Establishing a Commercial Company in the Republic of Croatia for Non-EU Nationals: Is an “Approval” Required under the Foreign Direct Investment Screening Act?

In practice, the term “foreign investment” is often equated with “setting up a company by a foreigner.” However, the legal framework distinguishes between the procedure for establishing a commercial company and the security mechanism for screening foreign investments.

Company Formation and the Foreign Investment Screening Act

When a person from outside the EU wants to start a company in Croatia, everything is often lumped under the same label of “foreign investment,” creating the impression that every new company must be specially approved.

However, the Ministry of Finance clearly states in its information that the Foreign Investment Screening Act does not change the procedure for establishing commercial companies.

In other words, the mere fact that the founder is a non-EU national does not automatically mean they must undergo screening by the Ministry of Finance or the Commission.

The purpose of this Act is not to decide who is allowed to open a company, but to enable the state to screen certain foreign investments if they could affect national security or public order.

The screening procedure can begin in two ways: either someone files an application for approval, or the competent authorities initiate the procedure themselves (ex officio). If an application is submitted, it is sent to the Ministry of Finance by registered mail or electronically.

Who Submits the Application and When Does the Obligation Arise?

Such an application is not filed by “just anyone.” It can be filed either by the foreign investor (a person or company from outside the EU that is investing) or by the target company itself, i.e., the obligated entity (“obveznik”).

It is also crucial when an application is required at all: this is linked to situations where the foreign investor acquires or changes a significant stake in such a company, or obtains “control” over it (for example, the ability to decide on important matters).

What Is an “Obligated Entity” (“obveznik”) and Why Isn’t Every Newly Established Company an Obligated Entity?

This brings us to the key concept: the “obveznik.”

This is not every company established in Croatia, but only a company that has been determined to fall within sensitive areas.

The Act provides that competent public authorities identify such obligated entities based on their business activity, keep records of them, and submit those records to the Ministry of Finance.

The Ministry then compiles a consolidated list and submits it to the Commission for confirmation.

In publicly available information, the Ministry of Finance further explains that screening focuses on investments linked to critical infrastructure (e.g., energy, transport, defence, finance, water), critical resources (energy, food), sensitive information, communications and electoral infrastructure, and the media.

Therefore, “small” and everyday business activities should generally not fall within the scope for which this screening is intended.

Residence and Work: A Separate Regime for Third-Country Nationals

Finally, it is important to separate another issue that often causes problems in practice: residence and work.

The Ministry of the Interior explains that third-country nationals are persons who are not from the EEA and not from Switzerland, and that the conditions for entry, residence and work in Croatia are regulated by the Foreigners Act.

This means that one question is whether someone can be the owner of a company, and another question is whether that person can actually live and work in Croatia or run the business from Croatia—and this sometimes requires regulating residence and work status.

Conclusion

Foreign investment screening is triggered only in special cases, namely for companies connected to sensitive areas (e.g., critical infrastructure, resources, communications, etc.).

The procedure may be initiated upon request or ex officio.

Since the Ministry of Finance has not yet adopted a regulation that would explain in detail the sectors and criteria used to determine who qualifies as an “obveznik,” practice has become uneven: in cases where founders are non-EU nationals, or where founders or persons authorised to manage the company (e.g., management board members, supervisory board members or authorised signatories/procurators) are from third countries, commercial courts often do not register the company immediately, but require that prior approval from the Ministry of Finance be obtained first

As a result, in practice, non-EU persons may face obstacles both when establishing a new company and when acquiring an existing one, because a prior approval is requested.