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New Regime for Pledge over Shares

May 2007 - Corporate & Commercial. Legal Developments by BABIC & PARTNERS Law Firm .

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At the end of July 2006, the Croatian central Registry of pledges over movable property became operational. The registry was established under 2005 Act on Registry of Pledge over Movable Property and is operated by the Croatian Financial Agency.

Purpose and Impact of the Registry

Registry is a public record in which the information on creditors, debtors, types of pledge and the movables encumbered by pledge are entered into. Particular information recorded in the registry is available online. By start of the registry's operations, the pledges, conditional transfers of ownership and other encumbrances over movable property, including shares in corporations, are effectively acquired by entry into the registry. This method of pledge acquisition is expected to drastically increase transparency in creditors-debtors relations especially as regards the pledges over shares in limited liability companies which were not subject to public record under previous legal regime.


The registry has been established with the view to create a safer investment climate and reduce the risks of debtor's abuse as well as the risk of creditors' loss and thus increase legal security. Although the registry is not specifically targeted at foreign investment, one may reasonably expect that its operation will have positive impact in foreign investments and related acquisitions of Croatian companies, by way of increasing the availability of information concerning the encumbrances over the target's shares as well as target's movable property.


Contributed by Marija Gregorić, Partner at Babić & Partners


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