Euro Adoption

Croatia's adoption of the euro on 1 January 2023 was the defining structural change. Redenomination removed currency mismatch as a systemic feature of domestic lending, eliminated FX-induced credit risk on previously widespread euro-indexed loans, and gave Croatian banks direct access to Eurosystem liquidity.

Macroprudential Measures and Market Structure

Corporate lending grew by around 12% year on year in the first half of 2026, the non-performing loan ratio stood at 2.3% at the end of March 2026, and the countercyclical capital buffer – 1.5% since mid-2024 – is set to rise to 2% with effect from 1 January 2027.

The Croatian National Bank (Hrvatska narodna banka, HNB) has maintained an active macroprudential stance, including a positive countercyclical capital buffer and borrower-based measures for consumer and housing lending.

The market is highly concentrated, with subsidiaries of Italian, Austrian and Hungarian groups holding the substantial majority of assets alongside a state development bank. Club deals of two to four domestic banks are therefore the default mid-market structure, and genuine competitive tension usually requires introducing a foreign lender.

The war in Ukraine affected Croatia mainly through energy prices and the resulting inflation spike, which peaked in 2022–23 and has since receded.

The more visible day-to-day impact is compliance. Sanctions screening, beneficial ownership verification and enhanced due diligence have lengthened credit approval timelines, particularly for borrower groups with shareholders or supply chains connected to sanctioned jurisdictions. Sanctions representations, undertakings and mandatory prepayment triggers are now negotiated in detail rather than accepted as boilerplate.

Tourism, a very large share of GDP and of banks' corporate exposure, has proved resilient for now, and hotel and resort financing has continued at volume. Increased European defence spending has begun to generate interest in financing for domestic defence and dual-use manufacturing, where lenders remain cautious.

Croatia has no domestic high-yield market in any meaningful sense, and the product has not driven financing terms or structures locally. The Zagreb Stock Exchange bond segment is dominated by sovereign issuance; corporate issuance is sporadic, generally unrated, placed with domestic institutional investors – principally the mandatory pension funds – and structured without high-yield covenant architecture.

The few Croatian groups with genuine high-yield needs have accessed the international market through foreign-incorporated issuers using New York or English law documentation. Those transactions bring Croatian obligors in as guarantors and security providers, which is where the local law interface arises around capital maintenance limitations, security agent structures and parallel debt schemes.

Any loosening of terms locally is driven by bank competition and sponsor pressure rather than by a bond alternative.

Bank lending remains overwhelmingly dominant, but the range of non-bank credit has broadened to include credit and private debt funds, which typically lend cross-border rather than through a local establishment; regulated leasing and factoring companies; and Croatian alternative investment funds pursuing private credit strategies.

Foreign alternative lenders arrive with international documentation expectations, and their entry has been the principal channel through which LMA-style terms have spread in the mid-market. Where a debt fund is the lender, transactions typically feature bullet or lightly amortising profiles, materially higher pricing, tighter information undertakings and occasionally equity kickers in mezzanine structures.

Direct lending at scale is rare, largely because domestic banks are liquid, deposit-funded and price aggressively for good credits. Alternative capital therefore appears where bank appetite is absent.

Documentation

A decade ago, domestic bank templates – short, bank-friendly and drafted around the enforceable notarial deed – covered almost the whole market. LMA-based documentation adapted for Croatian law is now standard wherever a foreign lender, syndicate, sponsor or alternative credit provider is involved, and several domestic banks use short LMA-derived precedents even for purely local deals.

Structural Techniques

Techniques increasingly seen include:

• HoldCo structures, used to isolate acquisition debt from operating company covenants and to accommodate a structurally subordinated shareholder layer;
• debt pushdown by merger of the acquisition vehicle with the target, the principal route around the financial assistance prohibition;
• structural rather than contractual subordination, favoured because the enforceability of contractual subordination against an insolvency administrator is untested; and
• intercreditor arrangements and a single security agent.

Preferred equity appears occasionally at HoldCo level but is not a developed local product, and Croatian corporate law offers limited flexibility to replicate preference share economics within a private limited company (d.o.o.).

ESG-linked lending is driven almost entirely by EU regulation rather than domestic initiative, principally the Taxonomy Regulation, SFDR, the CSRD as transposed into Croatian accounting legislation, and the EBA Guidelines on loan origination.

The dominant product is the sustainability-linked loan. Green loans appear in energy and public utilities, and very few Croatian banks operate dedicated green lending lines refinanced by EIB or HBOR funding. The most active sectors are renewable generation and grid infrastructure; tourism; shipping and shipbuilding; and real estate, where certification is increasingly a condition of institutional exit.

Two practical points recur. KPI selection is difficult for mid-market borrowers with limited historical ESG data, and verification costs are disproportionate at smaller deal sizes. Lenders have also become more careful about greenwashing risk, so declassification mechanics – the consequences of failing to report, as distinct from failing to hit a target – are now seriously negotiated.

Banks

Deposit-taking and the provision of credit as a business are reserved activities under the Credit Institutions Act (Zakon o kreditnim institucijama). A bank may lend to a Croatian company as an authorised Croatian credit institution, licensed by the European Central Bank (ECB) on the proposal of the HNB; by passporting from elsewhere in the EU or EEA, through a branch or cross-border, which requires only home regulator notification to the HNB and is by far the most common route; or, for a third-country bank, through an HNB-authorised branch.

Non-Banks

Lending to corporate borrowers by a non-bank is not in itself a licensed activity. Croatian practice distinguishes isolated or intra-group lending, which raises no authorisation issue, from lending offered to the public on a professional and continuous basis.

Adjacent activities are separately regulated: financial leasing and factoring require authorisation and supervision by the Croatian Financial Services Supervisory Agency (Hrvatska agencija za nadzor financijskih usluga, HANFA), and consumer lending by a non-credit institution requires ministerial approval. The servicing and purchase of claims is governed by the Act on the Manner, Conditions and Procedure of Servicing and Purchase of Claims (Zakon o načinu, uvjetima i postupku servisiranja i kupoprodaje potraživanja), transposing Directive (EU) 2021/2167. Croatia went beyond the Directive: the licensing and passporting regime captures not only servicers and purchasers of non-performing bank credit agreements but also purchasers and servicers of other receivables, a point commonly missed by foreign purchasers structuring portfolio acquisitions.

Subject to the authorisation position described in 2.1 Providing Financing to a Company, no restrictions apply to foreign lenders specifically. A foreign non-bank lender is in the same position as a domestic one.

EU and UN sanctions apply directly and are actively enforced. Statistical reporting obligations to the HNB for cross-border credit relationships survived euro adoption, but fall on the resident party.

There is no restriction on foreign lenders taking security or receiving guarantees, and foreign secured creditors are not disadvantaged by reason of nationality. The impediments are administrative. A Croatian personal identification number (OIB) is required before a foreign lender can be registered as pledgee in the public collateral registers. Documents executed abroad require legalisation and/or apostille and certified Croatian translation for registration.

The significant recent development is the Foreign Investment Screening Act (Zakon o provjeri stranih ulaganja), in force since 13 November 2025 and supplemented by an implementing by-law in 2026, which introduced Croatia's first genuine screening mechanism under Regulation (EU) 2019/452. Clearance by the Ministry of Finance is mandatory, and completion is suspended pending clearance, where a third-country investor – including an EU entity controlled by one – acquires 10% or more of the capital or voting rights in, or control over, a designated target entity in a sensitive sector such as energy, transport, digital infrastructure, defence, media, healthcare or banking.

This matters directly to secured lenders because enforcement of a share or shareholding interest pledge transferring control of such a target is itself an acquisition requiring clearance, and the Central Depository & Clearing Company (Središnje klirinško depozitarno društvo, SKDD), the commercial courts, concession grantors and the competition authority act as gatekeepers against unscreened completion. Where the package includes agricultural land, forest land or maritime concessions, separate restrictions on foreign acquisition may affect the lender's ability to acquire the asset on enforcement.

Croatia adopted the euro on 1 January 2023. Capital movements are free in accordance with EU law and payments may be made in any currency. EU and UN sanctions require the freezing of designated persons' assets regardless of currency, and banks apply these rules strictly.

The legacy of Swiss franc-indexed lending continues to shape the market. Following the statutory conversion of CHF-indexed consumer loans and extensive litigation on currency clauses and variable interest provisions, the courts have taken a strongly consumer-protective line. The direct effect on corporate lending is limited, but the episode has left Croatian lenders conservative about indexation and unilateral rate-setting, which is one reason why transparent externally set benchmarks are now the norm.

There is no general statutory restriction on how a corporate borrower applies loan or bond proceeds. Purpose clauses are universal and drafted tightly, supported by conditions to utilisation and, in acquisition and project financings, by direct payment mechanics.

Where the financing is supported by EU funds or state aid, the eligibility and durability conditions attaching to that support are frequently more restrictive than anything in the facility agreement.

Croatian law does not recognise the concept of a trust, and Croatia is not a party to the Hague Convention on the Law Applicable to Trusts. A structure in which a security trustee holds legal title for beneficiaries whose interests survives the trustee's insolvency cannot safely be replicated under Croatian law.

Agency, by contrast, is entirely conventional. Facility and security agents act under mandate and power of attorney, and foreign law syndicated financings routinely appoint a security agent to hold and enforce Croatian security. The structures used are joint and several creditor status (solidarni vjerovnik), constituting the agent as a creditor of the full secured amount; parallel debt imported from foreign law documentation; and direct security in favour of all lenders from time to time, with the agent empowered by irrevocable power of attorney to register, administer and enforce.

Croatian registers accommodate multiple secured creditors and the appointment of an agent, so the mechanics work. The residual issue is doctrinal: neither parallel debt nor joint and several creditorship has been tested before the Croatian courts in an insolvency context. The prevailing practitioner view is that both are valid, and legal opinions are qualified accordingly. In purely domestic club deals, granting each lender direct, equally ranking security remains common.

Transferring the Loan

Croatian law distinguishes the transfer of claims from the transfer of the contract. Assignment (ustup tražbine) transfers the lender's monetary claims without borrower consent, subject to any contractual prohibition; the borrower must be notified, and, until notification, may validly discharge its obligations by paying the original lender. Transfer of contract (prijenos ugovora) transfers the entire contractual position including undrawn commitments and requires all parties' consent, which is why advance consent, a permitted-lender list and disenfranchisement mechanics are standard. Sub-participation transfers economic exposure without any change in the lender of record.

Banking secrecy under the Credit Institutions Act restricts disclosure of borrower information to prospective transferees, so express consent and disclosure language is invariably included. Claims against consumers are subject to a materially more restrictive transfer regime, and the purchase and servicing of claims is separately licensed (see 2.1 Providing Financing to a Company).

Transferring the Security

Accessory security – mortgage and pledge – passes automatically with the assigned claim, although registration of the new creditor is necessary for effectiveness against third parties. Non-accessory security requires express retransfer or a fresh grant, and the timing of that step is a live issue in refinancings. A debenture note (zadužnica) is personal to the named creditor. Novation should be avoided, since it extinguishes the secured claim and with it the accessory security, and any replacement security ranks only from its new registration date and is exposed to claw-back as security granted for pre-existing debt.

There is no statutory prohibition on a borrower or sponsor buying back its own debt, and repayment mechanics are a matter of contract, subject to mandatory early repayment rights that apply only in the consumer context; restrictions in practice are contractual.

Two Croatian law risks matter where the sponsor is the purchaser. Debt held by a shareholder risks being treated as a substitute for equity and subordinated in insolvency, and repayments made to a shareholder before the opening of proceedings are open to challenge. Separately, acquisition of debt at a discount and any subsequent release can give rise to taxable income at borrower level, and deductibility of related-party interest is constrained by thin capitalisation and interest limitation rules (see 4.3 Foreign Lenders or Non-Money Centre Bank Lenders).

Certain Funds in Public Takeovers

Croatian law does not use the expression “certain funds”, but the Takeover Act (Zakon o preuzimanju dioničkih društava) achieves the same result by statute. Before publishing an offer, an offeror must secure the full consideration payable for all shares subject to the bid – either by depositing cash or by procuring an unconditional first-demand bank guarantee – and must evidence this to HANFA as a condition of approval. Funding certainty therefore sits with the guaranteeing bank rather than in the facility agreement, and the certain funds analysis is performed at the level of the guarantee facility.

Private Transactions and Documentation

Certain funds provisions are not mandatory in private acquisition financings but are standard in sponsor deals, following the LMA formulation. Both short and long-form documentation are seen: domestic bank templates remain common in bilateral corporate financings, while long-form LMA-based documentation is used in foreign sponsor-led, syndicated and cross-border deals. Facility agreements are not publicly filed, although the existence and issuer of the bank guarantee become public through the offer document.

Euro Adoption and Benchmarks

Redenomination and migration from the domestic National Reference Rate to Euro Interbank Offered Rate (EURIBOR) required systematic amendment of interest, break costs and market disruption provisions across existing portfolios. Benchmark replacement machinery is now standard drafting rather than a negotiated point.

Foreign Investment Screening

The Foreign Investment Screening Act (see 3.2 Restrictions on Foreign Lenders Receiving Security) is the most significant recent addition for transactional documentation: conditions precedent, long-stop dates and interim covenants must now accommodate a mandatory clearance with a standstill and a decision period of 120 days or more, and share security in covered sectors requires an enforcement analysis that did not previously exist.

Other Drivers

Transposition of the EU Restructuring Directive into the Bankruptcy Act has required amendment of event of default provisions, and clauses treating the opening of a preventive restructuring as an event of default need careful handling. Contractual recognition of bail-in powers is standard where a party is an EU financial institution and the Digital Operational Resilience Act (DORA) has driven changes to outsourcing, ICT and continuity provisions. Amendments to the Notaries Act have introduced notarial instruments in electronic form and remote notarial acts, which should in time remove a longstanding obstacle for foreign signatories, although roll-out has been gradual.

Statutory Ceilings

The Civil Obligations Act (Zakon o obveznim odnosima) caps contractual interest by reference to the statutory default interest rate. That rate is set half-yearly by reference to the ECB main refinancing rate, increased by eight percentage points for commercial contracts and by three percentage points in other relations.

The ceiling on contractual interest is calculated from that rate. Where at least one party is not a trader, the agreed rate may not exceed the applicable statutory default rate increased by one half; between traders, and between a trader and a public law body, the ceiling is that rate increased by three quarters. The ceiling is tested at the date of the contract or, for a floating rate, at each rate change. An agreed rate exceeding the ceiling is reduced to the ceiling by operation of law rather than invalidating the contract, so the consequence is a pricing adjustment rather than unenforceability.

Usury and Consumer Lending

Separately, a contract is void where a party exploits the other's distress, difficult financial position, inexperience, dependence or lack of judgment to obtain a manifestly disproportionate benefit. This requires both objective disproportion and subjective exploitation, and is essentially theoretical in arm's-length commercial lending. Generally speaking, consumer credit is subject to a more restrictive regime.

There is no general obligation to disclose financial contracts and facility agreements; however, the security agreements are almost always publicly filed.

• Registered security is public. Mortgages appear in the land register, pledges over movables and rights and shareholding interests in the register of security interests, and pledges over dematerialised securities in the SKDD register. Any counterparty can therefore establish the existence and usually the amount of registered security.
• Annual financial statements filed with the Financial Agency (FINA) disclose indebtedness, guarantees, contingent liabilities and related-party transactions in the notes.
• Issuers with securities admitted to trading are subject to the Capital Market Act, requiring disclosure of inside information – which a material financing or its breach may constitute – and notification of major holdings.
• Beneficial ownership must be registered in the beneficial ownership register, and cross-border arrangements bearing the relevant hallmarks are reportable under DAC6 (Council Directive (EU) 2018/822 amending the Directive on Administrative Cooperation).

Interest paid by a Croatian resident to a non-resident legal person is in principle subject to withholding tax at 10%, rising to 25% for payments to persons established in jurisdictions on the EU list of non-cooperative jurisdictions with which no double tax treaty applies. Repayments of principal are not subject to withholding tax.

In practice, most cross-border lending into Croatia bears no withholding tax, because the Profit Tax Act exempts interest on loans granted by a non-resident bank or other financial institution, together with interest on commodity credits for goods used in the taxpayer's business and interest paid to non-resident holders of government or corporate bonds. The Interest and Royalties Directive exemption additionally applies to interest between associated companies in different member states, and Croatia has an extensive treaty network under which relief is generally available at source on production of a residence certificate rather than by refund. Beneficial ownership and anti-abuse rules apply.

Croatia levies no stamp duty on loan or security documentation and has no net wealth tax, so the cost profile of a Croatian financing is low by regional standards. The charges that do arise are:

• notarial fees, calculated on a statutory tariff by reference to the secured amount and subject to a cap;
• court and registry fees for registration of security, which are fixed nominal amounts rather than ad valorem charges;
• real estate transfer tax, not triggered by the grant of a mortgage but relevant on enforcement or on a transfer of title by way of security;
• VAT, from which the granting and negotiation of credit and guarantees is exempt, although certain arrangement, advisory and agency fees may fall outside the exemption and should be confirmed line by line; and
• corporate income tax, applying at 18%, or 10% for taxpayers with revenues below EUR1 million, to a lender with a Croatian permanent establishment.

Withholding and Gross-Up

The exemption for interest paid to foreign banks and financial institutions means a conventional bank syndicate has no Croatian withholding exposure. The position differs where the lender is not a financial institution – a debt fund structured as a partnership or corporate vehicle, or an intra-group lender – in which case relief depends on the Interest and Royalties Directive or a treaty. Gross-up and qualifying lender machinery is therefore standard, with the gross-up obligation limited to lenders qualifying at the outset or ceasing to qualify through a change in law.

Permanent Establishment

A foreign lender whose Croatian activity goes beyond passive holding of a loan risks creating a permanent establishment, with interest attributable to it taken into Croatian corporate income tax rather than exempt. This is most likely where the lender takes an active management role, and is a live consideration in intensive workout and enforcement scenarios.

Assets and Techniques

Typical security packages cover real estate, shares in the obligors, bank accounts, receivables, plant, equipment and inventory, and registered intellectual property. Cash and financial instruments may additionally be taken as financial collateral under the Financial Collateral Act, the most lender-friendly regime available. Croatian law offers two basic techniques: the pledge (založno pravo), an accessory right that ranks by time of registration and is generally enforced through the court; and fiduciary transfer of title (fiducij), under which title passes to the creditor, offering stronger enforcement and better insolvency positioning at the cost of greater formality and express retransfer on release.

Collateral, Security and Perfection

Lenders typically take security over real estate, shares, movables, receivables, bank accounts and other rights. The form of security and the applicable formalities and perfection requirements vary by asset type, as set out below.

• Real estate – a mortgage requires a written agreement with the owner's notarised registration declaration and is created by entry in the land register, typically by a notarial deed or solemnized agreement, within days to a few weeks. A priority note secures rank from the date of filing.
• Shares in a d.o.o – the pledge agreement must be a notarial deed or solemnised, and in the FINA register, court register and/or company’s book of shares. The articles must be checked for consent requirements and transfer restrictions, which should be waived in advance. Shares in a joint stock company are dematerialised and the pledge is perfected in the SKDD system.
• Movables and rights – a pledge is registered in the FINA-maintained register of court and notarial security interests and requires a notarial deed or solemnised agreement.
• Receivables – pledge or fiduciary assignment; registration is advisable, and notification of the account debtor is required to prevent good discharge to the assignor and to protect ranking. Future receivables may be secured if sufficiently identified. Insurance claims are usually secured by endorsement of the policy in the lender's favour (vinkulacija).
• Bank accounts – the pledge agreement must be a notarial deed or solemnised, and is registered in the FINA register; commonly notification to and acknowledgement by the account bank is sought.
• Debentures – Croatian practice makes heavy use of the debenture and blank debenture (zadužnica, bjanko zadužnica), notarially confirmed instruments permitting direct enforcement against all of the debtor's bank accounts through FINA without court proceedings. These are not security interests strictly speaking but are a distinctive and highly effective element of the Croatian package.

Consequences, Timing and Cost

Failure to register generally means the security is ineffective against third parties: a competing creditor registering first ranks ahead, and in insolvency the creditor is treated as unsecured. A conventional package can normally be perfected within two weeks from execution, with the critical path running through notarial appointments, land registry entry and third-party acknowledgements. Costs comprise notarial fees on the statutory tariff, nominal registration fees and translation costs.

Croatian law does not recognise universal security interest over the whole of a company's present and future assets. Security must be created separately over each asset or class, observing the applicable perfection requirements.

Certain instruments produce partially comparable effects: a registered pledge or fiduciary transfer may be taken over a defined group of movables, such as inventory at identified premises, provided the description permits identification; receivables security may extend to all present and future claims of a defined type or against defined debtors. The package must be enumerated asset by asset and assets acquired after closing require supplemental security.

Downstream guarantees and security are not problematic in principle. The parent's management must still be satisfied the transaction is in the company's interest, but corporate benefit is ordinarily self-evident.

Upstream and Cross-Stream

Upstream and cross-stream support is constrained by the capital maintenance rules in the Companies Act (Zakon o trgovačkim društvima), which prohibit the return of contributions to shareholders otherwise than by lawful distribution. For a joint stock company, the rule is stricter: any non-arm's-length transaction with a shareholder risks characterisation as a prohibited return of capital. For a d.o.o. the rule is limited to the assets necessary to preserve registered share capital, which is why the d.o.o. is the preferred obligor vehicle. A guarantee or security for the debt of a shareholder may be treated as an indirect payment to that shareholder to the extent enforcement would erode protected capital.

The rules on affiliated companies separately restrict a controlling company from causing detrimental transactions unless compensated, and a director granting support in breach of capital maintenance faces personal and potentially criminal liability.

Resolution

Limitation language is market standard: the guarantee and security are enforceable only to the extent enforcement would not breach capital maintenance. A documented and where possible secured recourse claim against the borrower is used to offset the detriment, and debt pushdown by merger is the most robust structural answer (see 5.4 Restrictions on the Target). The effectiveness of limitation language has not been definitively tested by the Croatian courts, so lenders should assume that support from a Croatian subsidiary is worth materially less than its face amount.

The Companies Act prohibits a joint stock company from advancing funds, making loans or providing security to a third party for the purpose of the acquisition of its own shares. The prohibition is broad and applied to economically equivalent arrangements; a transaction in breach is void. No shareholder resolution can validate the assistance.

The position for a d.o.o. is less categorical: Croatian law does not replicate the express prohibition in the same terms, and the analysis runs instead through the capital maintenance and group rules described in 5.3 Downstream, Upstream and Cross-Stream Guarantees. This is a principal reason why acquisition structures are built around d.o.o. targets wherever possible, and why conversion from a joint stock company to a d.o.o. is sometimes undertaken as part of the transaction.

The Merger Route

The established solution is a debt pushdown by merging the acquisition vehicle with the target after completion. This is not prohibited assistance because the debt becomes the merged entity's own obligation rather than support for a third party's acquisition. Creditor protection rules apply – creditors may demand security for their claims within the statutory period. Lenders in Croatian leveraged transactions accept that target security is unavailable at closing and structure for post-completion accession within an agreed window.

Articles of association frequently require shareholder consent for indebtedness, encumbrance of real estate and the pledge or transfer of shareholding interests. Shareholders' agreements and pre-emption rights may restrict share security or complicate enforcement. Concession and license agreements commonly restrict encumbrance of concession assets and require grantor consent, which is central in project and infrastructure financings.

Restrictions on public goods, concessions and agricultural and forest land are addressed in 8.4 Foreign Ownership and 8.7 Natural Resources.

Security over shares in a regulated entity – a credit institution, insurer, investment firm or fund manager – engages qualifying holding rules, so enforcement requires prior regulatory approval. Acquisition of control on enforcement may engage merger control and, where the acquirer is a third-country investor and the target operates in a covered sector, foreign investment screening (see 3.2 Restrictions on Foreign Lenders Receiving Security). There are no material costs specific to the grant of security beyond notarial and registration fees (see 4.2 Other Taxes, Duties, Charges or Tax Considerations).

Release mechanics depend on the nature of the security. Accessory security – mortgages and pledges - is extinguished by operation of law on full discharge. Registered security nonetheless requires creditor's written consent to deletion (brisovno očitovanje) with notarised signature, and the application/instruction to the relevant registry.

Non-accessory security requires express retransfer, because title does not revert automatically. This is a substantive step, not a formality. Debentures and blank debentures must be returned and destroyed, and bank guarantees returned or their expiry confirmed.

In refinancings the simultaneity problem – the outgoing lender releasing only against payment while the incoming lender funds only against clean security – is resolved by escrow or by a co-ordinated closing with documents held to order.

Ranking

The governing principle is prior tempore potior iure. Rank is determined by the time of creation or, for registrable security, by the moment of filing, which is why priority notes and same-day filing matter. Second-ranking pledge is not possible over shares in joint stock company due to technical issues of the register. Also, for fiduciary transfer of title, a second-ranking interest is not conceptually available because title has already passed.

Varying Priority

Land registration rules expressly permit the assignment or exchange of priority rank between registered creditors, entered in the register with in rem effect. Contractual subordination of claims or of security is achieved by intercreditor or subordination agreement and is valid as a matter of contract.

Survival in Insolvency

Where subordination is reflected in the register, the administrator and the court will give effect to it. Where subordination is purely contractual, there is limited Croatian authority on whether an administrator is bound to distribute otherwise than in accordance with the registered position and statutory ranking. The risk is mitigated by a single security agent receiving all enforcement proceeds, so that distribution among creditor groups occurs outside the estate as a matter of contract, supported by turnover covenants under a foreign law intercreditor agreement. Croatian insolvency law separately recognises subordinated claims. Shareholder loans that substitute for equity fall into this category by operation of law (see 7.2 Waterfall of Payments).

Bank Set-Off and Enforcement Priority Over Accounts

Account banks reserve rights of set-off, retention and pledge over credit balances in their general terms. Where the account bank is not the secured lender, its rights prime an account pledge unless waived or subordinated. Banks resist a full waiver, and the negotiated outcome is usually subordination limited to claims arising from the account relationship; where no waiver is obtainable, accounts should be held with a syndicate member.

Enforcement against monetary claims is centralised through FINA, and the order of payment follows the order in which enforcement instruments are received. This is the most practically significant priming risk in Croatia and is managed by monitoring covenants, cash sweeps and minimum balance undertakings rather than by legal structuring.

Retention of Title and Statutory Liens

Where the relevant formalities are satisfied, retention of title is effective against the buyer's other creditors, meaning that goods in the obligor's possession may not form part of the security pool at all. The Civil Obligations Act separately confers liens by operation of law on carriers, warehouse operators, commission agents and repairers of movables. Both risks are addressed through representations, schedules of retained goods, undertakings to discharge such claims, a right for the lender to pay and be reimbursed, and exclusion from borrowing base calculations.

Ranking on insolvency is addressed in 7.2 Waterfall of Payments.

The Enforcement Title

Enforcement requires the secured obligations to be due and payable, and security documents customarily add contractual conditions such as a continuing event of default or delivery of an enforcement notice.

Croatian enforcement is organised around the enforcement title (ovršna isprava). A creditor holding a final judgment may enforce, but the far more efficient route is to have the loan and security documents drawn up as, or solemnised into, a notarial deed containing the debtor's consent to immediate enforcement, permitting enforcement without first obtaining a judgment. This is the single most important structuring decision in a Croatian financing. However, the documents must be in Croatian or accompanied by certified translation.

Method by Asset Class

• Real estate – court enforcement by public electronic auction, with statutory minimum prices at the first and second auctions. Filing to distribution commonly takes well over a year, and considerably longer if the debtor litigates or occupancy issues arise.
• Shares – most commonly through court-supervised sale, with market practice adding contractual sale mechanics and powers of attorney (with unestablished permanent court practice); pledges over dematerialised shares are executed through the broker and SKDD.
• Movables – court sale by auction or contractually agreed out-of-court sale (for assets with market value).
• Receivables and bank accounts – direct collection from the debtor following notification, or through FINA on an enforcement title, making these the fastest-realising elements of most packages.
• Financial collateral – cash and financial instruments provided under the Financial Collateral Act may be realised out of court by sale, set-off or appropriation (see 7.1 Impact of Insolvency Processes). This is the strongest position available to a secured creditor in Croatia.

Enforcement is stayed on the opening of insolvency proceedings (see 7.1 Impact of Insolvency Processes), certain assets serving a public purpose may be exempt, and statutory notice periods, valuation requirements and the debtor's right to challenge each add time. Lenders should assume court-supervised enforcement is a two-year exercise.

Choice of Law

The Rome I Regulation applies. Parties may choose the law governing the facility agreement, including a law with no connection to the transaction, and English law is frequently chosen in cross-border financings, subject to the usual limits of overriding mandatory provisions and public policy.

In rem aspects of security over Croatian assets are not open to choice of law. Creation, perfection, ranking and enforcement of a mortgage over Croatian land, a pledge over shares in a Croatian company or a pledge in a Croatian register are governed by Croatian law regardless of what the parties agree, so Croatian law security documents are invariably used.

Jurisdiction and Immunity

Submission to a foreign jurisdiction is effective under the Brussels Regulation between EU member states and under the Lugano Convention for EFTA states; otherwise, the Private International Law Act governs.

A waiver of sovereign immunity will generally be given effect, and Croatian law distinguishes immunity from jurisdiction from immunity from execution; a waiver of the former does not automatically extend to the latter. Assets dedicated to public functions are in practice protected from execution irrespective of the waiver's terms.

Judgments in civil and commercial matters from another EU member state are recognised and enforceable under the Brussels Regulation without any declaration of enforceability and without review of the merits and the Lugano Convention applies to EFTA judgments.

Recognition of non-EU judgments is governed by the Private International Law Act. The applicant applies to the competent court, and the merits are not re-examined. Recognition may be refused for defective service, exclusive Croatian jurisdiction, irreconcilability with another judgment or manifest conflict with public policy. Reciprocity is not a general condition under the current legislation. Bilateral treaties take precedence where applicable, and the 2019 Hague Judgments Convention applies in Croatia as an EU member state, adding a treaty-based route for judgments from the other contracting states.

Croatia is a party to the New York Convention, the European Convention on International Commercial Arbitration and the ICSID Convention. Foreign awards are recognised and enforced under the Arbitration Act on the Convention grounds, and the Croatian courts have generally taken a pro-enforcement approach. Arbitration under the rules of the Permanent Arbitration Court at the Croatian Chamber of Economy, or under ICC or VIAC rules, is common in project and cross-border finance documentation.

A foreign lender is not disadvantaged as such, but several practical matters affect enforcement.

• Identification – a Croatian personal identification number (OIB) is required for registration of security and for participation in enforcement proceedings; obtaining it in advance avoids delay at the worst possible moment.
• Language and documents – proceedings are conducted in Croatian; foreign-language documents require certified translation and foreign public documents apostilled or legalised.
• Acquisition on enforcement – a foreign lender acquiring collateral may encounter restrictions applicable to the asset class, particularly in agricultural and forest land, and may require regulatory approval where the asset is a qualifying holding in a regulated entity or where foreign investment screening applies.

The Framework and the Stay

Insolvency and restructuring are governed by the Bankruptcy Act (Stečajni zakon), which provides for pre-bankruptcy proceedings (predstečajni postupak), available where insolvency is imminent, and bankruptcy proceedings (stečajni postupak), aimed at realisation of the estate, with a bankruptcy plan available as an alternative to liquidation. A separate extraordinary administration procedure exists for companies of systemic importance (such as Agrokor). The opening of either principal procedure imposes a stay on individual enforcement: in pre-bankruptcy the stay is time-limited, while in bankruptcy individual enforcement ceases and creditors must file their claims in the proceedings.

Secured creditors hold a right of separate satisfaction (razlučno pravo) out of the proceeds of their collateral. That right survives the opening of proceedings, but its exercise passes to the bankruptcy court, who conducts the realisation, and a deduction is made in favour of the estate for the costs of realising the collateral. Secured creditors therefore retain economic priority but lose control of timing and process, which is the principal practical drawback. Third parties with a proprietary claim to an asset not belonging to the estate hold a right of segregation (izlučno pravo).

Effect on Claims and Contracts

On the opening of bankruptcy, non-monetary claims convert to monetary claims, unmatured claims are treated as due and interest ceases to accrue as an ordinary claim. Provisions making the opening of proceedings an automatic ground for termination are restricted, particularly in restructuring following transposition of the EU Restructuring Directive, and the administrator has an election in relation to contracts not fully performed on both sides. Set-off available before the opening is generally preserved; set-off acquired in the suspect period is vulnerable.

Financial Collateral and Close-Out Netting

The principal exception is the Financial Collateral Act, implementing the Financial Collateral Directive. Arrangements within its scope are insulated from the stay and from most claw-back rules: a collateral taker may realise cash or financial instruments by sale, set-off or appropriation notwithstanding the opening of proceedings. Close-out netting under qualifying financial contracts is enforceable against an insolvent Croatian counterparty, which underpins the enforceability of standard market documentation, including the ISDA Master Agreement. Eligibility depends on both the parties and the collateral falling within the statutory definitions, so it must be confirmed rather than assumed for corporate counterparties.

Failing credit institutions fall outside this regime: BRRD-based resolution and a dedicated compulsory liquidation regime apply instead, and resolution authorities may impose temporary stays on termination and close-out rights. Counterparties of Croatian banks should analyse their position under that framework.

Distribution follows this order:

• Costs of the proceedings and obligations of the estate are paid first and take priority over  all pre-opening claims. These include court fees, the administrator's remuneration and claims arising from post-opening acts.
• Secured claims are paid from the proceeds of the specific collateral ahead of unsecured creditors, subject to the statutory deduction in favour of the estate for the costs of realising the asset. Any shortfall ranks as an ordinary unsecured and filed claim.
• Higher-ranking claims are paid ahead of other unsecured claims out of the free estate. These principally comprise employee claims, including unpaid taxes, wages and severance within statutory limits, with related taxes and contributions.
• Ordinary unsecured claims rank pari passu and include trade creditors, unsecured financial creditors and the unsecured portion of secured claims.
• Subordinated claims are paid only after all ordinary claims have been satisfied in full and, in practice, are never paid. This category includes interest accruing after the opening, penalties and fines, claims under gratuitous transactions and, most importantly for lenders, shareholder loans and economically equivalent claims treated as substitutes for equity.
• Equity is addressed after the claims ranking described above.
• Assets subject to a right of segregation do not form part of the estate and are delivered to the entitled party rather than distributed.

Croatian insolvency proceedings are slow by European standards, and duration is driven by asset realisation rather than by the procedure itself. Pre-bankruptcy proceedings are subject to statutory deadlines and are intended to conclude within a few months, though extensions are common. Bankruptcy involving a going-concern sale can be completed relatively quickly, but full liquidation of an estate containing real estate typically takes several years, and estates involving litigation or challenges to pre-opening transactions run considerably longer.

Recoveries have historically been poor for unsecured creditors and materially better, though far from complete, for secured creditors.

The practical conclusion is that Croatian insolvency should be treated as a value-destroying outcome to be avoided rather than a realistic recovery route, which is why consensual restructuring and pre-emptive enforcement against liquid collateral dominate lender strategy.

Out-of-Court Restructuring

Consensual restructuring remains the dominant route, particularly where the creditor group is a small club of domestic banks. A standstill followed by an amendment and restatement – rescheduling, revised covenants, additional security and often new money on a super senior basis – is the standard toolkit.

The limits are familiar. Amendments bind only consenting creditors, so a single holdout can force the process into a court procedure. Directors must file for the opening of bankruptcy proceedings within 21 days of the occurrence of a bankruptcy reason, which constrains how long negotiations can continue. Because a debtor is presumed unable to pay once unexecuted payment orders have been recorded in the FINA register for more than 60 days, a prolonged block on the company's accounts independently triggers that obligation and is closely monitored by lenders. And any restructuring concluded in the shadow of insolvency is exposed to subsequent challenge (see 7.5 Risk Areas for Lenders).

Pre-Bankruptcy Proceedings

Pre-bankruptcy proceedings are a court-supervised restructuring available where the debtor faces imminent insolvency. Following transposition of the EU Restructuring Directive, the regime provides for classification of creditors, a moratorium on enforcement, a plan approved by requisite majorities within classes, court confirmation and cram-down of dissenting creditors, including cross-class cram-down subject to conditions. Secured creditors' rights are affected only where they are included as an affected class, which is a central negotiating point. The procedure has been used with mixed results, and its effectiveness depends heavily on early initiation.

A special regime for companies of systemic importance provides for court-appointed extraordinary administration, a moratorium and a settlement binding on creditors; it remains exceptional but is relevant to lenders financing very large Croatian groups.

Claw-Back

The most significant risk is challenge of pre-insolvency transactions. The Bankruptcy Act permits the administrator, and in some circumstances creditors, to challenge acts prejudicing the general body of creditors. The applicable suspect periods depend on the ground of challenge; it is shortest for transactions constituting congruent satisfaction and longest where the debtor acted with intent to prejudice creditors and the counterparty knew of that intent.

For lenders, this bites in three recurring situations: security granted for existing indebtedness rather than for new money; repayment received while the lender was aware of the debtor's difficulties; and security or repayment obtained as part of a restructuring that ultimately fails. Standard protections are to advance new money against any new security, to document the commercial rationale contemporaneously, and to obtain an independent restructuring assessment where the debtor is in difficulty.

Other Risk Areas

Other risk areas include:

• Shareholder positions – a lender that is also a shareholder, or becomes one through an equity kicker or debt-for-equity conversion, faces subordination and exposure to challenge of repayments received before the opening of proceedings.
• Loss of control – on the opening of bankruptcy proceedings, the administrator assumes the powers of the debtor's management bodies.
• Directors' duties – directors must file within 21 days once a bankruptcy reason has arisen, and failure exposes them to personal and potentially criminal liability. A director facing personal exposure may have an incentive to file that is not aligned with the lender's strategy.
• Perfection defects – security perfected late may be both ineffective against third parties and vulnerable to challenge as an incongruent satisfaction, so perfection discipline at closing is the principal determinant of the insolvency position.

Project finance in Croatia is concentrated in energy, real estate, transport and tourism infrastructure, with a growing environmental and utilities segment. Public infrastructure investment is grant-driven, so deal flow follows the EU programming and absorption cycle rather than the investment cycle.

Energy is the most active sector, with wind and solar generation attracting sustained investment on a increasingly merchant or hybrid basis; this investment is supported by corporate power purchase agreements rather than exclusively by regulated premium schemes, a development that has changed the bankability analysis considerably. Battery storage, grid reinforcement, geothermal and district heating are all in the pipeline. The LNG terminal on Krk island, together with its associated pipeline capacity, remains the largest single energy infrastructure asset. In transport and logistics, port and container terminal development on the Rijeka corridor has attracted international sponsors and multilateral lending.

Hotel, resort and marina development is financed on structures sharing many project finance features – SPV borrower, completion support and cash flow control – while retaining sponsor recourse. Seasonality remains a key factor in the credit analysis. Waste management, water and wastewater and district heating have been developed with EU cohesion and recovery funding at municipal level, with commercial debt co-financing.

Framework and Structures

Public-private partnerships are governed by the Public-Private Partnership Act (Zakon o javno-privatnom partnerstvu), with concessions governed by the Concessions Act implementing the EU Concessions Directive, and procurement by the Public Procurement Act. Sector legislation adds requirements in transport, maritime domain, waste and energy.

Croatian law contemplates contractual PPPs, in which the public and private partners conclude a long-term contract for delivery and operation of infrastructure, and institutional PPPs, in which they jointly establish a project company. Concessions are the other principal route and the standard mechanism where the asset involves the maritime domain, water or other public goods that cannot be privately owned. Since November 2025, foreign investment screening applies in addition where a third-country investor is the concessionaire or private partner in a covered sector.

Obstacles

PPPs remain comparatively rare. EU grant funding makes them economically unattractive to public authorities, since grant money is cheaper than private capital; approvals are slow and involve multiple authorities; and lenders' requirements for direct agreements, step-in and compensation on termination are not readily accommodated by standard public contract templates. Where PPPs have worked, they have tended to be individual public buildings, sports and educational facilities, and airport and port concessions.

The parties are free to choose the law governing project agreements, subject to the limits described in 6.2 Foreign Law and Jurisdiction. In practice, the choice is constrained by the counterparty's identity and the location of the assets.

In practice, the governing law commonly adopted for the principal project documents is as follows.

• Contracts with public authorities, including concession agreements, PPP contracts and agreements with state-owned utilities, are invariably governed by Croatian law with Croatian court jurisdiction, as public bodies have limited flexibility to agree otherwise.
• Construction contracts are commonly based on FIDIC forms but with Croatian governing law, because the works, permits and mandatory construction legislation are Croatian.
• Offtake and power purchase agreements with domestic counterparties are typically Croatian law; corporate PPAs with international counterparties are sometimes on EFET or similar forms under English law.
• Security over Croatian assets must be Croatian law, while senior facility agreements in internationally sponsored projects are frequently governed by English law, which is unproblematic.

Arbitration is enforceable as described in 6.3 Foreign Court Judgments and Arbitral Awards, and the ability of a Croatian public body to submit to foreign arbitration should be verified for the specific counterparty rather than assumed.

Real Estate

Nationals and entities of EU and EEA member states may acquire real property, including agricultural land, on the same terms as Croatian nationals and without consent. Third-country nationals and entities may acquire real property generally subject to reciprocity and the consent of the competent ministry, a process that takes time and requires advance planning. A Croatian-incorporated company is treated as domestic regardless of its ownership, which is why foreign investors almost invariably hold Croatian real estate through a Croatian d.o.o., subject to foreign investment screening where the company operates in a covered sector.

Restricted Categories

Agricultural land cannot be owned by third-country persons other than under an international treaty or by inheritance, so the restriction now bites on non-EU acquirers rather than on EU ones. This directly affects a lender's ability to acquire land on enforcement, including for renewable energy projects sited on agricultural land. Forests and forest land are subject to restrictions of the same character.

The maritime domain - sea, seabed, shore and associated land - is a public good that cannot be privately owned; use is granted only by concession, which is fundamental to port, marina and coastal tourism projects and shapes the entire security and step-in architecture in those sectors.

There is no restriction on a foreign lender taking security over Croatian real property; the restrictions bite on acquisition, so a third-country lender enforcing a mortgage over agricultural land will need to sell rather than acquire. Taking security at the level of the shares in the Croatian propco, in addition to the asset-level mortgage, addresses this and is standard, although that route engages the screening analysis described in 3.2 Restrictions on Foreign Lenders Receiving Security.

Recourse and Vehicle

Croatian project financings are usually structured as limited-recourse financings to a special purpose vehicle, almost invariably a d.o.o., which offers the greatest corporate law flexibility and straightforward pledging of shareholding interests.

Security and Control

The security package typically comprises:

• a pledge over the shareholding interests in the SPV, giving a single point of enforcement;
• a mortgage over project real estate and, where the site is on the maritime domain or other public land, security over the concession to the extent permitted with the grantor's consent;
• an assignment or pledge of project agreements, offtake and PPA receivables and insurance proceeds;
• a pledge over project accounts, structured wherever possible as financial collateral to obtain out-of-court realisation; and
• direct agreements with the grantor, offtaker, EPC and O&M contractors providing notice of default and step-in and cure rights.

Structuring Issues

Concessions and most operating permits are not freely transferable and their transfer on enforcement requires grantor consent, so securing an advance conditional consent is a central objective. Location, construction and environmental permits, grid connection and energy approvals must be obtained in sequence, and permitting risk rather than credit risk is the dominant construction-phase risk in Croatian renewable projects. Where the project benefits from grant support or a feed-in premium, the attaching conditions constrain the financing structure and the lenders' enforcement rights. Thin capitalisation and interest limitation rules apply to shareholder funding, VAT cash flow during construction should be modelled, and merger control and foreign investment screening may apply.

Banks and HBOR

Senior debt from a club of two to four domestic banks is the standard source for mid-sized projects. Croatian banks have developed genuine project finance capability, though for the largest transactions international banks are brought in and documentation moves to LMA-based form.

The Croatian Bank for Reconstruction and Development (HBOR) is central to the market. It lends directly and through commercial banks that on-lend its funds, operates dedicated programmes for energy transition, tourism, infrastructure and regional development, and performs the export credit agency function for Croatia, providing export credit insurance and guarantees.

International Institutions and EU Funds

The EIB, EBRD and IFC lend directly to larger projects and provide credit lines to Croatian banks, with EIB involvement particularly significant in transport, energy and municipal infrastructure. IFI participation brings environmental and social standards, procurement rules and information covenants that must be reconciled with commercial lender documentation. Croatia's Recovery and Resilience Plan – approximately EUR10 billion in grants and loans, close to 13% of GDP – closed to further implementation on 31 August 2026, and the balance should now shift back towards commercial and IFI debt.

Other Sources

Project bonds are essentially absent. Infrastructure and renewable energy funds participate at equity level and increasingly in mezzanine tranches. Corporate PPAs matter not as a financing source but as the contractual foundation making merchant renewable projects bankable.

Mineral resources are the property of the Republic of Croatia. Exploration requires a permit and exploitation a concession, each awarded by public tender under the Mining Act, granted for a defined term and subject to a concession fee and reinstatement obligations. Hydrocarbons are subject to a distinct regime under dedicated legislation administered by the hydrocarbons agency. Water is a public good, and abstraction beyond general public use requires a water right granted by permit or concession under the Water Act, which is relevant to hydropower, geothermal, industrial and irrigation projects; geothermal resources sit at the intersection of the mining and water regimes.

There are no general restrictions on the export of natural resources and no domestic beneficiation requirement of the kind found in some resource jurisdictions, although sector-specific rules, EU customs and environmental law, dual-use controls and sanctions apply. Legislation on strategic investment projects allows designated projects an accelerated and co-ordinated permitting process, which can materially compress timelines for large investments.

The Legislation and the Authorities

The framework is overwhelmingly EU-derived. It comprises principally:

• the Environmental Protection Act, governing environmental impact assessment for projects, strategic environmental assessment for plans and integrated environmental permits;
• the Nature Protection Act, requiring appropriate assessment where a project may significantly affect a Natura 2000 site, and the most frequent source of consenting difficulty for renewable energy and infrastructure projects;
• the Water Act;
• the Waste Management Act;
• the Physical Planning Act and the Building Act, governing location and construction permits; and
• the Occupational Health and Safety Act with sector-specific safety regulation.

Emissions trading obligations and, increasingly, the EU deforestation and carbon border adjustment regimes add further layers for particular sectors.

Community Consultation

Public participation is a mandatory element of environmental impact assessment and of spatial planning, with prescribed periods for public display and comment. It is also the principal source of delay and litigation risk in Croatian project development: challenges to environmental and location permits by local communities and non-governmental organisations are common, and an annulled permit can set a project back years.

Lenders should treat permitting and consultation risk as a distinct diligence workstream, verifying that consultation was properly conducted rather than merely that the permit was issued, and checking whether appeal periods have expired and any challenge is pending.