Answer ... Alternative investment funds (AIFs) are governed by the Alternative Investment Funds Act (Official Gazette 21/2018, 126/2019). The act transposed Directive 2011/61/EU and Directive 2011/89/EU into Croatian law. The act further established preconditions for the implementation of the following EU regulations:
- Commission Delegated Regulation 231/2013;
- Commission Implementing Regulation 447/2013;
- Commission Implementing Regulation 448/2013;
- Commission Delegated Regulation 694/2014;
- Regulation 345/2013; and
- Regulation 346/2013.
The AIF Act is supplemented by a number of ordinances enacted by the Croatian Financial Services Supervisory Agency (HANFA), which elaborate on its provisions (eg, types of AIFs, damages to investors, regulatory capital (sum of initial capital and own funds), shares of AIFs, depositary, authorisation of AIF managers (AIFMs)). Furthermore, HANFA and AIFMs must act in accordance with the mandatory guidelines adopted by the EU supervisory bodies (hereinafter referred to as ‘subordinate regulations’).
Answer ... The Ordinance on the Types of AIFs (Official Gazette 28/2019) prescribes the types of AIFs which can be incorporated in Croatia and the rules applicable to each different type. The ordinance distinguishes between AIFs with public and private offerings, which may be incorporated as open-ended or closed-ended AIFs. Closed-ended AIFs can further be established with or without legal personality. When incorporating a closed-ended AIF with legal personality, the provisions of the Companies Act must be observed.
The type of AIF is relevant when deciding on issues such as:
- the types of investors at which the AIF will be targeted;
- how the assets of the AIF may be invested; and
- applicable investment restrictions.
AIFs with private offering may take the following forms:
- private equity funds;
- venture capital funds;
- AIFs for investment in real estate;
- funds of funds;
- hedge funds;
- specialised AIFs;
- European venture capital funds, which are governed by Regulation (EU) 345/2013; and
- European social entrepreneurship funds, which are governed by Regulation (EU) 346/2013.
Answer ... The AIF Act contains provisions with extra-territorial reach, analogous to the rules included in Directive 2011/61/EU. Croatian AIFMs can generally manage and market the shares of AIFs incorporated:
- in Croatia or another EU member state (‘EU AIFs’); or
- in a third country (‘non-EU AIFs’), subject to further notification to HANFA and as long as they comply with the AIF Act.
The same rules apply to EU AIFMs intending to manage or market the shares of Croatian incorporated AIFs. More stringent provisions govern non-EU AIFMs, which are subject to further authorisation by HANFA where they intend to manage or market the shares of EU or non-EU AIFs within the European Union. The AIF Act sets out further conditions that must be fulfilled and documents that must be submitted to HANFA in order for AIFMs to provide notification or obtain authorisation for management or marketing in such situations. Small and medium AIFMs, as defined in questions 4.1 and 4.2, cannot manage or market the shares of non-Croatian AIFs, so the provisions outlined herein are relevant only for large AIFMs.
Answer ... The Foreign Account Tax Compliance Act (FATCA) Agreement between the Government of Republic of Croatia and the Government of the USA to Improve International Tax Compliance and to Implement FATCA is relevant in this regard.
Answer ... HANFA is authorised to implement and supervise the AIF Act, other applicable regulations and subordinate regulations as set out in question 1.1. Specific authorities and powers granted to HANFA are regulated in more detail by the Croatian Financial Services Supervisory Agency Act (Official Gazette 140/2005, 154/2011, 12/2012).
Supervision also includes the authority to impose administrative measures such as the following in case of breach:
- formal notice;
- orders to remedy illegalities and irregularities;
- special supervisory measures, such as an increase in capital or dismissal of members of the management or supervisory board; and
- annulment of authorisations.
HANFA is also authorised, among other things, to:
- adopt implementing provisions regulating the capital markets, investment and other types of funds, and pension and insurance funds;
- issue and annul permits, authorisations, licences and consents in accordance with the respective provisions;
- organise and supervise measures for the effective functioning of the financial markets;
- propose initiatives to adopt provisions to regulate the financial markets and financial services; and
- inform the public on the principles under which the financial markets operate.
Answer ... HANFA and other Croatian supervisory bodies are obliged to deliver all data on subjects under their supervision upon request to the supervisory bodies of other EU member states. Supervisory bodies are obliged to inform each other of all determined irregularities and other circumstances of importance for the performance of their duties.
HANFA also cooperates with competent bodies of other member states, the European Securities and Markets Authority (ESMA) and the European Systemic Risk Board (ESRB). HANFA shall, on its own initiative or upon request, deliver to these bodies information of importance for the performance of their duties. HANFA may also request information from competent bodies relevant for the performance of its own duties. Supervisory bodies shall also cooperate where this is necessary to analyse the business of a particular entity or to conduct other investigative measures.
If HANFA has clear and justifiable reasons to suspect that an AIFM which is not subject its supervision is acting or has acted contrary to the provisions transposing Directive 2011/61/EU into national law, it shall inform ESMA and the competent bodies of the AIFM’s home member state and host member state accordingly.
HANFA will also exchange information with the competent bodies of other member states where relevant in monitoring and responding to possible consequences that the business of individual AIFMs or AIFMs in general may have for the stability of systematically important financial institutions and for the proper functioning of markets in which the AIFMs are conducting business. This information will be delivered to ESMA and the ESRB.