MINISTRY OF FOREIGN AFFAIRS AND EUROPEAN INTEGRATION CROATIAN PARLIAMENT

PROMULGATING THE ACT ON AMENDMENTS TO THE COMPANIES ACT

Article 1

In the Companies Act (Official Gazette 111/93, 34/99, 52/00 and 118/03) in Article 2, paragraph 3 the word “and” between the words “General partnerships” and “limited partnerships” is replaced with a comma and the words “and economic interest groupings” is added after the words “limited partnerships”; the comma after the words “limited liability companies” is replaced with the word “and” and the words “and economic interest groupings” are deleted.

Article 2

In Article 3, after paragraph 7, the paragraph number “(9)” is replaced with paragraph number “(8)”.

Article 3

In Article 8, paragraph 3, item 1, after the word “seat”, the words “and business activities” are added.

Item 2 is amended to read:

2. name, or names, tax number and residence of the persons authorized to represent the founders in the branch.

Article 4

In Article 20, paragraph 1, the full stop is deleted, a comma added, followed by the words “and Arabic numerals may also be used.”

Article 5

In Article 21, paragraph 4, a sentence is added at the end which reads: “The same shall apply to the content of the company’s webpages.”

In paragraph 5, after the words “letters”, and the words “and webpages” are added.

Item 3 is amended to read:

3. the surnames and at least one name of the management board members, and, for joint stock companies, of the executive director and chairman of the supervisory board or management board.

Article 6

In Article 40, paragraph 1, after the words “management board”, a comma and the following words are added “or the executive director,”.

In paragraph 2, after the number “260”, the words “Article 272.d,” are added.

In paragraph 4, after the number “260”, the words “Article 272.d,” are added.

Article 7

In Article 62, paragraph 4, after the words “supervisory”, a comma and the words “or management” are added.

Article 8

In Article 64, the words “A court registration” are replaced with the word “Entry”.

Article 9

In Article 82, the word “forbid” is replaced by the word “revoke the authority of”.

Article 10

In Article 86, the number “(1)” is added before the initial word “The”.

Paragraph 2 is added which reads::

(2) Companies in which no member is a natural person are obliged to submit an annual financial report together with the company standing report, without delay after the acceptance of the same by the company members, and upon completion of the audit of the annual financial report as prescribed by law or other company agreement, the auditor’s report shall be submitted to the court register for the purpose of entry and announcement of that entry.

Article 11

In Article 93, the word “forbid” is replaced by the words “revoke authority of”.

Article 12

After Article 138, Article 138a and the title preceding it are added and read:

“Submission of the company reports to the court register

Article 138a

The provisions of Article 86, paragraph 2 of this Act are applied mutatis mutandis to limited partners in which none of the partners is a natural person.”

Article 13

In the title preceding Article 165, the words “bearer shares or” are deleted.

In Article 165, paragraph 1, the words “bearer shares or” are deleted.

In paragraph 2, the first sentence is deleted. The second sentence begins with the words “If the share is issued prior to payment of the full amount for which it is issued”, and the word

“The” is written with a small case letter.

Paragraph 3 is deleted.

Article 14

In Article 170, paragraph 1, item 2, the words “kind and” are deleted.

In item 4, after the words “made out” the comma is replaced by a semicolon and the words “or the indication that it is a bearer share” are deleted.

Article 15

In Article 172, paragraph 2, item 4, the words “or bearer shares” are deleted.

In item 10, the words “type and” are deleted.

Article 16

In Article 173, paragraph 3, item 5, the words “shares have been issued as registered or as bearer shares” are replaced with the words “shares have been issued”.

Paragraph 3, item 6 is altered to read “6. whether the company has a management and supervisory board or a management board and, respectively, the number of members of the management and supervisory boards, or the management board and executive directors;”.

Article 17

In Article 178, paragraph 2, the comma after the words “are issued” and the words “an indication as to whether they are registered or bearer shares” are deleted.

Article 18

In Article 180, paragraph 4, the full stop is replaced by a comma and the words “or the executive directors.” are added.

Article 19

In Article 181, paragraph 2, item 4, the following words are added at the end “or the executive directors or management board”.

In item 5, after the word “board”, a comma and the words “or the executive director or member of the management board,” are added.

Article 20

In Article 182, paragraph 1, after the word “board”, a comma and the words “or the executive directors or members of the management board,” are added.

In paragraph 2, item 1, after the word “board”, a comma and the words “or the executive director or member of the management board,” are added.

In item 2, the words “or the executive director or member of the management board,” are added at the end.

In item 3, after the word “board”, a comma and the words “or the executive director or member of the management board,” are added.

Article 21

In Article 183, paragraph 1, after the word “board”, a comma and the words “or the executive directors or members of the management board,” are added.

In paragraph 3, the spelling of a Croatian word is corrected, with no relevance to the English translation.

Article 22

In Article 186, the full stop is replaced by a comma and the words “or all executive directors and members of the management board”.

Article 23

In Article 187, paragraph 1, item 4, after the word “board”, a comma and words “or executive directors,” are added.

In item 5, after the word “boards”, a comma and the words “or executive directors and members of the management board,” are added.

In paragraph 2, item 5, the following words are added at the end “or executive directors and members of the management board”.

Article 24

In Article 188, paragraph 2, in the first sentence, after the word “boards”, a comma and the words “or executive directors and members of the management board,” are added.

In paragraph 3, item 2, the words “contain provisions restricting or diminishing creditors’ rights” are replaced by the words “contain contrary provisions that exclusively or predominantly serve to protect the company creditors or are otherwise passed in the public interest”.

Article 25

In Article 189, item 6, after the words “board”, a comma and the words “or executive directors and members of the management boards” are added.

Article 26

Article 190, paragraph 1, item 3 is amended to read:

3. full name or firm name, domicile or seat or, if the founder is a natural person, his tax number;

In paragraph 2, after the word “boards”, a comma and the words “or executive directors and members of the management board,” are added.

Article 27

In Article 191, paragraph 1, in the second sentence, after the word “management”, a comma and the words “or executive directors” are added and the Croatian word translated as “shall” is replaced by its plural form with no relevance to the English translation.

Article 28

In the title preceding Article 193, a comma and the words “or executive directors and members of the management board” are added.

Article 29

In Article 194a, paragraph 6, the word “price” is replaced by the word “fee”.

Article 30

In Article 196, paragraph 1, throughout item 3, after the words “number” and “quantity”, the comma and word “type” are deleted.

In item 5, after the word “seat” the words “and tax number for natural persons” are added.

In item 8, the words commercial register” are replaced by the words “court register”.

Article 31

In Article 198, paragraph 2, item 1, after the word “number”, the comma and the word “type” are deleted.

Article 32

In Article 201, paragraph 3, in the first sentence, the words “of a certain type or” are replaced with the words “and which”.

Article 33

In Article 202, in the first sentence, after the word “management”, a comma and the words “or the executive directors” and the Croatian word translated as “shall” is replaced by its plural form with no relevance to the English translation.

Article 34

In Article 203, paragraph 2, the words “of a particular type or” are replaced by the word “or a certain”.

Article 35

In Article 208, paragraph 1, the misspelling of the Croatian word translated as “vote” is corrected, with no relevance to the English translation.

Article 36

In the title preceding Article 222, the words “and capital reserves” are added.

In Article 222, paragraph 1, the words “capital of the profits” are replaced by the words “capital reserves (bound reserves)”.

After paragraph 1, a new paragraph 2 is added which reads::

(2) The company shall contribute the following into capital reserves

1. the share of the paid amounts for which shares are issued exceeding the nominal amount of the share and, for shares issued without a nominal amount, that amount exceeding the book value of the base capital relating to shares;

2. the share of the amount paid by the company for the acquisition of exchangeable bonds or bonds with a share purchase option exceeding the nominal amount of the issued bonds;

3. the amount by which the base capital is simply reduced in order to contribute funds into capital reserves.” In former paragraph 2, which becomes paragraph 3, after the words “Statutory reserves”, the words “and capital reserves” are added.

In former paragraph 3, which becomes paragraph 4, after the word “reserves” the words “and capital reserves” are added and after the words “Statutory reserves”, the words “and capital reserves” are added.

Article 37

After Article 222, a new Article 222a and the preceding title are added and read:

“Reserves on own shares, statutory and other reserves

Article 222a

(1) Only amounts stemming from net profits of the fiscal year or transferred profits from previous years may be contributed to reserves from profit.

(2) If a company acquired its own shares during the fiscal year, for that year, it must contribute the amount corresponding to the amount paid for acquisition of the own shares into reserves for those shares. In the reserves for own shares, the amount entered must correspond to the amount shown for those shares in the assets side of the balance sheet.

Amounts for statutory reserves may also be entered, if so determined under the articles of association that they may be used for such purpose, as may amounts from other reserves and profits exceeding the amounts of transferred loss that could not be covered from the net profits of the fiscal year. Reserves for own shares may be repealed only if those shares are alienated or withdrawn or are reduced by the amount by which they exceed the lower value recorded for own shares in the assets of the balance sheet.

(3) If the articles of association entitle the company to have statutory reserves, the articles of association must lay down

1. the level of those reserves in absolute amounts or the share of share capital or total own capital of the company;

2. share of the amount of net profits, reduced by the amount used to cover transferred losses,

the amount contributed into statutory reserves and the amount contributed to reserves of own shares if the company is entitled to such which, in a given fiscal year, are intended for the creation of statutory reserves;

3. the intent for which such reserves may be used.

(4) Statutory reserves may be used only for the purposes laid down in the articles of association.

(5) The company may use other reserves for any other purpose if not used for the purpose listed in paragraph 2 herein, unless otherwise laid down by the articles of association.”

Article 38

In Article 223, a new paragraph 4 is added which reads:

“(4) If the general meeting does not pass a decision on the use of profits, on the date shareholders acquire the claim for payment of dividends determined by that decision, which may not be more than 30 days after the date of passing the decision, the shareholders shall acquire the right to claim payment of the dividends upon expiry of the date of conclusion of the general meeting at which the decision was passed. Upon acquisition on the part of the shareholders, claims for payment of dividends shall be separated from shares with the realization of the acquired rights. In the decision on the payment of dividends, a date for maturity of such claims may be determined, which may not be more than 30 days from the date of acquisition of such claims by shareholders. If the date of maturity for claims is not determined at the general meeting, such claims shall mature upon expiry of 30 days from the date of their acquisition.”

Article 39

In Article 226, paragraph 1, the words “Registered shares shall be entered” are replaced by the words “Shares shall be entered”.

In paragraph 2, the words “having a registered share” are deleted.

In paragraph 3, in the first sentence, the word “registered” and in the second sentence, the word “registered” are deleted.

Article 40

In the title preceding Article 227, the word “registered” is deleted.

In Article 227, paragraph 1, the word “Registered” is deleted and the word “shares” is written with a capital letter.

Article 41

In Article 230, paragraph 3, in the third sentence, the word “registered” is deleted.

Article 42

Article 233 is amended to read:

(1) The company can acquire its own shares pursuant to the authority for their acquisition of the general meeting, which shall be valid for a maximum of 18 months and which determines the conditions under which they may be acquired and, in particular, the largest number of shares that may be acquired, the time period for which the authorization for the acquisition of shares is given and, if the shares are acquired through payment, the maximum and minimum value which the company may pay. The company may not acquire its own shares for the purpose of their trading.

Upon each acquisition of shares, the management board must establish whether the conditions prescribed under this Act have been met.

(2) Upon acquiring the shares from paragraph 1 of this Article and their handling, the provisions of Article 211 of this Act shall apply. These provisions shall be considered applied if the shares are acquired, or if they are handled, on the organized securities market. For other handling of the shares, a decision of the general meeting to such effect shall be required.

Upon acquiring shares, the provisions of Article 308, paragraphs 3 and 4 of this Act shall apply, mutatis mutandis. The general meeting may give the management board authority to revoke the own shares, without the need for a special decision to that effect.

(3) The company may acquire its own shares without the need to receive authorization from the general meeting

1. if this is necessary for the company to avoid serious hardship in the immediate future;

2. if the shares are to be offered for acquisition by employees of the company or of an affiliated company, such that within the deadline of one year of the date of acquisition, those shares much be transferred to those persons;

3. if shares are acquired to compensate company shareholders or minority shareholders of the dependent companies, according to the provisions of this Act;

4. if the acquisition is not for payment or if through the acquisition a financial institution purchases the shares on commission;,

5. if the shares are acquired from shareholders for the reason that the amount for which they were issued was not paid in full;

6. pursuant to the universal law of inheritance;

7. pursuant to the decision of the general meeting on the revocation of shares based on provisions to reduce the share capital;

8. competition imposed by the court for the purpose of settling a claim towards a shareholder.

(4) Shares acquired in the manner prescribed in paragraph 1 of this Article, and for the purpose listed in paragraph 3, items 1 to 3, 5 and 8 of this Article, together with the own shares already in the company’s possession may not account for more than ten percent (10%) of the share capital of the company. Further, such an acquisition is only permitted if the company creates the prescribed reserves for those shares such that the net company assets as listed in the financial reports for the last fiscal year does not, due to the acquisition of shares, become less than the amount of the share capital and reserves which it must possess by law or by the articles of association, and which may not be used to pay out shareholders. For that purpose, the amount of the share capital must be calculated and reduced by the amount in which that capital is not yet paid if that amount is not listed in the assets of the balance sheet. In the cases outlined in paragraph 1 of this Article and paragraph 3, items 1, 2, 4 and 8, the acquisition of shares is permitted only is they are paid in the full amount for which they are issued.

(5) In the cases outlined in paragraph 1 and paragraph 3, item 1 of this Article, the management board must inform the following general meeting of the reasons for and purpose of the acquisition of the shares, their number and share in the share capital and the countervalue of what the company gave for those shares.

(6) The acquisition of shares contrary to the provisions of paragraphs 1 and 3 of this Article is valid and the compulsory legal business on the transfer of shares shall be null and void.”

Article 43

In Article 234, paragraph 1, the grammatical structure of the first sentence is changed in the Croatian version, with no relevance to the English translation. In the third sentence, the words “reducing its share capital, or statutory reserves or reserves established by the articles of association, not to be used for payments to shareholders” are replaced by the words “reducing the net assets beneath the level prescribed in Article 233, paragraph 4 of this Act”.

In paragraph 2, the words “paragraphs 1 and 2” are replaced by the words “paragraphs 1, 3 and 4”.

After paragraph 2, new paragraphs 3 and 4 are added and read:

(3) When the company is permitted to provide someone with an advance payment, loan or insurance for the acquisition of own shares, including during the increase of the share capital, the company may do so under the following circumstances

1. the shares must be acquired under fair market conditions, particularly in the sense of what the company receives for that, including interest on the date of the loan, insurance given for the payment of the loan and return of the advance payment, such that the credit rating of the third person(s) participating in the deal must be verified in advance, and for which the company shall be held accountable;

2. in order to close the deal, the management board must obtain the prior approval of the general meeting by means of a decision arising from a majority vote comprising a minimum of two-thirds of the share capital represented at the general meeting at which the decision is being made. Prior to making its decision, a written report is submitted to the general meeting listing the reasons for entering into such a deal, the company’s interest in the deal, the conditions under which the deal is to be entered into, the risks involved for the company, with respect to its liquidity and solvency and the price by which the third person is to acquire the shares. The report must also be submitted to the registry court for announcement that it was submitted to the court, and on which date;

3. the amount of financial support given to the third person(s) must not, at any time, result in a decrease of the company’s net assets to a level beneath that listed in Article 233, paragraph 4 of this Act, bearing in mind reductions of net assets arising from previous acquisitions of the company’s own shares, either directly or through other persons. In the balance sheet, the company must list the reserves that cannot be used to pay shareholders among the liabilities, in the total amount and in the prescribed manner for the financial assistance provided to third persons.

(4) The legal business from paragraph 1 of this Article, which assists members of the management board, or executive directors and members of the supervisory or management board of the company, to acquire the company’s shares, even during increases in share capital, or the company is considered to be a controlling company over the company whose shares are the subject of interest, or if this is carried out by a third person on their behalf or for their account is null and void if it is not in the best interests of the company.”

Article 44

In Article 236, paragraph 1, the words “paragraph 1 and 2” are replaced by the words “paragraphs 1, 3 and 4”.

In paragraph 2, after the words “paragraph 1”, a comma and the words “3 and 4” are added.

Article 45

In Article 237, in the first sentence, the words “items 1 to 5 and item 7 and paragraph 2” are replaced by the words “and 3, items 1 to 6 and 8 and paragraph 4”. In the third sentence, the words “233, paragraph 2” are replaced with the words “233, paragraph 4”. In the fourth sentence, the words “paragraph 3” are replaced by the words “paragraph 5”.

Article 46

In Article 238, paragraph 1, in the first sentence, the number “2” is replaced by the number “3”. In the second sentence, after the word “amount”, the words “of the share capital” are added, and the number “2” is replaced by the number “4”.

Article 47

In Article 239, paragraph 2, item 1, the words “causing bankruptcy, violation of accounting regulations, inflicting damage to creditors, preferential treatment of creditors, abuse of position in the procedure of compulsory settlement or bankruptcy, unauthorized disclosure or procurement of business or trade secrets or fraud” are replaced by the words “abuse of bankruptcy, abuse of the bankruptcy procedure, inflicting damage to creditors or violations of accounting obligations”.

Article 48

In Article 241, paragraph 5, the number “49” is replaced by the number “41”.

Article 49

In Article 244, paragraph 1, after the first sentence, a new sentence is added which reads:

“Unless the decision on appointment states differently, the mandate of the chairman and members of the management board shall begin upon the date of the decision of appointment, regardless of the entry into the court register.”

Article 50

Article 244a is amended to read:

(1) The chairman or member of the management board may submit his or her resignation regardless of the request for compensation of damages that the company may have towards them stemming from the contract entered into with the company. A decision of the supervisory board is not required for termination of membership in the management board.

Unless otherwise stated in the resignation, and if there is sound reason, it shall become effective on the date submitted to the company or, contrarily, upon expiry of 14 days from that date.

(2) The resignation from paragraph 1 of this Article shall be submitted in written form to the supervisory board. The remaining members of the management board must be informed of the resignation immediately.

(3) A submitted resignation may only be withdrawn with the consent of the supervisory board.”

Article 51

Article 250 is amended to read:

(1) The management board must inform the supervisory board of

1. business policy and other principle issues regarding the future management of the business,

and deviations from previous forecasts, and their reasons;

2. profitability of the company business, particularly the return on equity;

3. the course of business, particularly revenues and the condition of the company;

4. business activities which could have a material impact on the profitability and solvency of the company.

(2) For a controlling company in a concern, the report shall also include the companies of the concern.

(3) The supervisory board may request the management board to submit reports on other issues of importance to the business and condition of the company.

(4) The management board shall submit a report on business policy at least once per year, unless a change of condition or new matters necessitate an immediate report; reports on profitability of the company and on the return on equity at the supervisory board meeting where annual financial statements are discussed; reports on current business activities and on the condition of the company at least once quarterly; reports on business activities which could have a material impact on the profitability and solvency of the company shall be submitted sufficiently early to allow the supervisory board to take a position regarding these issues.

(5) Reports shall be made conscientiously and accurately. They must be submitted in a timely fashion and, as a rule, be in writing.

(6) The supervisory board may at any time request the management board to provide information on matters related to business activities of the company which either have or reasonably may be expected to have a material impact on the condition of the company. The supervisory board may request the submission of reports on the condition of the company, or legal and business affairs with affiliated companies. Each member of the supervisory board can request the management board to submit the said report to the supervisory board. Should the management board refuse to do so, the member of the supervisory board may repeat the request for the submission if supported by at least one other member of that board. In that case, the management board is obliged to submit the said report.

(7) Each member of the supervisory board has the right to review the report. Unless otherwise decided by the supervisory board, each member has the right to receive a written copy of the report, at his or her request. Should the supervisory board conclude so, the report should also be given for review to members of the commissions of the supervisory board, in line with the conclusion. The chairman of the supervisory board is obliged to inform the supervisory board members of the report by the management board no later than the first session held after submission of the report.”

Article 52

After Article 250, new Articles 250a and 250b and the title preceding them are added and read:

“Annual report on the condition of the company

Article 250a

(1) The management board is obliged to submit a report on the condition of the company to the general meeting, once a year.

(2) In the annual report on the condition of the company, at least the development and business of the company and the financial condition in which it stands, with a description of the main risks and uncertainties it is exposed to must be correctly listed. This must be a balanced overview and complete analysis of the development and business results and position of the company, in line with the scope and complexity of its operations. The analysis must contain financial indicators and, if necessary, other indicators relating to certain business affairs, including announcements on environmental protection and employees may be given, to the extent necessary to comprehend the development, business results and condition of the company. Where necessary, the analysis must further explain the amounts listed in the annual financial reports.

(3) The report must also include and overview of

a) all important business events that arose during the fiscal year;

b) the expected future development of the company;

c) company activities in the area of research and development;

d) announcements on the acquisition of own shares;

e) the existence of branches of the company;

f) information on the use of financial instruments and information important for the judgement of the condition of company assets, its obligations, financial position, gains and losses, financial risk management objectives and policies, including the policy of taking loss protection measures and individual important types of envisaged business with special accounting requirements and the exposure of the company to price risk, credit risk, liquidity risk and cash flow risk.

(4) For companies whose shares are traded on the organized securities market, a statement on the application of the corporate governance code from Article 272p of this Act shall form an integral part of the report.

(5) The report from paragraph 1 of this Article must be public.

Consolidated annual report of the company

Article 250b

(1) The management of the controlling company with a seat in the Republic of Croatia, and the controlled company with a seat in that country or abroad, must submit a written consolidated report of the company to the general meeting, if one or more of the controlled companies are companies of capital.

(2) The consolidated annual report of the company must correctly report at least the development and business results and the financial condition of the companies included in the consolidation, taken as a whole, with a description of the main risks and uncertainties they are exposed to. This must be a balanced overview and complete analysis of the development, business results and financial position of the companies included in the consolidation, taken as a whole, in line with the scope and complexity of their business. The analysis must contain financial indicators and, if necessary, other indicators relating to certain business affairs, including announcements on environmental protection and employees may be given, to the extent necessary to comprehend the development, business results and condition of the company. Where necessary, the analysis must further explain the amounts listed in the consolidated annual financial reports.

(3) With respect to those companies, the report must also provide an overview of

a) all important business events that arose during the fiscal year;

b) the expected future development of the companies, taken as a whole;

c) activities of those companies as a whole in the area of research and development;

d) the number and nominal amount of shares, if shares are issued without a nominal value the book value of all shares of the controlling company held by itself, by the controlling companies or persons acting on the behalf of or for the account of those companies;

e) for all companies included in the consolidation, information on the use of financial instruments and information important for the judgement of the condition of company assets, its obligations, financial position, gains and losses, financial risk management objectives and policies, including the policy of taking loss protection measures and individual important types of envisaged business with special accounting requirements and the exposure of the company to price risk, credit risk, liquidity risk and cash flow risk;

f) a description of the main characteristics of internal control of controlling companies and the risk management system in relation to the procedure of preparing and drafting the consolidating the financial reports when the securities of a company are traded on the organized securities market; if the consolidated annual report of the company and the annual report on the condition of the company are submitted jointly, that information must be included in the part of the report including the statement on the application of the corporate governance code.

(4) When submitting the consolidated annual report of the company is requested alongside the submission of the annual report on the condition of the company, these two reports can be submitted as a single report. In drafting such a report, the main emphasis should be placed on which is more significant for the companies included in the consolidation, taken as a whole.

(5) In respect of the statement of application of the corporate governance code, the provisions of Article 272p of this Act shall apply mutatis mutandis.

(6) The report from paragraph 1 of this Article must be public.”

Article 53

In Article 252, paragraph 1, a second sentence is added which reads: “The conduct of a member of the management board is not contrary to the obligation of the manner of handling company affairs if, based on the appropriate information, it is possible to reasonably assume that he or she is acting out of the interests of the company in making corporate decisions.”

Article 54

In Article 254, paragraph 2, the number “20,000,000” is replaced with the number “80,000,000”.

Article 55

In Article 255, paragraph 2, item 3, after the words “management board”, a comma and the words “or executive director” are added.

In item 4, after the words “management board”, a comma and the words “or executive director” are added.

Article 56

In Article 256, paragraph 3, in the second sentence, the words “are registered shares and that such shares” are deleted.

Article 57

In Article 258, at the end a new sentence is added which reads: “Unless otherwise stated in the decision on selection or the statement on appointment, the mandate of the member of the supervisory board shall commence on the date the decision was made, or the statement given, regardless of the entry into the court register.”

Article 58

In Article 260, in the first and third sentences, after the words “share capital of the company”, the words “or at least 8,000,000 HRK of that capital” are added.

Article 59

Article 260a is amended to read:

(1) The chairman or member of the supervisory board may submit their resignation. No decision by the general meeting is necessary to terminate membership in the supervisory board.

(2) A written resignation is submitted to the company and, unless it states otherwise, shall be effective of the date of its submission. The company management board is obliged to immediately inform all members of the supervisory board of the resignation.

(3) A submitted resignation may only be withdrawn with the consent of the general meeting.”

Article 60

In Article 262, paragraph 2, between the words “or” and “selection”, the words “statement on” are added.

Article 61

In Article 264, paragraph 2, after the third sentence, a sentence is added which reads:

“Conduct contrary to the said obligations of the supervisory board shall not mean that the decisions made at the session are without effect.”

Article 62

In Article 269, paragraph 1, in the fourth sentence, before the word “majority”, the word “regular” is added.

Article 63

In Article 272, paragraph 1, a first sentence is added which reads: “The members of the supervisory board are obliged to act in the interests of the company.”

Article 64

After Article 272, a new subsection 2a, and new Articles 272a, 272b, 272c, 272d, 272e, 272f, 272g, 272h, 272i, 272j, 272k, 272l, 272m, 272n and 272o, and the title preceding them are added and read:

Subsection 2a

MANAGEMENT BOARD

**Selection of the company organization **

Article 272a

The articles of association may determine that the company has a management board in place of a management and supervisory board.

Composition of the management board

Article 272b

**(1) **The management board consists of at least three members. The articles of association can determine that the management board has more members. Where the law prescribes that a supervisory board must have an employee representative, the same shall apply for an employee representative in the management board. The provision of Article 254 of this Act shall apply mutatis mutandis for determining the number of members of the management board.

(2) With respect to the characteristics of persons who may be appointed as members of the management board, the provisions of Article 255, paragraph 2, items 2 to 5 of this Act shall apply mutatis mutandis such that the management board is considered to fall under the bodies of the company listed in that Article.

Selection, appointment of members of the management board, duration of the mandate and relations with the company

Article 272c

**(1) **The provisions of Article 256 of this Act shall apply mutatis mutandis to the selection and appointment of members of the management board.

(2) Members of the management board are selection, or appointed, for the duration determined in the articles of association, to a maximum of six years and may be reselected, or reappointed. The provision of the second sentence of Article 258 of this Act shall apply mutatis mutandis.

(3) The provision of Articles 269 to 271 of this Act shall apply mutatis mutandis to remuneration of a member of the management board, contracts entered into with the company and loans granted by the company.

Appointment of a member of the management board by the court

Article 272d

**(1) **The provisions of Article 257 of this Act shall apply mutatis mutandis to the appointment of members of the management board by the court, such that any member of the management board or shareholder may submit a proposal to the court, while executive directors are obliged to do so. If the management board also consists of an employee representative or such a representative must be included in the board, the employee council may also submit a proposal.

(2) Should the management board have fewer members than that envisaged by law or the articles of association for longer than three months, the court shall, at the proposal of one of the persons from the preceding paragraph herein, appoint the board members to the required number. In urgent cases, the court may do so at the proposal of the above persons prior to the expiry of that deadline.

(3) The mandate of the member of the management board appointed by the court shall expire with the beginning of the mandate of the member selected or appointed in line with the articles of association, in place of the missing member.

(4) The member of the management board appointed by the court has the right to compensation of expenses associated with carrying out the tasks and, if the management board member receives remuneration for his or her work, and also on that remuneration. The court shall determine the amount of compensation and remuneration at the proposal of the member in question. Pursuant to a court decision, seizure may be implemented.

Removal of a member of the management board

Article 272e

The provisions of Articles 259 and 260 of this Act shall apply mutatis mutandis to the removal of members of the management board.

Resignation of a member of the management board

Article 272f

The provisions of Article 260a of this Act shall apply mutatis mutandis to the resignation of members of the management board. Entry of changes in the management board and executive directors of the company and announcement thereof into the court register

Article 272g

**(1) **The provisions of Article 262 of this Act shall apply mutatis mutandis to the entry of changes in the management board and announcement thereof in the court register, such that the application for entry and changes announced is submitted by all executive directors and the chairman of the management board.

(2) The provisions of Article 245a of this Act shall apply mutatis mutandis to the entry of changes of executive directors of the company, such that the application for entry is submitted by all executive directors and the chairman of the management board.

Competences of the management board

Article 272h

(1) The management board manages the company, sets the foundations for carrying out the business activities, oversees management of company business and represents the company before the executive directors. When the management board represents the company before one of the executive directors, then none of the executive directors may participate in that representation.

(2) The management board is obliged to convene the general meeting when necessary for the interests of the company. This decision is made by means of a regular majority vote. The management board may entrust certain tasks relating to the preparation and running of the general meeting to the executive directors.

(3) The management board ensures that the company books are properly kept. It is obliged to take measures appropriate for the systematic supervision over the running of the company business, in order to reveal circumstances that could jeopardize the company and its business in time. The provisions of Articles 250a, 250b and 263, paragraph 2 of this Act shall apply mutatis mutandis.

(4) The provisions of Article 251 of this Act shall apply mutatis mutandis to the obligations of the management board concerning company losses, insolvency or overindebtedness.

(5) The provisions of Article 300a to 300e of this Act shall apply mutatis mutandis to the preparation and approval of annual financial reports, and the obligations listed therein for the company management board shall apply to the executive directors, and what is listed for the supervisory board shall apply for the management board. The articles of association may determine that the general meeting shall approve the financial reports Work of the management board

Article 272i

(1) The members of the management board select from among themselves a chairman and at least one deputy chairman, in the manner laid down in the articles of association. The chairman and deputy chairman of the management board may not be selected among the executive directors of the company.

(2) The management board may adopt rules of procedure for its work. The articles of association may regulate certain issues of the work of the management board, which shall constitute its obligation.

(3) The provisions of Article 264, paragraph 2 of this Act shall apply mutatis mutandis to the keeping of the minutes of the session of the management board and to the rights of the members of the management board thereof.

(4) The provisions of Article 264, paragraph 3 of this Act shall apply mutatis mutandis to the appointment of commissions of the management board and their authorities. Convening sessions, participations therein and decision-making in the management board

Article 272j

**(1) **The provisions of Article 265 of this Act shall apply mutatis mutandis to the convening of sessions of the management board.

(2) The provisions of Article 266 of this Act shall apply mutatis mutandis to participation in sessions of the management board.

(3) The provisions of Article 267 of this Act shall apply mutatis mutandis to decision-making in the management board.

(4) Members of the management board who also act as executive directors in the company shall not participate in decision-making on the appointment and revocation of appointment of executive directors, their liability and relations with the company. Members of the management board who also act as executive directors shall not be considered in the establishment of quorum or majority required for decision-making in those matters.

Duty of care and liability of members of the management board

**Article 272k **

The provisions of Article 272 of this Act shall apply mutatis mutandis to the duty of care and liability of members of the management board.

Executive directors

Article 272l

**(1) **The management board appoints one of more executive directors for a mandate, the duration of which is determined in line with the articles of association, but for no longer than six years. If more than one executive director is appointed, one must be appointed the chief executive director. The provision of the second sentence of Article 244, paragraph 1 of this Act shall apply mutatis mutandis. Deputy executive directors may be appointed, and shall be regulated in the same manner as the appointment of deputy members of the management board. Executive directors may be appointed from among the members of the management board, but only such that the majority of members of the management board are not executive directors. The appointment of executive directors must be entered into the court register. If a person who is not a member of the management board is appointed an executive director, he or she must fulfil the criteria laid down in Article 239, paragraph 2 of this Act. The articles of association may prescribe other criteria for persons appointed as executive directors and more specifically regulate the manner of appointment by the management board.

(2) The executive directors manage the company business. If more than one executive director is appointed, they are authorized to manage company business exclusively jointly. The articles of association or the rules of procedure on the work of executive directors as passed by the management board may determine a different manner of managing the company business. The authorities granted by law to the management board may not be transferred to he executive directors. The executive directors are obliged to submit an application for entry into the court register and to submit the appropriate supporting documents to the registry court as prescribed in this Act for members of the company management board.

(3) The provisions of Article 242 of this Act shall apply mutatis mutandis to the management of business of the company and its affiliated companies by the executive directors, their authorities, obligations and liabilities therein, such that the provisions laid down in this Act for the company management board shall apply.

(4) If the prepared annual or periodical financial reports or an assessment by the executive directors reveals that the company has losses more than one-half the amount of the company share capital, they must inform the chairman of the management board thereof without delay. The same applies in the case the company becomes insolvent or overindebted.

(5) If the company has more than one executive director, they may adopt rules of procedure for their work, unless the articles of association place such authority under the competence of the management board, or if that organ should adopt it. The articles of association may also regulate certain issues for the executive directors that would otherwise be regulated under the rules of procedure, and these shall be binding. The executive directors shall adopt the rules of procedure only through a unanimous vote.

(6) Unless otherwise regulated by the articles of association, the management board may decide at any time to revoke the appointment of an executive director. This shall not impact the contract entered into between the executive directors and the company.

(7) Unless otherwise regulated by the articles of association or the rules of procedure, the executive directors are obliged to report to the management board in accordance with the provisions of Article 250 and prepare the reports from Articles 250a and 250b of this Act.

(8) The provisions of Articles 244a and 247 through 249 of this Act shall apply mutatis mutandis to the executive directors.

(9) The provisions of Articles 252, 273 and 273a of this Act shall apply mutatis mutandis to the duty of care and liability of executive directors.

(10) Provisions concerning executive directors shall also apply to their deputies.

Representation

Article 272m

**(1) **The company is represented by the executive directors, and the provisions of Article 241 and 242 of this Act shall apply mutatis mutandis.

(2) The management board represents the company towards the executive directors.

Signatures of the executive directors

Article 272n

The executive directors shall sign on behalf of the company, by which they must list the firm name and the phrase “executive director”.

Appointment of executive directors by the court

Article 272o

The provisions of Article 245 of this Act shall apply mutatis mutandis to the appointment of executive directors by the court.”

Article 65

The current Subsection 2a and current Article 272a become Subsection 2b and Article 272p and are amended to read:

Subsection 2b

APPLICATION OF THE CORPORATE GOVERNANCE CODE

Statement on application of the Corporate Governance Code

Article 272p

(1) The management and supervisory boards, or management board of a company whose shares are traded on stock market are obliged to ensure that, in a special section of the annual report on the condition of the company, the management board lists at least the following

a) information on the Corporate Governance Code it is bound by and/or the Corporate

Governance Code the company applies voluntarily and/or the practice of corporate governance applied above and beyond that which is required by the regulations, and information as to where the appropriate Corporate Governance Code or the practical corporate governance applied is published;

b) whether the company deviates from the Corporate Governance Code as outlined under item a and explanation as to where such deviation occurs and reasons for such deviation;

c) description of the basic criteria of implementation of internal supervision in the company and risk management with respect to financial reporting;

d) information on significant indirect and direct shareholders in the company, including the direct holding of shares in pyramidal structures and mutual shares, holders of securities with special control rights and a description of those rights, restrictions on the right to vote such as restrictions on the right to vote on a certain percentage or number of shares, time limits for activating the right to vote or cases in which, in co-operation with the company, the financial rights from those securities is separate from holding such securities, rules on appointment and revocation of appointment of the members of the management or management board and amendments to the articles of association, on the authorities of the members of the management or management board, particularly with respect to the authorise to issue shares or to acquire own shares;

e) information on the composition and activities of the management and supervisory boards, or management board and their auxiliary bodies.”

Article 66

Article 273, paragraph 6, item 1 is deleted.

The previous items 2 and 3 become items 1 and 2.

Article 67

In Article 273a, paragraph 1, in the second sentence, the word “only” is added after the word “may” and the words “conclusion of” are added before the words “general meeting”.

In paragraph 4, in the second sentence, the words “set aside” are replaced the words “set aside or rejected”.

Article 68

In Article 279, paragraph 1, the word “a month” is replaced by the words “30 days”.

In paragraph 2, in the first sentence, the words “the depositing of shares by a specified date prior to the general meeting” are deleted. In the second sentence, the words “the shares must be deposited, i.e. by which” are deleted.

Paragraph 3 is deleted.

Former paragraph 4 becomes paragraph 3.

After paragraph 3, a new paragraph 4 is added which reads:

(4) The time limits in this Article shall commence as of the date the general meeting is held backwards, such that the day it was to be held is not taken into consideration. If the time limit expires on a non-working day, it shall be considered expired as of the following working day.”

Article 69

In Article 281, paragraph 1, in the third sentence, the words “whose shares are quoted on the stock exchange” are replaced by the words “whose shares are traded on the organized securities market”.

Paragraph 2 is amended to read:

(2) The foregoing communication shall be made by the management board to shareholders who, after the notification of the convening of the general meeting, have requested to receive such communication.”

**Article 70 **

In Article 284, paragraph 1, the words “for the shareholders the company’s bearer shares, or where, in the case of registered shares which he does not own” are replaced by the words “shares which he does not own but”.

In paragraph 2, in the second sentence, the word “registered” is deleted.

In paragraph 7, in the first sentence, the words “holding bearer shares or if it is, for the shareholders owning registered shares” are replaced by the words “that are”, and a grammatical change is made to the Croatian sentence with no relevance to the English translation.

Article 71

In Article 285, paragraph 4, in the second sentence, the word “registered” is deleted.

Article 72

In Article 286, paragraph 3, a misspelling of the Croatian word “record” is corrected, with no relevance to the English translation.

Article 73

In Article 287, paragraph 2, item 5, the full stop is replaced by a semicolon and item 6 is added which reads:

6. if the announcement is available on the company webpage at least seven days prior to the date of commencement of the general meeting, and for its duration.”

After paragraph 4, a new paragraph 5 is added which reads:

(5) The general meeting may, in the company articles of association or rules of procedure, authorize the chairman of the general meeting to set an appropriate time limit for the realization of the shareholder’s right to pose questions and for debate and may regulate this in greater detail. The chairman of the general meeting shall also have this authority if not prescribed by the articles of association or rules of procedure on the work of the general meeting, if he deems the time limit necessary for the orderly functioning and reasonable duration of the general meeting.”

Article 74

In Article 291, paragraph 6, in the second sentence, the words “unless otherwise provided for by the articles of association” are replaced by the words “unless the articles of association provide for other, less formal forms of assistance”.

Article 75

In Article 292, paragraph 1, the first sentence is deleted.

Article 76

In Article 300, paragraph 3, a sentence is added which reads: “The person filing an application for appointment of a special auditor is obliged to compensate the company with the paid court fees and costs concerning the special audit where claims made intentionally or by gross negligence resulted in the action of the special audit and if the auditor’s report is positive.”

Article 77

In Article 300d, in front of the word “Where”, the item number “(1)” is added.

Paragraph 2 is added which reads:

(2) After the management and supervisory boards, or management board or general meeting approve the annual financial reports and consolidated financial reports when so obliged, the management board, or the executive directors are obliged to submit the same together with the annual report on the condition of the company and the consolidated annual report and auditor’s report to the court register without delay, for the entry of the submission and announcement thereof.”

Article 78

The title preceding Article 301a and Article 301a are deleted.

Article 79

In Article 302, paragraph 2, the word “registered” is deleted.

Article 80

In Article 304, paragraph 1, in the second sentence, after the word “majority”, the comma is deleted and the words “but not less than the majority of votes representing two-thirds of the share capital represented at the general meeting at which the decision is made,” are added.

In paragraph 2, in the second sentence, after the word “shares”, the words “granting the right to vote” are added.

Article 81

In Article 309, paragraph 3, item 1, the words “a copy of each subscription form and” are erased and the words “Croatian Securities Commission” are replaced with the words

“Croatian Agency for Supervision of Financial Services”.

Article 82

In Article 313, paragraph 1, the words “with the purpose of converting convertible bonds into shares, or exercising priority rights for the subscription of new shares given by the company” are replaced by the words “which will be carried out only to the extent necessary to realize the right to the acquisition of shares from paragraph 2 of this Article”.

In paragraph 2, item 3, after the words “management board”, a comma and the words “or executive directors” are added, and in item 4, the number “504” is replaced by the number “504a”, and the number “5” is replaced by the number “2”.

Article 83

In Article 324, paragraph 3, the Croatian word “immaterial” is replaced by another Croatian word of the same meaning with no relevance to the English translation.

**Article 84 **

In Article 328, paragraph 1, after the words “reserves”, the words “from profit” are added.

Article 85

In the title of Article 329, after the word “reserves”, the words “from profit” are added.

In Article 329, paragraph 1, in the first sentence, after the words “reserves”, the words “from profit” are added. In the second sentence, the word “Reserves” is written with a lower case letter and the word “Capital” is added before it, and after the word “if”, a comma is added and the words “together with statutory reserves,”, and the word “value” is replaced by the word “amount”.

Article 86

In Article 345, paragraph 2, in the first sentence, the full stop is deleted and the words “or the court rules that the creditor’s claim need not be settled”.

Article 87

In Article 349, paragraph 2, the words “capital profits and reserves” are replaced by the words “statutory reserves and capital reserves”, and the words “reduction of reserves” are replaced by the words “and that the remaining statutory and other reserves from profit have been spent”.

Article 88

In the title preceding Article 359, the word “adoption” is replaced by the word “approval”.

Article 89

In Article 360, paragraph 4 is amended to read:

(4) The decision of the general meeting may be set aside for the reason that incorrect or incomplete notification was made, or that the making of the notification was withheld, if the shareholder with an objective assessment believes the giving the notification is an important assumption for preserving the right to participation at the general meeting and other membership rights. An action for setting aside the decision of the general meeting may not be based on the fact that incorrect, incomplete or insufficient notification was given on the establishment of the level or suitability of the remuneration, severance, additional payments or other forms of compensation, if prescribed by law that complaints for such are realized in out-of-court proceedings.”

Article 90

In Article 362, item 1, after the word “meeting”, a comma and the words “and who acquired shares prior to the announcement of the agenda of the general meeting”.

In item 3, the full stop at the end is deleted and the words “if they acquired shares prior to the announcement of the agenda of the general meeting;”

Article 91

In Article 363, paragraph 4, a second sentence is added which reads: “In the proceedings, the shareholder may join the plaintiff as an intervener no later than one month from the date of announcement.”

Article 92

In Article 364, paragraph 1, after the fourth sentence, a fifth and sixth sentence are added and read: “The company whose shares are traded on the organized securities market is obliged to announce the court judgement in the company journal without delay. If the court judgement on the action to nullify or the set aside the decision of the general meeting establishes that the decision of the general meeting is nullified, the judgement shall not be entered into the court register if the final binding court judgement from Article 366a, paragraph 1 establishes that the lack of a decision does not impact its effect, and therefore, the validity of the entry of the decision into the court register.”

Article 93

After Article 366, a new Article 366a and the title preceding it is added which reads:

“Entry of a decision which is the subject of an action to set aside into the court register

Article 366a

(1) If an action is sought to set aside the decision of the general meeting on the increase or reduction of the share capital, issue bonds, corporate contract or in cases when the action to set aside the decision of the general meeting is not permitted under this Act, at the proposal of the company, a civil suit may rule to allow the decision to be entered into the court register and its lacking shall not impact the effect of the entry. The court will bring such a judgement when an action is not permitted or is obviously unfounded or, considering the weight of the violation or rights outlined in the action and the interest of the applicant and its shareholders, it is necessary that the decision of the general meeting come immediately into effect in order to eliminate significant damage for the applicant and its shareholders. The facts upon which the judgement is made must be probable.

(2) The legally binding judgement from paragraph 1 of this Article shall be binding for the registry court. Its establishment shall affect everyone. A decision on the court’s proposal must be made within three months of the date it was made. Any postponements in passing the judgement must be justified by a judgement, against which there can be no appeal. In urgent cases, a judgement may be passed without a hearing. An appeal may be lodged against the judgement within three days of receipt by the parties. The second-instance court is obliged to rule on the appeal within thirty days.

(3) If the action to set aside is proven to be founded, the company having received the judgement from paragraph 1 of this Article is obliged to compensate the plaintiff for damages incurred with the entry of the decision into the court register pursuant to the court judgement. No request may be made to eliminate the effect of the entry of the decision into the court register.”

Article 94

In Article 376, paragraph 2, in the first sentence, a grammatical change is made to the Croatian sentence, with no relevance to the English translation.

Article 95

In Article 385, paragraph 1, in the third sentence, the words “no founder” are replaced by the words “the founder”. The fourth sentence is amended to read: “The total amount of all business shares must equal the amount of the company share capital.”

Article 96

In Article 390, paragraphs 3 and 8 are deleted.

Paragraphs 4, 5, 6 and 7 become paragraphs 3, 4, 5 and 6.

Article 97

Article 391 is amended to read:

(1) Under the company agreement, the members of a company may be required to make, in addition to capital contribution payments, additional payments in money or fulfil other requirements with asset value. This shall not increase the share capital of the company.

(2) The obligation of payment in money of the members referred to in paragraph 1 of this Article shall be proportionate with their business shares in the company for those members of the company obliged to fulfil other requirements. Any provision of a company agreement stipulating some other proportion of additional payments shall be without effect. A company agreement may provide that the said obligation be limited to a specific amount, which shall be determined in accordance with the proportion of the members’ business shares. A company agreement may also stipulate that company members may decide on any additional payments to be made to the company. Unless the company agreement explicitly provides that such a decision can be taken with a minimum three-fourths majority of the vote, the members of the company may take such a decision only unanimously.

(3) Where a member, when invited to do so, fails to fulfil his obligation of additional payment to the company as limited to a specific amount, and where not limited in such a manner, when it does not exceed the amount determined in the company agreement, the provisions of this Act governing late payment of capital contributions shall apply, unless the company agreement provides otherwise. A predecessor of a company member shall be liable for payments to the company only to the extent of his obligation at the moment of registration of his application for exit from the company in the business share register.

(4) Where the obligation to make additional payment is not limited to a specific amount, any member of the company who has paid his capital contribution in full may be relieved of the payment obligation relating to his business share by putting his business share at the disposal of the company within one month from the moment he was invited to make the payment. Where he fails to pay what is demanded of him or fails to use the aforementioned right within the stipulated time limit, the company may notify him by registered mail that it is deemed that the has placed his business share at the disposal of the company. The company shall be obliged to put the member’s business share up for public sale, which involves a public bidding procedure, within one month of receipt of the aforementioned statement by the member of the company, or from the aforementioned notification to the member, while sale through any other channel shall be possible only upon approval from the member of the company whose business share is being sold. As regards the proceeds of the sale, the company shall pay the member of the company any amount remaining after costs of the sale have been covered and the obligation of additional payment has been settled. Where no settlement of the company’s claim can be achieved from the proceeds of the sale of a business share, the business share shall belong to the company which can sell it for its own account.

The company agreement may provide that the settlement of the obligation of a company member in the manner described in this paragraph may be restricted to cases involving demands for payment to the company which exceed a certain specified amount.

(5) The amounts paid may be returned to the members of the company if not required for the coverage of company losses. The return of the amounts paid shall be allowed to all the members only and in proportion with their capital contributions and not before expiry of a three-month period from the moment when the company announces its decision to make such a return. Where a company agreement allows additional payments to be made even before capital contribution payments are made in full, the return of such amounts shall not be allowed before full capital contribution payments are made. Where amounts paid are returned this restriction notwithstanding, the recipients of the amounts so returned, the management board members and other members of the company shall be liable to the company pursuant to the provisions of Articles 407 and 430 of this Act.

(6) If, in addition to the payment of business share, one or more members obliges the company to requirements that do not consist of payment in money but that have asset value, the company agreement must determine the scope and assumptions for the fulfilment of such requirements, the measures for determining compensation which the company must pay and the contractual penalties in the case of non-fulfilment or untimely fulfilment of the said obligations. The payment of the company may not be greater than the value of the requirements to be fulfilled.”

Article 98

In Article 394, paragraph 4, item 3, the words “Article 239, Article 2” are replaced by the words “Article 239, paragraph 2”.

Article 99

In Article 401, paragraph 1, the words “whose names had been entered into business share registers” are replaced by the words “considered holders towards the company”.

Article 100

After Article 406, Article 406a and the title preceding it are added and read:

Capital reserves

Article 406a

(1) The company contributes the following to the capital reserves

1. the share of paid amounts for which business shares are issued that exceed the nominal amount of the share capital;

2. the amount of additional payments by company members for the purpose of acquisition of special rights in the company;

3. amounts of other additional payments by company members, such as additional requirements;

4. amounts by which the share capital is simply reduced in order to contribute funds in capital reserves.

(2) Only amounts from the net profit of the fiscal year or from the net profit from earlier fiscal years may be contributed to reserves from profit; these include reserves for own business shares, reserves envisaged under the company agreement and other reserves.

(3) The provisions of Article 222, paragraph 3 and 4 of this Act shall apply mutatis mutandis to the use of funds of the capital reserves, except for the provision pertaining to statutory reserves and the prescribed amount of those reserves and capital reserves.

(4) In the reserves for own business shares, the amount contributed must correspond to the amount listed in the assets of the balance sheet for that business share. These reserves can be terminated only if the company alienates or withdraws the own business shares or reduces them by the amount which they exceed the amount of the lower listed value of those business shares in the assets of the balance sheet. These reserves may be formed from the reserves as envisaged by the company agreement, if that agreement foresees such a possibility and from the amounts of other reserves from profit that exceed the amounts of transferred losses from previous years that could not be covered from the net profit of the fiscal year.

(5) The reserves envisaged by the company agreement may only be used for the purpose laid down in that agreement.

(6) The provision of Article 222, paragraph 5 of this Act shall apply mutatis mutandis to the use of other reserves.”

Article 101

In Article 407, a new paragraph 1 is added which reads:

(1) No payments shall be made to company members from the company asset value corresponding the amount of the share capital. This does not apply for requirements by the other contracting party of the agreement on managing the company business and the agreement on the transfer of profit or for requirements in the sense that the company has towards the member on the request for a counter-requirement in the same value or for return of that which was given and which is calculated and the request for return of a loan to replace capital and that which, in the economic sense, corresponds to that loan.”

Paragraphs 1, 2, 3 and 4 become paragraphs 2, 3, 4 and 5.

In former paragraph 5, which becomes paragraph 6, the words “paragraphs 1 to 3” are replaced by the words “paragraphs 2 to 4”.

In former paragraph 6, which becomes paragraph 7, the words “paragraphs 2 and 3” are replaced by the words “paragraphs 3 and 4”.

Article 102

In Article 408, paragraph 3, in the third sentence, the words “this shall not mean that the rules on capital contribution can be applied to his earlier or new loans” are replaced by the words “shall mean that the rules on capital contribution are not applied to earlier claims and new loans to the level of the share capital paid into the company, in accordance with the Act, during increases of share capital based on which the share was acquired”.

Article 103

In Article 410, paragraph 2, the second sentence is replaced by two sentences which read “The management board is obliged to report, without delay, all changes to the company members or their business shares to the register court. The management submits and signs the list of full names of the company members, their dates of birth and domicile, and for legal persons the firm name and seat, tax number, the nominal value of the share, the amounts paid into the company for such share and any amounts reimbursed to the member, their business share and the number under which the business share is registered with the company. The management board shall change the list of company members based on the notification on the change and the submitted proof that such change has occurred.”

Paragraph 3 is amended to read:

(3) If a notary public participated in the changes from paragraph 2 of this Article, he shall be obliged, immediately upon making the change and without regard for any possible later consequences of its invalidity, to sign the list of company members in place of the management board, and to submit one copy to the register court and one copy to the company. On this list, the notary public must confirm that the information on the list corresponds to the change in which he or she participated, and that the information contained therein correspond to the information in the final list that was submitted to the register court.”

Article 104

In Article 411, paragraph 1, after the first sentence, a new sentence is added which reads:

The list of company members submitted by the management board to the register court is changed by submission of a new list with the appropriate proof of change submitted to the court.” In the previous second sentence, the words “notification regarding the members” shall be replaced by the words “list of members”, and the Croatian word “which” is replaced by the same word in a different grammatical case, with no relevance for the English translation, and the words “said notification” are replaced by the words “said list”. At the end of the paragraph, a new sentence is added which reads: “For he who legally acquires a business share or right to such share, the contents of the list submitted to the register court shall be valid as accurate, except for acquirers of business shares for whom it is known that the information is not accurate.”

Article 105

In Article 412, after paragraph 4, a new paragraph 5 is added which reads:

(5) Should all the business shares by any means be merged with one person, such that the company becomes one person, this shall not require a change to the company agreement nor shall it require a deed of establishment. If the company was established pursuant to a deed of establishment and it should later become a company with more than one member, the company members must conclude a company agreement.”

Former paragraph 5 becomes paragraph 6.

Article 106

In Article 416, paragraph 5 is deleted.

Article 107

In Article 423, paragraph 2, at the end, a new sentence is added which reads: “Unless otherwise stated in the decision on appointment, the mandate of the chairman and the members of the board commences on the date the decision on appointment was made, regardless of the entry in the court register.”

**Article 108 **

In Article 424, paragraph 2, the paragraph number “(3)” is added before the words “Approval of recall”.

Former paragraphs 3 and 4 become paragraphs 4 and 5.

Article 109

In Article 426, after 6, a new paragraph 7 is added which reads:

(7) If the company has no members of the management board or a temporary trustee, the members of the supervisory board, if the company has one, shall accept communications of expressions of will and submission of the same in writing and, if the company does not have one, this shall be entrusted to the company members. The expressions of will and shall be communicated or delivered in writing to them at the addresses listed in the court register. An expression of will shall be deemed duly communicated or delivered in writing if so communicated or delivered to one of the said persons.”

In paragraph 7, which becomes paragraph 8, the number “49” is replaced by the number “41”.

Paragraph 8 becomes paragraph 9.

Article 110

After Article 431a, Article 431b and the title preceding it are added and read:

Annual report on the condition of the company and consolidated company annual reports

Article 431b

The provisions of Article 250a and 250b of this Act shall apply mutatis mutandis to the submission of annual reports on the condition of the company and the consolidated company annual reports.”

Article 111

In Article 434, paragraph 2, items 1, 4 and 5, the number “300” is replaced by the number “200”.

In paragraph 4, in the second and third sentence, the number “300” is replaced by the number “200”.

Article 112

In Article 437, after paragraph 4, paragraph 5 is added which reads:

(5) Unless otherwise stated in the decision on election or announcement on appointment, the mandate of the member of the supervisory board commences on the date the decision is made, or announcement is given, regardless of the entry in the court register.”

Article 113

In Article 441, paragraph 1, item 1, after the word “company”, the words “report of the management board on the condition of the company,” are added.

In item 5, after the words “division” a comma and the word “merger” are added.

After paragraph 2, paragraph 3 is added which reads:

(3) Once the general meeting has approved the annual financial reports and consolidated financial reports, where these are mandatory, and accept the annual report on the condition of the company and consolidated company annual reports, the management board of the company is obliged to submit these reports, together with the auditor’s report, where an audit of the financial reports is prescribed by law or required under the company agreement, without delay to the court register for the purpose or entry of the submission and announcement thereof.”

Article 114

In Article 457, paragraph 5, the word “certified” is replaced by the word “confirmed”.

Article 115

In Article 458, paragraph 2, item 1, the words “certified” is replaced by the word “confirmed”.

Article 116

In Article 459, paragraph 1, in the first sentence, after the word “reserves” the words “from profit” are added.

Article 117

In Article 465b, paragraph 1, in the first sentence, after the word “reserves” the words “from profit” are added, and after the words “used in its reduction” are replaced by the words “obtained by their reduction”.

Article 118

In Article 475, paragraph 1, the word “is” is replaced by the words “may be”.

After paragraph 2, paragraph 3 is added which reads:

(3) It shall be deemed that a company may have a controlling influence in another company if, as a shareholder or company member, it has the right to elector or appoint and revoke the appointment or remove the majority of members of the management or supervisory boards, or company management board or, pursuant to an agreement entered into with other shareholders or members of that company, has control over a majority of the voting rights in the company.”

Article 119

In Article 478a, paragraph 1, the word “those” is replaced by the words “all”, and the words “who are not the shareholders or members of a controlling company” are replaced by the words “except those who, pursuant to legal or commercially founded ties with the controlling company (second contracting party) had direct or indirect benefit from the agreement similar to that of the company (second contracting party)”.

Article 120

In Article 480, paragraph 1, item 3, the words “on its behalf and for its account” are replaced by the words “on behalf of the company, and for its account”.

Article 121

In Article 496, paragraph 2, the words “priority right in settling the claims” are replaced by the words “corresponding legal request towards the controlling company”.

Article 122

In Article 500, before the words “If requested”, the paragraph number “(1)” is added.

In item 2, after the words “supervisory”, a comma and the words “or management” are added.

Paragraph 2 is added which reads:

(2) If there are circumstances of a reasonable suspicion that damage was incurred to the company through conduct contrary to the obligation of proper business management, the shareholder, or company members whose shares, or business share, account for the level of share capital from Article 298, paragraph 2 of this Act, may file such a request, if it appears likely that they were shareholders, or company members at least three months prior to making the request.”

Article 123

In Article 501, paragraph 1, the words “the priority in compensation” are replaced by the words “legal request”.

In paragraph 2, the Croatian word translated as “liable” is replaced by another Croatian word with the same meaning, with no relevance for the English translation.

Article 124

Article 503 is amended to read:

(1) The general meeting of a joint stock company or limited liability company shall have the authority to decide on the integration of the company into another joint stock company or limited liability company with its seat in the Republic of Croatia (the principal company) if all shares or sole shareholding in the company is held by the prospective principal company. The provisions of this Act and of the articles of association on amendments of the articles of association shall not apply to such decision.

(2) A decision on the integration shall be valid if it has been approved by the general meeting of the prospective principal company. The decision on the approval shall be adopted by votes representing at least three-fourths of the share capital represented in the general meeting at the time of the adoption of the decision. The articles of association may require a greater majority or impose additional requirements. The second sentence in paragraph 1 shall apply to that decision.

(3) From the date of convening of the general meeting at which the decision is adopted for the integration, shareholders or company members must be permitted insight into the following in the company premises

1. decision on integration;

2. management board report of the future principal company, including the legal and economic substantiation and explanation (integration report);

3. annual financial reports and report on the condition of the company for the past three years for all companies participating in the integration.

(4) Each member or shareholder may, at his request, and at the expense of the company, request a photocopy of the decision on integration.

(5) Shareholder or company members have the rights from paragraph 1 of this Article at the general meeting at which the decision to grant consent to the integration is adopted.

(6) At the start of the discussion on granting consent to the integration, the management board must provide an explanation. Each shareholder or company member must, at his request, be informed of all important facts concerning the integration that related to the company being integrated.

(7) The management board of the integrated company must submit an application for entry of the integration into the court register in which it is registered. The application must list the firm name of the principal company. The application is submitted with the appended minutes of the general meeting at which the decision on the integration was adopted, the original appendices or a notarized photocopy and the statement of the management board that the decision on the integration was not set aside or that a request to set aside was rejected.

(8) The company shall be deemed to have been integrated into the principal company upon entry of the integration into the commercial register kept in the place of the seat of the company to be integrated.”

Article 125

In Article 504, paragraph 1, the words “6 and” are deleted and after the number “7”, the words “and 8” are added.

In paragraph 2, in the first sentence, the word “publication” is replaced by the word “announcement”, and the Croatian word translated as “valid” is replaced by the same Croatian word in another grammatical case with no relevance to the English translation.

In item 2, the Croatian word translates as “it” is replaced by the same Croatian word in another grammatical case with no relevance to the English translation, and the Croatian word translated as “offering” is replaced by the same Croatian word in another grammatical case with no relevance to the English translation.

Paragraph 9 is deleted.

Article 126

In Article 504a, paragraph 2, in the fifth sentence, after the words “general meeting”, the words “of the integrated company” are added. In paragraph 3, in the second sentence, before the word “entry” the words “announcement of” are added.

Article 127

In Article 513, paragraph 2, after item 3, a new item 4 is added which reads:

4. in the case from Article 520, paragraph 4 of this Act, the level of additional cash payments and the provision that such additional cash payments shall be made by the transferee company or the firm, or the full name of another person to pay that amount;”.

Items 4 to 7 become items 5 to 8.

In item 8, which becomes item 9, after the word supervisory”, a comma and the words “or management” are added.

After paragraph 2, a new paragraph 3 is added which reads:

(3) Statements by other persons obliged to make cash payments in place of the transferee company must be given in the form of a notarized document.”

**Article 128 **

In Article 515, paragraph 2, in the first sentence, the full stop is replaced by a comma and the words “at the proposal of the supervisory or management board of the company” are added.

In the second sentence, the words “management boards” are replaced by the words “supervisory or management boards”.

Article 129

After Article 515, Article 515a and the title preceding it are added and read:

Review of the merger by the supervisory or management board

Article 515a

The supervisory or management board of each company participating in the merger is obliged to review the intended merger pursuant to the merger report of the management board and the auditor’s report on the merger from Articles 514 and 515 of this Act. That board is required to compile a written report of such.”

Article 130

In Article 517, paragraph 1, the words “filed with the commercial register” are replaced by the words “submitted to the register court” and two sentences are added which read “The company must announce that the merger agreement has been submitted to the court register.

The announcement must inform shareholders of their rights from paragraph 2 of this Article.”

In paragraph 2, item 4, after the word “Act”, the full stop is deleted and the words “and reports of the supervisory or management boards from Article 515a of this Act” are added.

Article 131

In Article 520, paragraph 4 is amended to read:

(4) If the ratio of share exchange of the transferor company for shares of the transferee company is such that it does not permit one or more shares of the transferor company to be exchanged for a whole number of shares of the transferee company, the transferee company or another person must pay contributions in cash to the shareholders of the transferor company not holding a sufficient number of shares of the transferee company. Such contributions in case shall not exceed one-tenth of the aggregate par value of the given shares of the transferee company, or the share capital corresponding to the said shares without nominal value.”

Article 132

In Article 521, paragraph 2, in the second sentence, after the words “merger agreement”, the words “management board report on the merger from Article 514 of this Act, the auditor’s report from Article 515 of this Act, the report by the supervisory or management boards from Article 515a of this Act, the statement of persons from Article 513, paragraph 3 of this Act if, in accordance with Article 531 of this Act, a general meeting of the transferee company was not held, the statement of the management board of the transferee company that the shareholders having rights to do so did not call for its convening,”.

**Article 133 **

In Article 522, paragraph 3, after the first sentence, a new sentence is added which reads:

The transferee company is the overall legal successor of the transferor company and thereby enters into all legal relations of the transferor company.” The second sentence becomes the third sentence.

Article 134

The title preceding Article 529 is amended to read: “Nullity of the decision on the merger”

Article 529 is amended to read:

An action to set aside the decision on merger of the general meeting or an action to declare the nullity of such a decision may be filed only within 30 days of the date of the decision.”

Article 135

In Article 530, before the word “If”, the paragraph number “(1)” is added, and a paragraph 2 is added which reads:

(2) Following the emergence of the legal consequences of the merger of persons which, due to the provisions of Article 529 of this Act, may no longer reject the decision of the general meeting on the merger or request the establishment of its nullity, claims for compensation of damages may be filed. Such claims are always filed against the transferee company.”

Article 136

In Article 531, paragraph 1, a second and third sentence are added and read: “In the announcement from Article 517, paragraph 1 of this Act, shareholders must be informed of this right. If no request is made for the convening of the general meeting, the management board of the transferee company must, at least one month prior to convening of the general meeting of the transferor company at which the decision on granting consent for the merger agreement is to be adopted, ensure that shareholders may realize their rights from Article 517, paragraph 2 of this Act.”

In paragraph 2, the words “items 3 to 5” are replaced by the words “items 3 and 4 and Article 514”, and the words “and Article 517, paragraph 2, item 5” are deleted and a new sentence is added which reads: “In that case, the provisions of the preceding paragraph of this Article shall be applied mutatis mutandis to the merger.”

Article 137

In Article 532, paragraph 2, in the second sentence, the words “two months” are replaced by the words “one month”. After the third sentence, three new sentences are added and read:

The court must announce that a request has been filed for additional payments because the ratio of the share exchange has been set too low. Within one month of the announcement that the request has been filed, the shareholders holding such rights may file their requests for additional payment. They must be informed of such rights in the announcement.”

After paragraph 2, paragraphs 3 to 8 are added and read:

(3) Shareholders may waive their right to filing a request for additional payment with a statement in the minutes of the general meeting at which the decision on the merger is adopted, or by a statement given in the form of a notarized document.

(4) Shareholders of the transferor company who succeed with their request for additional cash payment also have the right to legal interest on arrears, which was valid on the date of appearance of the legal consequence of the merger with the entry of the merger into the court register of the transferee company, increased by two percentage points, from the date of the appearance of the legal consequences of the merger with the entry of the merger into the court register of the transferee company.

(5) At the request of the transferee company, the court may permit shareholders of the transferor company who filed a request to receive additional shares of the transferee company instead of payment in cash. For that purpose, the transferee company must use its own shares, if it has any. If the transferee company does not have its own shares or does not have a sufficient number, it can issue new shares by increasing the share capital, by which contributions are not required. An increase in the share capital shall be permitted only if, according to the last financial report which may not be older than eight months from the date of the decision to increase the share capital, the amount of available reserves that can be used for that purpose is at least equal to the amount for which the new shares are issued or, if the total amount of the share capital after the increase and reserves which the company must have, and may not be used to increase the share capital, than equal or less than the total value of the company assets, reduced by its liabilities.

(6) The court may request an expert opinion on the adoption of the decision on the request.

Pursuant to the expert opinion, participants in the procedure may reach a settlement on the amount of payment in cash, or on the number of newly issued shares of the transferee company to be allocated to shareholders of the transferor company.

(7) Appeals may be filed against the court decision ruling on the request by the transferee company and every shareholder filing such a request within one month and, if the court permitted that the transferee company issue new shares in place of payment in case, then also by the shareholders of the transferee company whose rights have been reduced thereby.

(8) The transferee company shall bear the advance costs of the procedure, and each party shall bear the advance costs of its representation in the procedure.”

Article 138

In Article 533, paragraph 1, the words “Article 520, paragraph 2” are replaced by the words “Article 520, paragraph 4”.

Article 139

In Article 547, paragraph 2, in the second sentence, the words “two months” are replaced by the words “one month”. After the third sentence, four new sentences are added and read: “The court must announce that a request has been filed for payment due to the fact that the ratio of the share exchange has been set too low. Within one month of the announcement that that such a request has been filed, members have the right to do so may submit their request for payment. They must be informed of such a right in the announcement. The provisions of Article 532, paragraphs 3 to 8 of this Act shall apply mutatis mutandis.”

Article 140

In Article 548, paragraph 1, in the first sentence, the words “paragraphs 1, 2 and 5” are replaced by the words “paragraphs 1 and 2”.

**Article 141 **

In Article 549, paragraph 6 is added which reads:

(6) The provisions of Article 567, Article 569, item 4 and Article 570 of this Act shall apply mutatis mutandis to the merger.”

Article 142

After Article 549, Section 4a, the titles and Articles 549a, 549b, 549c, 549d, 549e, 549f, 549g, 549h, 549i, 549j and 549k are added and read:

Section 4a

CROSS-BORDER MERGERS AND CONSOLIDATIONS

Definition of cross-border mergers and consolidations

Article 549a

**(1) **In the sense of this Act, a cross-border merger is a merger in which at least one of the companies participating in the merger (transferor company or transferee company) is validly established according to the law of the Republic of Croatia, and at least one company participating in the merger is a company of capital in the sense of Article 2, item 1 of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies, which is validly established according to the law of another state of the European Union or a state that is a party to the Agreement creating the European Economic Area.

(2) In the sense of the provisions of this Act, a cross-border merger is a merger in which one of the companies participating in the merger is a joint stock company or limited liability company validly established according to the law of the Republic of Croatia, and at least one company participating in the merger is a company of capital in the sense of Article 2, item 1 of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies, which is validly established according to the law of another state of the European Union or a state that is a party to the Agreement creating the European Economic Area. The provisions of this Section on cross-border mergers shall apply mutatis mutandis to cross-border consolidations.

(3) Cooperatives may not participate in cross-border mergers according to the provisions of this act, even when they have such right according to the law of other European Union Member States or states that are party to the Agreement creating the European Economic Area fulfilling the criteria of Article 2, item 1 of Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies, nor may companies outlined in Council Director 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).

(4) The provisions on cross-border mergers of this Act shall apply mutatis mutandis if one of the merging companies is validly established and has a registered seat in a state which is not a member of the European Union nor is a party to the Agreement creating the European Economic Area, under the condition that such in a merger, the transferee company is validly established according to the law of the Republic of Croatia and has a registered seat, central place of management or central place of business in the Republic of Croatia.

(5) Unless otherwise regulated in the provisions of this Section of this Act, the provisions of Sections 1 through 4 of Title VII of this part of the Act shall apply mutatis mutandis to crossborder mergers.

Joint merger plan

Article 549b

**(1) **The bodies authorized to represent the companies participating in the merger shall draft a joint merger plan, which must include the following information

1. legal form, firm name and registered seat of all companies participating in the merger;

2. ratio of share exchange or share and amount of additional cash payment;

3. details on the transfer of shares, or share in the transferee company;

4. expect impact of the merger on employment;

5. period as of which acquirers of shares in the transferee company have the right to a share of profits in the company and all details concerning those rights;

6. date as of which the activities of the transferor company are valid as though taken for the account of the transferee company;

7. rights by which the transferee company gives the company members having special rights, and holders of other securities, or the measures proposed with regard to those persons;

8. special benefits granted to experts participating in the review of the merger, and members of the management and supervisory bodies of the companies participating in the merger;

9. articles of association or company agreement of the transferee company;

10. if necessary, notification on procedures by which co-decision-making is established for employees in the transferee company;

11. notification on the assessment of the value of assets and liabilities transferred to the transferee company;

12. date to which the profit and loss statement refers, which is considered for establishing the conditions of the merger.

(2) If all shares or business shares in the merged company are held by the transferee company, the joint merger plan need not contain the information from items 2, 3 and 5 of the previous paragraph of this Article.

(3) The joint merger plan must be composed in the form of a notarized document.

Announcement of the joint merger plan

Article 549c

**(1) **The joint merger plan must be submitted to the court register prior to the convening of the general meeting at which the merger decision is to be adopted, and at least one month prior to the merger. The company must announce that the merger agreement has been submitted to the court register.

(2) In the announcement of the merger plan, the following information must be specially listed

1. information that the joint merger plan has been submitted to the court register;

2. legal form, firm names and registered seats of all companies participating in the merger;

3. data on registers in which the companies participating in the merger have been registered;

4. designation as to the manner foreseen for creditors and minority company members participating in the merger to realize their rights and address at which they may receive complete notification without charge.

Merger report

**Article 549d **

(1) The management body of each company participating in the merger must compile a report on the merger, substantiating the legal and economic aspects of the merger and listing the consequences that the merger will have on the company members participating in the merger, creditors and employees.

(2) Employees and their representatives must be allowed to have insight into the report from the previous paragraph of this Article, no later than one month prior to the convening of the general meeting that is to decide on the merger. If the employees give their opinion on the merger, this must be included in the merger report.

Audit of the merger

Article 549e

(1) The provisions of Article 515 of this Act shall apply mutatis mutandis to the audit of mergers.

(2) An audit of the merger shall not be necessary if all members of all companies participating in the merger should agree thereof.

Decision of the general meeting

Article 549f

**(1) **If the transferee company holds all the shares of the transferor company, a decision of the general meeting of the transferor company as to the validity of the merger shall not be sought.

(2) The general meeting may make its consent for the merger conditional in that the employees of the transferee company explicitly approve the manner of co-decision-making of employees in that company.

Ratio of share exchange or business shares, additional cash payments and special rights of shareholders or company members

Article 549g

The provisions of this Act on the procedures of court review of the ratio of the exchange of shares (Article 532), or business shares (Article 547) and on the realization of special rights of shareholders (Article 562) or company members (Article 570) shall apply mutatis mutandis to the transferor company with a registered seat in a European Union Member State or a state that is a party to the Agreement creating the European Economic Area, and that state does not recognize the said procedures, only if their application before the competent court and state is explicitly agree to by the general meeting of the transferor company at the time the decision on the merger is adopted.

Protection of creditors of the transferor company

Article 549h

Creditors of the transferor company must be given insurance if they apply for such purpose in writing within two months of the date of announcement of the merger plan, wherein listing the foundation for and amount of the claim. This right shall belong only to creditors in relation to claims arising prior to or no later than 15 days after the announcement of the merger plan, and which prove that the merger threatens the fulfilment of their claims.

Announcement of the merger in the register of merged companies in the register seat in the Republic of Croatia

Article 549i

(1) For merger companies having a registered seat in the Republic of Croatia, the court in whose register the company has been entered is competent for the supervision of all activities in the merger procedure, if they concern that company.

(2) The management board of the merged company shall submit an application for entry into the court register. The application for entry of the merger must list that the procedure of court examination is ongoing concerning the ratio of exchange of shares (Article 532), or business shares (Article 547) and on the realization or special rights of shareholders (Article 562), or company members (Article 570).

(3) The court from paragraph 1 of this Article shall enter into the register the note that the merger will only be valid upon fulfilment of the conditions prescribed by the law of the state that is competent for the transferee company.

(4) The announcement of the entry of the merger shall list that the procedures from paragraph 2 of this Article are underway and must list the note from paragraph 3 of this Article.

(5) The announcement of the entry of the merger shall be considered confirmation that all the necessary activities listed in paragraph 1 of this Article are valid and have been completely fulfilled.

(6) The transferee company shall submit the confirmation from paragraph 5 of this Article to the competent body in the state in which the seat of the transferee company is registered, no later than six months from the date of its issue, along with the joint merger plan approved by the general meeting.

(7) After the competent body from the previous paragraph of this Article receives notification that the legal consequences of the merger have come into effect, the court from paragraph 1 of this Article shall, without delay, enter a note in the register thereof and forward the collection of documents of the transferor company in its possession to the competent organ.

Application for entry of the merger into the register of transferee companies with a registered seat in the Republic of Croatia

Article 549j

(1) For transferee companies with a registered seat in the Republic of Croatia, the court in whose register the company is entered or will be entered shall be competent for supervision over the implementation of the merger, and shall in particular verify that the companies participating in the merger have validly adopted the joint merger plan and that all issues concerning employee co-decision-making.

(2) If this concerns a merger, the application for entry in the court register of the transferee company shall be submitted by its management board and chairman of the supervisory board if the company has such an organ and, if this concerns a consolidation, the application for entry of the newly formed company shall be submitted by the joint authorized organs of the consolidated companies.

(3) The joint division plan and the confirmation from Article 549i, paragraph 5 of this Act shall be appended to the application for entry.

(4) The court from paragraph 1of this Article shall ex officio and without delay inform all registers in which the merged companies had been registered of the date of entry of the merger into its register.

Effect of the merger

Article 549k

If the registered seat of the transferee company is in the Republic of Croatia, the legal consequences of the merger shall come into effect upon the entry of the merger in the court register of that company. If the registered seat of the transferor company is in the Republic of Croatia, the legal consequences of the merger shall come into effect according to the provisions of the laws of those states in which the seat of the transferee company is registered.”

Article 143

Article 550b, paragraph 2, item 8 is deleted. Items 9 and 10 become items 8 and 9.

In former item 11, which becomes item 10, the Croatian word translated as “division” is replaced by another Croatian word, with no relevance to the English translation. Items 12 to 15 become items 11 to 14.

Article 144

In Article 550e, paragraph 2 is amended to read:

(2) The division auditor is appointed by the court from Article 40 of this Act.”

Article 145

In Article 550g, paragraph 1, the words “shall be registered with the court register” are replaced with the words “shall be submitted to the court register”, and the words “such registration is required” are replaced with the words “such submission shall be made”.

In paragraph 2, the words “of the registration referred to in” are replaced by the words “that the division plan has been submitted to the court register in accordance with the provisions of”.

In paragraph 3, item 1, the Croatian word translated as “plan” is replaced by another Croatian word of the same meaning, with no relevance to the English translation.

Article 146

In Article 550n, paragraph 1, item 1, after the semicolon at the end, the words “and, if some part of the assets is not distributed according to the division plan or in line with the division plan was not possible to carry out, that part of the assets or compensation thereof shall be distributed to all new companies in the same share as the allocation of the net company assets shares according to the division plan;”.

Article 147

In Article 550r, paragraph 1, after the words “The provisions of Article 550b through 550p”, the words “and Article 512 to 549” are added.

In paragraph 2, item 3 is amended to read:

3. if some significant change in assets or obligations of the company should occur after drafting of the division plan and prior to the date of the convening of the general meeting of the joint stock company or the limited liability company being divided at which the decision on division is to be made, the management board of the company being divided must inform the management boards of all the transferee companies, so as to inform their general meetings of such change;”

After item 3, items 4 and 5 are added and read:

4. the agreement on division and takeover must state the date as of when the shares in the transferee company gives their new owners the right to participate in the profits of those companies;

5. the application for entry of the division in the court register may be submitted by each of the companies participating in the division.”

Article 148

The title preceding Article 552 is amended to read: “Obligation of transfer of company assets”.

Article 552 is amended to read:

(1) The approval of the general meeting shall be required for a contract obliging a company to transfer its entire assets or assets greater than the value of one-quarter of the share capital where in the latter case this would mean a significant change in the structure of the company, with the exception of cases of integrations, consolidations or divisions. This approval must be given in the manner prescribed in Article 301 of this Act, if this does not simultaneously alter the company’s subject of activities. The articles of association may require a larger majority or may impose additional requirements for passing such a decision.

(2) For the entire duration of the period following the announcement to convene the general meeting, shareholders must be able to freely examine the contract from paragraph 1 of this Article at the premises of the company seat. Upon request, each shareholder shall receive, without delay, a photocopy of the contract. The contract must also be displayed for shareholders to review at the general meeting, and the company management board must explain the contract prior to the passing of the decision on giving approval thereof. The minutes of the general meeting shall be appended to the contract.

(3) If the transfer of assets should lead to the dissolution of the company, a copy of the contract on the transfer of assets, notarized by a public notary, shall be appended to the application for entry substantiating the reasons for dissolution of the company.”

Article 149

In Article 557, paragraph 2, the third sentence is deleted.

Article 150

In Article 561, item 4, the words “supervisory boards of the joint stock company” are replaced by the words “supervisory or management boards of the joint stock company”.

Article 151

In Article 564, paragraph 4, the comma after the word “if” and the words “due to restrictions referred to in Article 416 of this Act” are deleted.

Article 152

In Article 569, item 4, the words “supervisory boards of the joint stock company” are replaced by the words “supervisory or management boards of the joint stock company”.

Article 153

In Article 579, paragraph 1, item 2, the Croatian word translated as “class” is replaced by another Croatian word, with no relevance to the English translation.

Article 154

In Article 604, after paragraph 2, new paragraphs 3 and 4 are added and read:

(3) If the criteria for the appointment and removal of members of the management board have not been established as envisaged under paragraph 2 of this Article, members of the management board shall be appointed and removed by a unanimous vote by the members of the grouping. Each member of the grouping may file an action with the court from Article 40 of this Act and request that the court rule to revoke an appointment of a member of the management board, if there is sound reason to do so. Such reason shall in particular exist if the member of the management board should grossly violate his obligation to manage the business of the grouping or should become incompetent to properly manage such business.

(4) The management board is obliged to ensure the books of the grouping are properly kept, the annual financial reports are compiled and submitted in a timely manner to the members of the grouping who are to decide thereon.”

Article 155

After Article 606, Article 606a and the title preceding it are added and read:

Initiation of bankruptcy proceedings

Article 606a

(1) Each member of the management board and each liquidator of the grouping shall be obliged to request the initiation of bankruptcy proceedings over the grouping when the legally prescribed criteria for such have been met.

(2) Each member of the grouping shall be obliged to request the initiation of bankruptcy proceedings over the grouping when the legally prescribed criteria for such have been met.”

Article 156

In Article 612, paragraph 2, after the words “shall not”, the word “permanently” is added.

After paragraph 2, a new paragraph 3 is added which reads:

(3) Carrying out business activities shall not be considered occasional or one-time activities, or carrying out individual tasks. Whether the activities may be considered permanent transaction of business in the sense of the preceding paragraph of this Act shall be assessed according to the specific circumstance of the case in question.”

**Article 157 **

In Article 613, paragraph 1, after the first sentence, a new sentence is added which reads:

“The founder, having a seat not in a Member State of the European Union nor in a state that is a party to the Agreement creating the European Economic Area, may establish a branch if it has been registered in the register in the country in which it has its seat for a minimum of twoyears.”

In paragraph 3, item 1, the words “excerpt from the register in which the founder is registered” are replaced by the words “proof that the founder is registered in the state in which it has a registered seat”, and after the words “time of entry”, the words “and persons authorized for representation and the scope of their authorities” are added, and after the words “time of its formation”, the comma is deleted and the words “and persons authorized for representation and the scope of their authority,” are added.

In paragraph 4, item 1, the words “ordinarily transacts business there” are replaced by the words “transacts business”.

Item 2 is deleted.

Item 3 becomes item 2.

In paragraph 5, the number “3” is replaced by the number “2”.

In paragraph 6, the number “3” is replaced by the number “2”, and after the words “seat in”, the words “a Member State of the European Union or” are added.

After paragraph 7, paragraph 8 is added which reads:

(8) The founder is obliged to submit its annual financial reports and other financial documents required by law to the register court in which the branch is registered for entry within 15 days of the date of their adoption.”

Article 158

In Article 615, after paragraph 2, paragraph 3 is added which reads:

(3) The submission of annual financial reports and other financial documents of the founder required by law shall be entered into the register court in which the main branch is registered.”

Article 159

In Article 618, paragraph 2, the words “The Ministry of the Economy may decide on the dissolution of a branch” are replaced by the words “The register court in the territory of the seat of the branch may, ex officio or at the proposal of an interested person, make a decision to dissolve the branch”.

Item 1 is deleted.

In item 2, which becomes item 1, the words “or if the founder has gone bankrupt” are deleted.

Item 3 is deleted.

In item 4, which becomes item 2, the number “3” is replaced with the number “2”.

After paragraph 2, a new paragraph 3 is added which reads:

(3) The provisions of Article 621 to 623 of this Act on the dissolution of companies shall apply mutatis mutandis to the dissolution of a branch.”

In paragraph 3 which becomes paragraph 4, the second sentence is deleted.

Article 160

In Article 620, paragraph 3, after the words “A foreign company of capital”, a comma and the words “having a seat in a state which is not a European Union Member State nor a party to the Agreement creating the European Economic Area,”, the words “domestic company of capital” are replaced by the words “company of capital having a registered seat in the Republic of Croatia, a European Union Member State or state that is party to the Agreement creating the European Economic Area”, and the words “domestic natural person” are replaced by the words “natural person who is a citizen of the Republic of Croatia, European Union Member State or state that is party to the Agreement creating the European Economic Area”.

Article 161

In Article 624, paragraph 1, items 1, 2, 4 and 6, after the words “management board”, a comma and the words “or executive director” are added.

Paragraph 2 is amended to read:

(2) The penalty from paragraph 1 of this Article shall be imposed against anyone giving a false statement as a member of a management board or executive director or chairman of the supervisory board for the purpose of entry into the court register of an increase in share capital of the joint stock company from Article 331, paragraph 1 of this Act, or as a member of the management board or chairman of the supervisory board in a limited liability company from Article 460, paragraph 2 of this Act, or as a member of the management board or executive director for the purpose of entry into the court register of the transformation of a joint stock company into a limited liability company from Article 560, paragraph 3 of this Act, or as a member of the management board of a limited liability company for the purpose of reduction of the share capital of the company or insurance for creditors from Article 464, paragraph 2, item 3 of this Act.”

Article 162

In Article 625, paragraph 1, after the words “management board”, a comma and the words “or executive director,” are added.

Article 163

In Article 626, paragraph 1, items 1 and 2, after the words “management board”, a comma and the words “or executive director,” are added.

In item 2, the words “or that a compulsory settlement be concluded accordingly” are deleted.

Article 164

In the title preceding Article 627, the words “share deposit certificates” are replaced by the words “share rights certificates”.

In Article 627, paragraph 1, the words “share deposit certificate or interim” are deleted.

Article 165

In Article 629, paragraph 1, after the words “management board,” the words “or executive director,” are added.

In paragraph 3, after the words “management board”, a comma and the words “or executive director” are added, and after the words “made either by the management board”, a comma and the words “or all executive directors,” are added.

**Article 166 **

In Article 630, paragraph 1, item 2, after the word “letterhead”, a comma and the words “or on the company website” are added.

After item 6, item 6a is added which reads:

6a. if, where prescribed under this Act, it fails to submit to the court register, or fails to submit to the court register within the legally prescribed deadline, the annual financial reports, consolidated financial reports, auditor’s report, annual report on the condition of the company or consolidated company annual reports for the entry of the submission and announcement thereof (Article 86, paragraph 2; Article 138a; Article 300d, paragraph 2; Article 441, paragraph 3; Article 613, paragraph 8);”.

In item 12, the word “registered” and the words “or if it has issued bearer shares, before the full par value, or a greater amount for which they were issued, has been wholly paid” are deleted.

After item 14, item 14a is added which reads:

14a. if it fails to alienate or withdraw the shares when obliged to do so by law (Article 236);”.

In item 31, the words “structure of its management board” are replaced by the words “the appointment of the members of the management board, or executive directors”.

In item 34, after the words “management board”, a comma and the words “or executive directors,” and a misspelling of the Croatian word translated as “board” is corrected, with no relevance to the English translation. After item 35, item 35a is added which reads:

35a. if the management board or executive directors fail to give a statement on the application of the corporate governance code within the legally prescribed deadline, or fail to give it in the manner prescribed under this Act (Article 272p);”.

In item 36a, after the words “management board”, a comma and the words “or executive directors” are added.

In item 66, the number “481” in brackets is replaced by the number “481b”.

In item 68, after the words “management board”, a comma and the words “or executive directors” are added, and the Croatia word translated as “announced” is replaced by the same word in a different grammatical case, with no relevance to the English translation.

In item 69, after the words “management board”, a comma and the words “or executive directors” are added, and the number “3” in brackets is replaced by the number “7”.

In item 81, the words “the Ministry of the Economy has dissolved its branches in the Republic of Croatia” are replaced by the words “its branches in the Republic of Croatia have been dissolved” and the words “paragraph 2, item 1” are replaced by the words “paragraph 3”.

In paragraph 2, after the words “management”, a comma and the words “or executive director” are added, and after the word “or” the words “member of the” are added.

Article 167

In Article 631, paragraph 1, item 9, the full stop is deleted and the word “or” is added, and item 10 is added which reads:

10. other than members of the management board, fail to submit the list of company members to the register court or to the company, when so required to do so by law, or fails to do so within the legally prescribed deadline, or submits a list which does not contain the legally prescribed information or prescribed confirmation or it fails to confirm the true condition, or the list is not signed (Article 410, paragraph 3).”

**Article 168 **

In Article 632, paragraph 1, after the words “management board”, a comma and the words “or executive directors” are added.

Article 169

In Article 633, at the end of paragraphs 1 and 2, the full stop is deleted and the words “and a European economic interest grouping” are added.

In paragraph 3, at the end of the first sentence, the full stop is deleted and the words “or of a European economic interest grouping” are added.

At the end of paragraph 4, the full stop is deleted and the words “and to European economic interest groupings” are added.

Article 170

In Article 639, paragraph 2, in the first sentence, the words “the court or” are deleted.

Article 171

The word “partnership” used in the Companies Act (Official Gazette 111/93, 39/99, 52/00 and 118/03) in any grammatical case is replaced by the words “civil law partnership” in the appropriate case.

In the title preceding Article 40, paragraph 1, and in Article 62, paragraph 1; Article 180;

Article 220, paragraphs 3 and 5; Article 221, paragraph 3; Article 227, paragraph 2; Article 255, paragraph 2, items 2 and 4; Article 273, paragraphs 1, 2 and 6; Article 274, paragraph 2;

Article 275, paragraphs 1 and 3; Article 276; Article 277, paragraphs 1 and 3; Article 280, paragraph 3; Article 281;

Article 282, paragraph 1; Article 283; Article 284, paragraphs 2 and 3; Article 293, paragraph 2; Article 294; Article 298, paragraph 1; Article 299, paragraphs 2 and 4; Articles 300b, 300c, 300d and 300e, paragraph 1; Article 301, paragraph 1; Article 325, paragraph 1; Article 326, paragraph 2; Article 341, paragraph 2; Article 357, paragraph 2; Article 358; Article 359, paragraphs 2 and 3; Article 362, item 5; Article 363, paragraph 2;

Article 364, paragraph 1; Article 371, paragraph 3; Article 374, paragraphs 2 and 4; Article 375, paragraph 3; Article 376, paragraph 2; Article 384a, paragraph 1; Article 480, paragraph 2; Article 493, paragraph 3; Article 495, paragraphs 1 and 2; Article 499; Article 502, paragraph 2; Article 526, paragraph 1; Article 528; Article 533, paragraph 3 and paragraph 7, item 2; Article 534, paragraphs 3 and 4; Article 550b; Article 550c, paragraph 5; Article 550e, paragraph 4;

Article 550f; Article 550g, paragraph 3; Article 550i, paragraph 1; Article 550k, paragraph 1; Article 550l, paragraphs 1 and 3; Article 565, paragraph 1; Article 568, paragraphs 2 and 3; Article 574; Article 579, paragraph 1; Article 580, paragraph 2; Article 624, paragraph 1, items 1 and 2 and paragraph 2; Article 625, paragraph 1; Article 629, paragraphs 1 and 3; Article 630, paragraph 1, items 33, 34 and 35 and paragraph 2 of the Companies Act (Official Gazette 111/93, 39/99, 52/00 and 118/03), the use of the words “supervisory board” in any number or case, is replaced by the words “supervisory, or management board” in the appropriate number and case.

The words “capital profits” used in the Companies Act (Official Gazette 111/93, 39/99, 52/00 and 118/03) in any case is replaced with the words “reserve capital” in the appropriate case.

Article 172

The words “national registration number” used in the Companies Act (Official Gazette 111/93, 39/99, 52/00 and 118/03) in any case or number are replaced by the words “tax number” in the appropriate number and case.

In Article 7, paragraph 4, item 4 of the Act, after the words “names,” the words “tax number” are added.

In Article 54, paragraph 2 of the Act, after the words “procurator”, the words “and his tax number” are added.

In Article 70, paragraph 1 of the Act, after the words “surname,” the words “tax number” are added.

Article 173

The Legislation Committee of the Croatian Parliament shall hereby be authorized to prepare and publish a revised version of the Companies Act.

Article 174

This Act shall be published in the Official Gazette, and shall enter into force on 1 April 2008, with the exception of the provisions of Article 142 which shall apply as of the date of accession of the Republic of Croatia into the European Union.