Official Position Regarding the Application of Article 2(2) of the HAFC Act in Connection with the Establishment of the PlatiMe.hr Digital Platform

The Croatian Financial Services Supervisor (hereinafter: HANFA) received on April 8, 2021, a request for an opinion from Plati me d.o.o. (hereinafter: the Applicant) regarding the application of the provisions of Article 2, point 2 of the Act on the Croatian Financial Services Supervisor (Official Gazette nos. 140/05, 154/11, and 12/12, hereinafter: the HAFC Act) in connection with the establishment of the digital platform PlatiMe.hr.

According to the request, PlatiMe.hr is a digital platform envisioned as a bulletin board where Senders of electronic invoices (creditors) would have the opportunity to display issued and received and confirmed invoices (due and due), showing the desired selling price at which Senders would assign their claims to Buyers. On the other hand, Buyers, including financial institutions, would have the opportunity to make offers to purchase and acquire due and due claims (invoices). In this way, the platform would aim to connect supply and demand, and would have the ability to sign standard electronic contracts (e-Contracts) for the assignment of claims, thereby enabling transparent contract conclusion for all stakeholders in the claim transfer process. The platform's operation will involve Plati me d.o.o. as the platform administrator, Senders and Recipients of electronic invoices, and Buyers who are financial institutions, as well as other entities acting as Buyers who will make offers to purchase due and due claims.

In relation to all the above, the Applicant emphasizes that it does not purchase nor participate in financial transactions, but serves as a sort of bulletin board, and is therefore interested in whether the described model of operation and the Applicant as Platform Administrator constitute a supervised entity within the meaning of Article 2, point 2 of the HAFC Act, and whether they are subject to HANFA's regulation and supervision.

Given that the subject inquiry points to the necessity of promoting, organizing, and overseeing measures for the effective functioning of financial markets in the sense of harmonizing the conduct of supervised entities under Article 2, point 2 of the Act on the Croatian Financial Services Supervisor (Official Gazette nos. 140/05 and 12/12), the following action is taken.

Based on Article 15, point 4 of the Act on the Croatian Financial Services Supervisor, HANFA adopted at the meeting of the Board of Directors held on May 6, 2021, the

OFFICIAL POSITION

I. Article 15, point 1 of the HAFC Act stipulates that in exercising public authorities, HANFA is authorized to adopt implementing regulations based on this Act, laws regulating the capital market, investment and other funds, takeover of joint-stock companies, pension insurance companies, insurance and reinsurance, and financial services, as well as other laws when authorized by such laws, and paragraph 2 of the same article stipulates that HANFA is authorized to supervise the business of supervised entities established in regulations under point 1 of this article, and legal entities engaged in factoring business, unless banks conduct it within their registered activity, and to impose measures to eliminate identified illegality and irregularities.

Furthermore, point 2 of Article 2 of the HAFC Act stipulates that supervised entities of HANFA are all legal or natural persons engaged in providing financial services, advising on the financial market, selling, intermediating, or managing assets of users of financial services. The specific business activities are more detailed in sectoral regulations under HANFA's competence.

Following the above, given that the described business model cannot be characterized as providing a financial service, HANFA is of the opinion that the Platform Administrator is not a supervised entity of HANFA on this basis within the meaning of Article 2, point 2 of the HAFC Act.

II. Although the Platform Administrator is not a supervised entity of HANFA, it is a person who possesses information necessary for HANFA to determine whether factoring business is conducted in accordance with regulations, and is obliged to cooperate in the supervision process.

Namely, according to the described business model, via the PlatiMe.hr platform, a legal factoring business may be concluded between contracting parties (Senders and Buyers) as prescribed by Article 4 in conjunction with Article 2, point 13 of the Factoring Act (Official Gazette nos. 94/14 and 85/15; hereinafter: ZOF), according to which Article 4 defines factoring business as a legal business in which the provider of factoring services, based on and in accordance with a factoring contract concluded with the supplier and/or buyer, purchases factoring objects with or without the right of recourse, and by Article 2, point 13 of the ZOF, the factoring object is defined as existing and/or future, due, whole or partial monetary claims arising from the delivery of goods and/or provision of services by business entities in the domestic or foreign market.

In accordance with Article 18 of the ZOF, factoring business as a business activity on a continuous basis may only be conducted by a factoring company registered in the court registry based on HANFA's approval, a factoring company from another Member State under Article 59 of the ZOF, a branch of a factoring company from a third country and a factoring company from another Member State under Article 61 of the ZOF, or a credit institution. If another entity can appear as a Buyer, and if such entities can continuously purchase due claims via the platform, there is a possibility that the activities of such individual Buyer on the platform may cross into unlicensed factoring business.

III. HANFA considers it necessary to timely inform business entities that would occasionally conduct factoring business as Buyers via the mentioned platform about which provisions of the ZOF and under what conditions might apply to them, so that such business entities do not cross into continuous and predominant conduct of these activities relative to their registered activities and thereby conduct unlicensed factoring business. Following the above, HANFA considers that the Applicant must make such a clear warning continuously available to Buyers and potential Buyers in a prominent place on its platform.

HANFA will publicly publish on its website the criteria by which it will determine when occasional activity of purchasing due claims may cross into conducting factoring business. These criteria will, in essence, take into account the following:

• whether the goal of purchasing due claims is to ensure a steady source of income for the person purchasing them,
• whether the method of purchasing due claims is structured to have all elements of a factoring contract or an equivalent to a factoring contract,
• whether such a person advertises, directly or indirectly, as someone purchasing due claims and whether such promotional activities are directed towards the public or a narrower group of potential clients,
• how often such a person purchases due claims within a period of one year and in what amounts,
• whether such a person conducts the business of purchasing due claims in a manner whose purpose is to circumvent the licensing obligation as a factoring company,
• whether it is an activity economically similar to factoring business, which the person conducts as part of its main activity which is also subject to licensing and supervision by an authorized body.

These criteria are not mutually exclusive, and will be considered in their entirety, all with the aim of determining whether a certain person conducts the business of purchasing due claims on a continuous and predominant basis.

IV. In accordance with Article 75 of the ZOF, HANFA may conduct supervision over the conduct of factoring business by collecting information from various sources, which includes situations where there is suspicion of unlicensed conduct of regulated activities. In accordance with Article 98 of the ZOF, HANFA is authorized to conduct supervision over other persons who, in addition to other activities or as their sole activity, conduct factoring business without HANFA's approval. Given that the Applicant as Platform Administrator possesses information necessary for HANFA to determine whether an individual Buyer or the Applicant itself is conducting unlicensed factoring business, the Applicant is obliged to provide HANFA, upon request, access to business documentation and other data from which these circumstances could be determined. Depending on the activities of unlicensed entities on the platform, it is possible that HANFA will request such data from the Applicant on a continuous basis.

V. This official position is published on HANFA's website.

CLASS: 008-02/21-03/01 FILE NO.: 326-01-70-72-21-3

Zagreb, May 6, 2021

CHAIRMAN OF THE BOARD OF DIRECTORS Dr. sc. Ante Žigman