris Babić, Senior Partner, Babić & Partners, Zagreb, Croatia

Marija Gregorić, Partner, Babić & Partners, Zagreb, Croatia

Iva Basarić, Senior Associate, Babić & Partners, Zagreb, Croatia

Topics

The topics included:

– Croatia’s economic outlook and sector specific investment opportunities

– Tips to overcome cultural differences and mitigate legal risks

– Dominant issues and how to deal with obstacles

– Buyer beware: essentials when buying business in Croatia

– Opportunities and challenges in employment and immigration law

– Reflections on EU membership and its effects on Croatia

Additional Information

For further information, including presentations from the Seminar, please contact us at office@babic-partners.hr

On 1 July 2013 Croatia became the 28th member of the EU, after more than eight years from applying for full membership (2003) and after having acceded to the treaties back in December 2011. Boris Babić, senior Partner in Babic & Partners law firm commented for Chambers & Partners: “I think it is great moment and we all hope it will foster and bring benefits to the economy.” He adds that there is still work to be done and that Croatia will continue to make reforms, but it is “a good signal to the business community and will improve stability in the region.”

Boris Babić, Senior Partner in Babic & Partners law firm and Vice-Chair of Real Estate Committee of International Bar Association (IBA) and attended the 8th Annual Bar Leaders’ Conference held in Zurich from 22-23 May 2013. The conference was organized by IBA in association with the Zurich Bar Association and the Swiss Bar Association. This conference brought together bar presidents, senior officers, bar executives, law firm and individual practitioners from all around the world to discuss the latest developments and issues affecting the law profession. The speakers included leading officers of IBA and American Bar Association (ABA), as well as leading officers of several national bar associations.

Ministry of Economy, as the registry authority for the Croatian representative offices of corporations seated outside Croatia officially announced that, as a result of amendment to the Croatian Trade Act, the representative offices of corporations seated in EU member countries will cease to exist by operation of law as of the date of Croatia’s accession to EU. Under the Ministry’s announcement, the founding entities of such representative offices who intend to continue or extent their business operations in Croatia are required to change local corporate form by way of establishing a local branch office or an affiliate. Given that the announced termination of the representative office is expected to occur on 1 July 2013 (by Croatia’s accession to EU) and that no grace period has been provided to the founding entities in this regard, the above announcement of the Ministry will strongly affect the business of all corporations seated in EU having established representative office in Croatia.

Babić & Partners are proud to present their brand new website (http://www.babic-partners.hr/). The website is designed primarily to better inform clients and potential clients about Firm’s legal services as well as to outline news and trends important for the business and legal community. In an effort to provide a stronger client experience, we have focused resources on building a content-rich website with an emphasis on our commitment to clients and their interest, including steady stream of legal news, updates, expert publications and other resources.

The Act on Financial Operations and Pre-Bankruptcy Settlement entered into force on 1 October 2012. The Act regulates financial operations of companies, periods for settlement of monetary debts, status of companies in case of illiquidity and insolvency and pre-bankruptcy settlement procedure. It was expected that the Act will not only improve previous inefficient restructuring model (many bankruptcy proceedings have lasted for more than 10 years) but that its enactment will solve the problem of illiquidity and insolvency of many Croatian companies as well.

The new model introduced by the Act allows debtors to accept a restructuring plan and agree to a pre-bankruptcy settlement with creditors. The initiative for the procedure lies with the debtors, i.e. illiquid or insolvent companies, that are required to initiate the pre-bankruptcy settlement procedure within 60 days as of becoming illiquid (if restructuring efforts would have failed) or latest within 21 days as of becoming insolvent. The proceedings are initiated before and primarily run by the Croatian Financial Agency (“FINA”). Noncompliance with an obligation to initiate the pre-bankruptcy proceedings exposes a debtor to misdemeanor fines (monetary fines for the company and the responsible person within the company). The duration of the pre-bankruptcy procedure is limited and the procedure has to be completed within 120 days.

However, immediately upon its entry into force, numerous deficiencies and ambiguities arose in the application of the Act and affected its initial success (e.g. content and form of documentation necessary for opening of the pre-bankruptcy procedure were not well sufficiently defined, relationship with the bankruptcy procedure was not regulated, etc.). More specifically, while the Government expected that FINA would have received over 20.000 requests for pre-bankruptcy settlement procedure by the end of 2012, FINA had actually received only about 240 requests by December 2012. The Government therefore decided to amend the Act swiftly and directly by enacting the Ordinance on 21 December 2012. The amendments to the Act mostly relate to procedural issues of pre-bankruptcy settlement with the aim of simplifying the whole procedure. For example, some of the changes to the Act include: (i) less documentation required for initiation of the pre-bankruptcy settlement procedure; (ii) the possibility (in exceptional cases) of freeing the debtor’s bank accounts even prior to the ruling on the opening of the pre-bankruptcy procedure; (iii) changes related to the effects of the settlement, etc.

It appears from the preliminary available data that the amendments have achieved some success. Specifically, by the end of January 2013, FINA received more than 3.000 requests for initiation of pre-bankruptcy settlement procedure. However, as the initial hearings were scheduled for February 2013 it remains to be seen how these procedures will end and whether the Act will ultimately fulfill its intended goals.

Overview: The Act on Financial Operations and Pre-Bankruptcy Settlement