1. Basic facts about leasing in Croatia

The Leasing Act of December 2006 was the pioneer law which for the first time systematically organised leasing business in Croatia and provided legal framework for performance of leasing services by the specialised leasing companies. Certain imperfections noticed during the application of the Leasing Act 2006 are planned to be overcome by adoption of the new Leasing Act which has been put into the parliamentary procedure for further adoption. The prospective Leasing Act tends to improve scope of business of the leasing companies and provides for more detailed rules in respect to risk management and supervision of the leasing companies, conditions for performance of the leasing activities by the EU based companies and the companies from third countries, registry of leased assets and many more.

2. Leasing companies and the EU market

The admittance of Croatia to the EU sets requirements for adjustment of the Croatian leasing market with the EU laws and its further liberalisation in terms of admissibility of the EU based leasing companies to provide leasing services in Croatia. Leasing services in Croatia may be performed by: a) a Croatian legal entity (joint stock company or a limited liability company) which has obtained a license by the Croatian Agency for Supervision of the Financial Services (“HANFA”) and under specific conditions; b) leasing company with the registered seat in the EU member state; and c) branch office of the leasing company having the registered seat in the country outside the EU which is not the signatory to the EEA Agreement. Exceptionally, the financial leasing services may also be performed by the credit institution in compliance with the laws regulating credit institutions activities.

3. Risk management and control

The prospective Leasing Act sets additional requirements to the standards and business rules as well as risk management and control of the business activities of the leasing companies. The new standards regarding organisational structure of the leasing companies, internal auditing, separation of business processes and internal control systems are also included in the new regulations. Further improvements relate to the supervision procedures of business of leasing companies, as well as cooperation between supervising authorities. The supervising measures which may be applied to the business of the leasing companies and which have not been regarded in the old (current) Leasing Act are warnings and recommendations to be addressed to the management board of the leasing company, special supervisory measures which include amongst other share capital increase, dismissal of the management board member, risk reduction, temporary prohibition of conclusion of new leasing and rental agreements and some others. 

4. Register of the leased assets

The prospective Leasing Act provides for more precise regulation of the Register of Leased Assets which is kept with HANFA, the manner of keeping of the business records and handling with confidential information. With the purpose of enabling more efficient control of activities of the leasing companies by the competent government authorities, the exceptions where the data confidentiality rules do not apply, have been expanded.

5. Mobilizing of the leased assets

The prospective Leasing Act provides for a significant novelty in that, beside the activities of financial and operative leasing, the leasing companies would be authorised to provide services which are directly or indirectly related to leasing activity. Having regard to the negative economic trends and decrease in the credit worthiness of the clients, the welcomed solution is that the leasing companies shall be enabled to further rent the leased objects that were returned by the clients due to their inability to meet financial obligations. It is expected that this solution should benefit both parties to the lease agreement.

6. Provider of the leased assets, future goods as the object of leasing

Another novelty refers to a person providing the assets to be purchased by the leasing company and then leased to the customer. Pursuant to the old (current) regime, the provider (seller) of the assets to the leasing company may only be a legal person. The prospective Leasing Act eases the way of obtaining the assets subject to later lease in that, the provider of the assets to the leasing company may also be a natural person.

Furthermore, with the purpose of stimulating business activities in the leasing market as well as in the entire economy, according to the new regulations, the leasing agreements may be used not only for financing of the existing assets but also for certain investment projects, public-private partnerships, building of real estate or other ventures which require longer financial support. As opposed to the old law, the prospective Leasing Act defines the object of the leasing as the movable or immovable property in accordance with the laws regulating ownership rights and explicitly provides that the object of the leasing may be a future thing.

7. Conclusion

As at September 2013 Croatia counts 25 active leasing companies. Within the structure of the non-banking sector, the leasing companies participate with HRK 22,24 billion which is 4,1% of the entire assets of the financial sector or 16,5% of the assets of the non-banking financial sector. In 2012 the leasing companies gained net profit of HRK 142,6 million.

These figures show not just the importance of the leasing market in Croatia but also a need for such a market to be further developed in a manner to enable financial stability and prosperity of the economy.

The new Leasing Act is expected to result in improvement of legal certainty by both lessors and lessees. The Government expects that the new statutory regime will safeguard steady and safe leasing activities at the same time giving the opportunity to entrepreneurs and leasing companies to more proactive project financing.