Regulation on the Capital of a Leasing Company - Unofficial Consolidated Text (NN 60/14 and 142/22)

UNOFFICIAL CONSOLIDATED TEXT REGULATION ON THE CAPITAL OF A LEASING COMPANY (Official Gazette No. 60/14 and 142/22)

The Regulation on Amendments to the Regulation on the Capital of a Leasing Company (Official Gazette No. 142/22) entered into force and applies from January 1, 2023.

Regulation on the Capital of a Leasing Company – Unofficial Consolidated Text (Official Gazette No. 60/14 and 142/22) 1

Introductory Provisions Article 1. (1) This Regulation prescribes: – the method and rules for calculating capital, – the method and deadlines for reporting, – additional requirements for measures and procedures regarding the conduct of the leasing company in ordinary and extraordinary circumstances. (2) This Regulation also provides a detailed description and content of certain items taken into account in the calculation of the capital of a leasing company.

Definitions of Terms Article 2. For the purposes of this Regulation, the following terms are used:

1. Law – Leasing Law ("Official Gazette" No. 141/13),
2. Agency – Croatian Financial Services Supervisory Agency (HANFA),
3. Leasing Company – a legal entity that has received a license from the Agency to conduct financial and/or operational leasing business,
4. Share Capital – share capital as prescribed by Article 9 of the Law,
5. Capital – capital of a leasing company as prescribed by Article 10 of the Law.

Items Included in the Calculation of the Capital of a Leasing Company Article 3. (1) A leasing company is required to meet two capital conditions: – share capital must not be less than 132,722.81 euros, – capital must not be less than 132,722.81 euros. (2) The capital of a leasing company referred to in paragraph 1, item 2 of this Article, includes the following items: – subscribed and paid-in share capital (paid amounts for business shares or nominal value of ordinary and non-cumulative preferred shares realized upon issuance of those shares), – all types of reserves formed from profit after taxation, – retained earnings of previous years determined on the basis of audited annual financial statements (not encumbered by any future obligations) and approved by members or shareholders and distributed in accordance with the decision of the general meeting on the use of profit, – profit of the current year determined on the basis of audited annual financial statements (not encumbered by any future obligations) and approved by members or shareholders, or distributed in accordance with the decision of the general meeting on the use of profit, or profit determined on the basis of financial reports for periods during the year and confirmed by auditors, which, in accordance with the decision of members or shareholders, or the general meeting on the use of profit, not encumbered by any future obligations, is distributed into reserves and/or retained earnings during the year, and – capital reserves (amounts above the nominal value/accounting value realized upon issuance of shares referred to in item 1 of this paragraph and upon acquisition and/or disposal of own shares, as well as additional payments by shareholders into capital). (3) The sum of the items from paragraph 2 of this Article is reduced by the following items:

Regulation on the Capital of a Leasing Company – Unofficial Consolidated Text (Official Gazette No. 60/14 and 142/22) 2 – acquired own business shares or own shares, excluding cumulative preferred shares, at accounting value, – intangible assets, in the form of goodwill, licenses, patents, trademarks, concessions, and positive reserves arising from the revaluation of intangible assets, – carried forward losses of previous years, determined on the basis of audited annual financial statements, – loss of the current year, determined on the basis of an audited annual financial report and approved by members or shareholders, or by the general meeting, or loss determined on the basis of financial reports for periods during the year, – capital reserves (the difference between the amount achieved from the sale and the nominal value of the share if it is lower than the nominal amount), and – unrealized losses from the valuation adjustment of financial assets available for sale, negative net revaluation reserves arising from accounting for investments in associates or joint ventures using the equity method, and other negative net revaluation reserves. (4) Positive revaluation reserves are not included in the calculation of capital.

Method and Deadlines for Reporting to the Agency Article 4. (1) A leasing company reports to the Agency on the capital of the leasing company via the Report on the Calculation of Capital of a Leasing Company (IIKLD) (Annex No. 1) and the Instructions for the Calculation of Capital of a Leasing Company (Annex No. 2), which are an integral part of this Regulation. (2) The report referred to in paragraph 1 of this Article must be submitted by the leasing company to the Agency quarterly and annually with the status as of the last day of the calendar year or the last day of the calendar quarter. (3) The report referred to in paragraph 1 of this Article must be submitted by the leasing company to the Agency quarterly with the status as of the last day of the calendar quarter, specifically: – with status as of March 31 of the current year no later than April 30 of the current year, – with status as of June 30 of the current year no later than July 31 of the current year, – with status as of September 30 of the current year no later than October 31 of the current year, – with status as of December 31 of the current year no later than January 31 of the following year. (4) The report referred to in paragraph 1 of this Article with status as of the last day of the calendar year must be submitted by the leasing company to the Agency no later than April 30 of the following year. (5) The report referred to in paragraph 1 of this Article must be submitted by the leasing company in the manner prescribed by the relevant technical instruction issued by the Agency. (6) Notwithstanding the provisions of paragraphs 3 and 4 of this Article, the leasing company is required to submit the Report referred to in paragraph 1 of this Article within the deadline determined by the Agency.

Preventive Measures of the Agency in Case of Assessment that the Capital of a Leasing Company May Fall Below the Minimum Capital Level Article 5. (1) A leasing company is required to continuously monitor and determine compliance with the condition regarding the minimum amount of capital. (2) If the Agency assesses that the capital of the leasing company may fall below the level of the minimum amount of capital referred to in paragraph 1 of Article 10 of the Law, it may request the leasing company to adopt measures to reach the necessary level of capital or to prepare a proposal for measures for which other bodies of the leasing company are competent. (3) Along with the notice on measures from paragraph 1 of this Article, the management of the leasing company is required to attach business projections for the next three years: – for the first year, by quarters, and – for the remaining two years, annually. (4) The business projections referred to in paragraph 3 of this Article must include at least the following: balance sheet (Report on Financial Position), income statement (Report on Comprehensive Income), Report on the Calculation of Capital of a Leasing Company, and a set of assumptions on which the projections are based. (5) The leasing company submits the projections referred to in paragraph 3 of this Article to the Agency in accordance with the instruction on the method of submitting data to the Agency, signed by the persons who prepared them and the responsible persons. The forms for the projections referred to in paragraph 3 of this Article are available for the leasing company to download from www.hanfa.hr in the menu Forms/Forms for Reporting Projections.

Internal Acts Article 6. (1) A leasing company is required to adopt internal acts by December 31, 2014, which shall define at least the following: – strategies and policies defining the method of managing the capital of the leasing company in ordinary and extraordinary circumstances, – plan and procedures for preventing, or for the conduct of the leasing company in the event that the capital of the leasing company may fall below the level of the minimum amount of capital referred to in paragraph 1 of Article 10 of the Law. (2) The leasing company is required to regularly update the internal acts referred to in paragraph 1 of this Article.

Transitional and Final Provisions Article 7. This Regulation enters into force on the eighth day from the date of publication in the "Official Gazette," and applies for the first time for annual financial and additional reports prepared with status as of December 31, 2014, which are submitted to the Agency in the manner and deadlines prescribed by the Regulation on the Structure and Content and Method and Deadlines for Submission of Financial and Additional Reports of Leasing Companies.

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ANNEX 1. Report on the Calculation of Capital of a Leasing Company – IIKLD ANNEX 2. Instructions for the Calculation of Capital of a Leasing Company

These Instructions further prescribe the content and format of the report on the calculation of capital and the method of preparing and filling out the report on the calculation of capital that a leasing company is required to submit to the Agency.

Items 1 to 12 refer to capital items that form the capital of a leasing company with a positive or negative sign.

1. Share Capital: 1.1. Paid-in business shares: for a leasing company established as a limited liability company, enter the nominal value of the paid-in and subscribed business share that constitutes the share capital of the leasing company. 1.2. Paid-in ordinary shares: for a leasing company established as a joint-stock company, enter the nominal value of the paid-in and subscribed ordinary shares that constitute the share capital of the leasing company. 1.3. Paid-in non-cumulative preferred shares: for a leasing company established as a joint-stock company, enter the nominal value of the paid-in (and subscribed) non-cumulative preferred shares that constitute the capital of the leasing company.

2. Reserves formed from profit after taxation: enter the mathematical sum of reserves relating to:

Regulation on the Capital of a Leasing Company – Unofficial Consolidated Text (Official Gazette No. 60/14 and 142/22) 5 2.1. statutory reserves – the amount of net profit distributed to this type of reserve, taking into account the provisions of Articles 220 and 222 of the Companies Act (if the leasing company is structured as a joint-stock company), 2.2. articles of association reserves or reserves provided for in the company contract – the amount of net profit distributed to reserves in accordance with the articles of association of the leasing company, taking into account the provisions of Articles 220 and 222.a of the Companies Act or the company contract, taking into account the provision of Article 406.a of the Companies Act, 2.3. reserves for the repurchase of own shares or reserves for own business shares – the amount of net profit distributed to reserves, taking into account the provisions of Articles 220 and 222a of the Companies Act or the provision of Article 406.a of the Companies Act, 2.4. other reserves – the amount of net profit distributed to reserves formed in accordance with the provisions of Articles 220 and 222a of the Companies Act or the provision of Article 406.a of the Companies Act.

3. Capital reserves: enter the part of the paid-in amount for which shares are issued that exceeds the nominal value of the shares (ordinary and non-cumulative preferred), and if the shares in question are issued without nominal value, enter the amount that exceeds the accounting value of the share capital relating to the aforementioned types of shares (if the leasing company is structured as a joint-stock company). Enter the part of the paid-in amounts for which business shares are issued that exceeds the nominal amounts of the shares (if the leasing company is structured as a limited liability company). Capital reserves also include additional payments by members or shareholders of the leasing company into capital (Article 222. (406.a) of the Companies Act).

4. Retained earnings: enter the amount of retained earnings of previous years, shown in the financial report, which was determined on the basis of audited annual financial statements (not encumbered by any future obligations) and approved by members or shareholders of the leasing company, or distributed in accordance with the decision of the general meeting of the leasing company. In the financial reports for the first quarter of the current year, the leasing company may also include part of the profit from the previous year (item profit of the previous year) if the leasing company decided to retain this part of the profit with the approval of the decision by members or shareholders or the supervisory board of the leasing company.

5. Profit of the current year: enter the amount of profit of the current year determined on the basis of audited annual financial statements (not encumbered by any future obligations – reduced by paid dividends, paid taxes, and other obligations from profit in the reporting period) and approved by members or shareholders of the leasing company, or distributed in accordance with the decision of the general meeting of the leasing company on the use of profit.

6. Acquired own business shares: enter the value of business shares acquired by the leasing company itself through repurchase, structured as a limited liability company, using assets exceeding the amount of the company's share capital, and specifically according to legally prescribed reserves for the acquisition of own shares, which do not reduce the company's share capital, or reserves that must be created on the basis of the company contract, which cannot be used for payments to company members.

7. Acquired own shares: enter the mathematical sum of items 7.1 and 7.2, which relate to shares that the leasing company, structured as a joint-stock company, acquired through direct or indirect repurchase (accounting value/cost of investment) as well as those that the leasing company directly or indirectly holds in pledge (accounting value/nominal value), specifically: 7.1. ordinary shares are entered with a negative sign, 7.2. non-cumulative preferred shares are entered with a negative sign.

8. Intangible assets: enter, with a negative sign, the amount (including increase/surplus from revaluation) of intangible assets characterized by uncertainty of future benefit, relating to: goodwill, licenses, patents, trademarks, and concessions. Software solutions or software support in development are not considered deductible items in the calculation of basic capital.

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9. Carried forward losses: enter, with a negative sign, the amount of losses from previous business years, shown in the financial position report of the leasing company, which were determined on the basis of audited annual financial statements and approved by members or shareholders, or the general meeting of the leasing company.

10. Loss of the current year: enter, with a negative sign, the amount of the loss of the current year determined on the basis of audited annual financial statements which were approved by members or shareholders, or the general meeting of the leasing company, or loss determined on the basis of financial reports for periods during the year.

11. Capital reserves: enter, with a negative sign, the amount that is lower than the nominal value of the shares (ordinary and non-cumulative preferred), and if shares are issued without nominal value, the amount that is lower than the accounting statement of the share capital amount, relating to the aforementioned types of shares (Article 222 of the Companies Act).

12. Unrealized loss of financial assets available for sale: enter with a negative sign unrealized losses from the valuation adjustment of financial assets available for sale.

13. Negative net revaluation reserves: enter with a negative sign negative net revaluation reserves arising from accounting for investments in associates or joint ventures using the equity method, as well as other negative net revaluation reserves.

CAPITAL: enter the result of the mathematical sum of items 1. – 13.