January 01, 2024

The Establishment of a Croatian Secret Company: A Secret Investment as a Strategic Business Move

In the business world, confidentiality and discretion are often key to success. This is especially true when it comes to investments and participation in companies. In the Republic of Croatia, the concept of a secret society provides an interesting opportunity for investors who want to participate in the profits of the company, while remaining in the shadows. In the following text, we as Croatian lawyers and law firm clarify the basic elements and legal framework of the establishment of a secret company under the Croatian Companies Act (ZTD).

What is a secret company?

Secret company, according to the provisions of the Companies Act, is a specific form of business cooperation and investment in business where one person (secret member) invests property value in the company of another person (entrepreneur). Through such an investment arrangement, the secret member acquires the right to participate in profits, but also in the loss of the entrepreneur’s enterprise (Article 148 ZTD).

Key features of a secret company:

Privacy and discretion: The secret company is not a legal entity and does not have its own name. The name or company of a secret member cannot be recorded in the company of the entrepreneur, thus ensuring a certain level of privacy (Article 148).

Exclusive rights and obligations of the undertaking: The entrepreneur, despite the secret participation of the other party, remains the sole holder of all rights and obligations in legal transactions.

Contribution of a secret member: The stake of a secret member becomes part of the undertaking’s assets and may include money, objects or rights whose value can be quantified.

Special notes:

Responsibility of the entrepreneur: The entrepreneur must ensure the delivery of the contract to the competent branch office of the Ministry of Finance – Tax Administration, either directly or through a notary public, depending on the circumstances of signing the contract.

Right of supervision: A secret member has the right of access to financial statements and business books under the law. This right of a secret member may not be restricted or excluded by contract.

The establishment of a secret company allows investors to participate in profits without exposing their role to the public of the court register. Nevertheless, the secret member will still have to report to the tax administration. In this sense, the secret member is not entirely secret. Therefore, the secret company is a convenient option for those who want to invest with a little more discretion. It is important, however, to adhere to strictly prescribed legal procedures and obligations to ensure legal validity and protection of all parties involved.

For anyone seeking a deeper understanding of secret societies or needing professional legal assistance in setting up or administering a secret society, our team stands ready to provide in-depth advice and support.

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