Regulation, licensing and registration

Principal regulatory bodies

What are the principal regulatory bodies that would have authority over a private equity fund and its manager in your jurisdiction, and what are the regulators’ audit and inspection rights and managers’ regulatory reporting requirements to investors or regulators?

The national regulatory body for PE funds is the Regulator. In general, the Regulator:

  • monitors the organisational conditions, strategies, policies and procedure of a UAIF and the funds;
  • monitors and assesses the financial stability and standing of the supervised entity and the risks to which it is exposed; and
  • supervises the legality of the UAIF’s conduct.

The Regulator’s supervision is both on and off site and the Regulator has the power to fine a UAIF and the managers personally, to order changes in organisation by an administrative act and finally to revoke the UAIF’s licence as the most stringent measure.

The funds also have disclosure requirements. To start with, they issue fund rules and the annual financial report, which they report both to the Regulator and to the investors.

The annual accounts must be audited, and the auditor is approved by the investors.

Both an OIFRC and a ZIFRC also have the obligation to file half-yearly financial reports to the Regulator, and a valuation report to the depositary bank.

Governmental requirements

What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?

As stated in question 2, OIFRCs, ZIFRCs and UAIFs are subject to a licensing processes and are regularly supervised by the Regulator in accordance with Croatian and EU regulations.

OIFRC and ZIFRC rules and their amendments are pre-approved by the Regulator. UAIF articles of association and their organisational issues are also pre-authorised and supervised by the Regulator.

Registration of investment adviser

Is a private equity fund’s manager, or any of its officers, directors or control persons, required to register as an investment adviser in your jurisdiction?

Under the Alternative Investment Funds Act, a UAIF should have at least two management board members and at least one management board member is required to obtain an investment adviser’s licence.

Fund manager requirements

Are there any specific qualifications or other requirements imposed on a private equity fund’s manager, or any of its officers, directors or control persons, in your jurisdiction?

The board of directors of a UAIF must have a minimum of two directors. The directors and officers of the UAIF must meet certain requirements regarding integrity and reputation. In this respect, they must complete a questionnaire required by the Regulator and present their plan of activities to the Regulator. The Regulator licenses the members of the management board for a five-year term and can refuse the licence application if they do not fulfil the legal requirements. In that sense the law requires at least three years’ experience of governing positions in a UAIF or at least five years’ experience in similar positions. The management board members should have a contract of employment with the UAIF with full working hours, and at least one of the members should know the Croatian language and have an investment adviser licence.

For the capital requirements of a UAIF see question 2.

Political contributions

Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure of, political contributions by a private equity fund’s manager or investment adviser or their employees.

There are no specific rules applicable to managers or advisers of PE funds.

The Financing of Political Parties Act regulates contributions to political parties. It prescribes that legal entities can donate up to 300,000 kuna per fiscal year and natural persons 30,000 kuna. The identity of the contributors is recorded by the political party and a list of contributors must be publicly available.

Use of intermediaries and lobbyist registration

Describe any rules - or policies of public pension plans or other governmental entities - in your jurisdiction that restrict, or require disclosure by a private equity fund’s manager or investment adviser of, the engagement of placement agents, lobbyists or other intermediaries in the marketing of the fund to public pension plans and other governmental entities. Describe any rules that require a fund’s investment adviser or its employees and agents to register as lobbyists in the marketing of the fund to public pension plans and governmental entities.

As both OIFRCs and ZIFRCs are regulated as AIFs, the applicable rules under the AIFMD with respect to the marketing and distribution of AIFs are in place and should be complied with.

Other than those mentioned above, there are no specific rules governing the marketing of funds to public pension plans and other governmental entities.

Bank participation

Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.

There are no such rules in Croatia.