Law on Alternative Investment Funds – Unofficial Consolidated Text (NN 21/18, 126/19, 110/21, 83/23, 152/24 and 13/26)

Croatian Financial Services Agency, 10000 Zagreb, Franje Račkoga 6, P.O. Box 164, Croatia t: 01 6173 200, f: 01 4811 507, e: info@hanfa.hr, OIB: 49376181407, MB: 02016419, w: www.hanfa.hr LAW ON ALTERNATIVE INVESTMENT FUNDS (Official Gazette Nos. 21/18, 126/19, 110/21, 83/23, 152/24 and 13/26) – Unofficial Consolidated Text

PART ONE
GENERAL PROVISIONS

Article 1. (OG 13/26)
(1) This Law regulates the conditions for the establishment, operation and cessation of management companies for alternative investment funds from the Republic of Croatia and alternative investment funds, and supervision over their operations, as well as the conditions under which management companies for alternative investment funds from another Member State or a third country may carry out the activity and/or trade in shares of alternative investment funds they manage within the territory of the Republic of Croatia. (2) This Law applies to:

1. AIFMs from the Republic of Croatia managing one or more AIFs from the Republic of Croatia, another Member State or a third country
2. AIFMs from another Member State managing one or more AIFs from the Republic of Croatia and/or distributing shares of AIFs they manage within the territory of the Republic of Croatia
3. AIFMs from a third country managing one or more AIFs from the Republic of Croatia and/or distributing shares of AIFs they manage within the territory of the Republic of Croatia.

Transfer of European Union Regulations
Article 2. (OG 13/26)
(1) This Law transposes the following EU acts into Croatian legislation:

1. Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on AIFMs and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (Text with EEA relevance) (OJ L 174, 1.7.2011), as last amended by Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending Directives 2011/61/EU and 2009/65/EC regarding delegation procedures, liquidity risk management, supervisory reporting, depositary and custodian services, and AIF lending approvals (Text with EEA relevance) (OJ L, 2024/927, 26.3.2024.) (hereinafter: Directive 2011/61/EU).
2. Directive 2011/89/EU of the European Parliament and of the Council of 16 November 2011 amending Directives 98/78/EC, 2002/87/EC, 2006/48/EC and 2009/138/EC regarding additional supervision of financial entities in a financial conglomerate (Text with EEA relevance) (OJ L 326, 8.12.2011.)
3. Directive (EU) 2019/2034 of the European Parliament and of the Council of 27 November 2019 on prudential supervision of investment firms and amending Directives 2002/87/EC, 2009/65/EC, 2011/61/EU, 2013/36/EU, 2014/59/EU and 2014/65/EU (Text with EEA relevance) (OJ L 314, 5.12.2019.)
4. Directive (EU) 2023/2864 of the European Parliament and of the Council of 13 December 2023 amending certain Directives regarding the establishment and functioning of a single European access point (Text with EEA relevance) (OJ L 2023/2864, 20.12.2023.) (hereinafter: Directive (EU) 2023/2864).
   (2) This Law ensures the implementation of the following EU acts:
5. Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU regarding exemptions, general operating conditions, depositaries, financial leverage, transparency and supervision (Text with EEA relevance) (OJ L 83, 22.3.2013.) (hereinafter: Delegated Regulation 231/2013)
6. Commission Implementing Regulation (EU) No 447/2013 of 15 May 2013 establishing the procedure for AIFMs opting to be subject to Directive 2011/61/EU (OJ L 132, 16.5.2013.)
7. Commission Implementing Regulation (EU) No 448/2013 of 15 May 2013 establishing the procedure for determining the reference Member State of an AIFM from outside the EU in accordance with Directive 2011/61/EU (OJ L 132, 16.5.2013.)
8. Commission Delegated Regulation (EU) No 694/2014 of 17 December 2013 supplementing Directive 2011/61/EU regarding regulatory technical standards defining types of AIFMs (Text with EEA relevance) (OJ L 183, 24.6.2014.)
9. Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (Text with EEA relevance) (OJ L 115, 25.4.2013.) (hereinafter: Regulation (EU) No 345/2013), as last amended by Regulation (EU) No 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds (Text with EEA relevance) (OJ L 293, 10.11.2017.) and
10. Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (Text with EEA relevance) (OJ L 115, 25.4.2013.) (hereinafter: Regulation (EU) No 346/2013), as last amended by Regulation (EU) No 2017/1991 of the European Parliament and of the Council of 25 October 2017 amending Regulation (EU) No 345/2013 on European venture capital funds and Regulation (EU) No 346/2013 on European social entrepreneurship funds (Text with EEA relevance) (OJ L 293, 10.11.2017.)
11. Regulation (EU) 2019/1156 of the European Parliament and of the Council of 20 June 2019 on facilitating cross-border distribution of undertakings for collective investment and amending Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) No 1286/2014 (Text with EEA relevance) (OJ L 188, 12.7.2019.) (hereinafter: Regulation (EU) 2019/1156)
12. Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on prudential requirements for investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (Text with EEA relevance) (OJ L 314, 5.12.2019.) (hereinafter: Regulation (EU) 2019/2033).
13. Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (Text with EEA relevance) (OJ L 123, 19.5.2015.), as last amended by Regulation (EU) 2023/606 of the European Parliament and of the Council of 15 March 2023 amending Regulation (EU) 2015/760 regarding requirements relating to investment policies and operating conditions of European long-term investment funds, scope of eligible assets, portfolio composition and diversification requirements, cash borrowing and other fund rules (Text with EEA relevance) (OJ L 80, 20.3.2023.) (hereinafter: Regulation (EU) 2015/760).
    (3) When this Law grants the Croatian Financial Services Agency the power to adopt regulations, such regulations shall be adopted by the Management Board of the Croatian Financial Services Agency.

Authority of the Agency to Ensure Implementation of EU Regulations, Regulatory and Implementing Technical Standards, and Guidelines
Article 3.
(1) The Croatian Financial Services Agency (hereinafter: the Agency) is responsible for implementing and supervising the application of this Law and EU regulations under Article 2(2).
(2) Guidelines issued by European supervisory authorities in accordance with their powers are binding on the Agency and persons whose obligations are defined by this Law and relevant regulations, to the extent determined by the Agency's statement under point 1 of this paragraph, provided that:

1. the Agency has stated, in accordance with procedures established by regulations establishing European supervisory authorities, that it fully or partially commits to complying with certain guidelines or intends to align with them by a specified deadline; and
2. the Agency has published a notice of its statement on its website, with entry into force and application dates specified by the respective guidelines, except when the Agency states its intention to align with certain guidelines by a deadline, in which case entry into force and application dates are specified by the statement under point 1.
   (3) The Agency publishes links to guideline texts on its website, together with notices containing the following information regarding specific guidelines:
3. which supervised entities the guideline applies to;
4. whether the guideline applies fully or partially; and
5. the application start date, with transitional periods if applicable.
   (4) Supervised entities and persons subject to guidelines under paragraph 2 must take all necessary actions to align with them, within the scope and deadlines specified in the Agency's notice under paragraph 2(2).

Meaning of Certain Terms
Article 4. (OG 13/26)
The following terms have the meanings specified in this Law:

1. investment fund is a collective investment undertaking whose sole purpose and objective are to raise funds through public or private offers and invest those funds in accordance with a pre-determined investment strategy, exclusively for the benefit of the fund's shareholders;
2. open-ended investment fund with public offer (hereinafter: UCITS fund) is an investment fund defined by the law governing the establishment and operation of open-ended investment funds with public offers;
3. alternative investment fund (hereinafter: AIF) is an investment fund established with the purpose and objective of:
   a) raising funds through public or private offers from investors and investing those funds in accordance with a pre-determined strategy and investment objective of the AIF, exclusively for the benefit of the AIF's shareholders; and b) not requiring approval for establishment and management as a UCITS fund under the law governing open-ended investment funds with public offers;
4. open-ended AIF is separate property without legal personality, established and managed by a management company for alternative investment funds (hereinafter: AIFM), in its own name and for the common account of investors in the AIF, in accordance with this Law, the prospectus and/or rules of that AIF. An open-ended AIF may be managed only by an external AIFM. Shares of an open-ended AIF are redeemable upon investor request, directly or indirectly, from the assets of the open-ended AIF, in the manner and under conditions set out in the prospectus and/or rules of the AIF, prior to liquidation or cessation of the AIF;
5. closed-ended AIF is:
   a) closed-ended AIF with legal personality – a legal entity established as a joint-stock company, limited liability company or limited partnership, which is established and managed by an AIFM in its name and for its account in accordance with this Law, the rules of the AIF, the prospectus (where applicable) and the articles of association or partnership agreement, whose shares are not redeemable from AIF assets upon investor request. A closed-ended AIF with legal personality may be established without an external AIFM, as a closed-ended AIF with internal management; b) closed-ended AIF without legal personality – separate property without legal personality, established and managed by an AIFM, in its own name and for the common account of investors in the AIF, in accordance with this Law and the rules of the AIF, whose shares are not redeemable from AIF assets upon investor request. A closed-ended AIF without legal personality is always managed by an external AIFM;
6. AIF from another Member State is:
   a) an AIF for which operational approval has been issued or which is registered in a Member State in accordance with applicable national law; or b) an AIF for which operational approval has not been issued or which is not registered in a Member State, but has its registered office and/or central administration in a Member State;
7. AIF from a third country is an AIF that is not from the Republic of Croatia or another Member State;
8. share represents a share in an open-ended AIF or closed-ended AIF without legal personality, and a stock or business share in a closed-ended AIF with legal personality;
9. investor is the holder of shares in an open-ended AIF or closed-ended AIF without legal personality, and a shareholder or holder of a business share or general partner or limited partner in a closed-ended AIF with legal personality;
10. professional investor is an investor considered a professional investor in accordance with the capital market law, or who may be treated as a professional investor upon own request;
11. qualified investor is an investor meeting the following criteria:
    a) has sufficient experience and professional knowledge to understand the investment risks involved, and investing in the AIF aligns with its investment objectives; and b) for the purpose of investing in one AIF, is willing to pay a minimum of 50,000.00 euros or equivalent value in another currency, as prescribed by the AIF rules, and meets at least one of the following two conditions:
    – its net asset value is at least 250,000.00 euros or equivalent value in another currency; – it works or has worked in the financial sector for at least one year in professional roles requiring knowledge of investments comparable to those in the AIFM, or its business, whether for its own account or on behalf of others, involves managing, acquiring or disposing of assets of the same type as AIF assets;
12. retail investor is an investor who is not a professional or qualified investor;
13. depositary is a credit institution or branch of a credit institution, or an investment firm or branch of an investment firm under Article 186(4), to whom tasks under Article 189 are entrusted;
14. AIFM is a legal entity with its seat in the Republic of Croatia that, based on approval by or registration with the Agency, carries out the activity of managing one or more AIFs;
15. external AIFM is an AIFM managing one or more open-ended or closed-ended AIFs, which may also carry out other activities provided by this Law;
16. closed-ended AIF with internal management is an AIF that does not have an external AIFM, but manages its own assets, thereby simultaneously being an AIFM. A closed-ended AIF with internal management is always a legal entity;
17. AIFM from another Member State is a legal entity with its seat in another Member State that, based on approval by the competent authority of that Member State, carries out the activity of managing one or more AIFs;
18. AIFM from a third country is a legal entity with its seat in a third country that, based on approval by the competent authority of that third country, carries out the activity of managing one or more AIFs;
19. home Member State of the AIFM is the Member State in which the AIFM's registered office is located. For an AIFM from a third country, all references to 'home Member State of the AIFM' in this Law are interpreted as 'reference Member State', in accordance with Article 128;
20. host Member State of the AIFM is:
    a) a Member State that is not the home Member State of the AIFM, where the AIFM manages one or more AIFs established in the European Union; b) a Member State that is not the home Member State of the AIFM, where the AIFM trades shares of one or more AIFs established in the European Union; c) a Member State that is not the home Member State of the AIFM, where the AIFM trades shares of one or more AIFs established in a third country; d) a Member State that is not the reference Member State of the AIFM, where an AIFM from a third country manages one or more AIFs established in the European Union; e) a Member State that is not the reference Member State of the AIFM, where an AIFM from a third country trades shares of one or more AIFs established in the European Union; f) a Member State that is not the reference Member State of the AIFM, where an AIFM from a third country trades shares of one or more AIFs established in a third country; or g) a Member State that is not the home Member State of the AIFM, where the AIFM carries out ancillary activities under Article 11(2);
21. reference Member State of the AIFM is a Member State determined in accordance with Article 128;
22. home Member State of the AIF is a Member State in which the AIF has received approval or is registered by the competent authority in accordance with that Member State's national law. When an AIF is subject to approval or registration by competent authorities of multiple Member States, the home Member State is the one whose authority first issued approval or conducted registration. For an AIF not approved or registered in a Member State, the home Member State is where its registered office and/or central administration are located;
23. host Member State of the AIF is a Member State that is not the home Member State, where shares of the AIF are traded;
24. branch is a place of business that is part of the AIFM, has no legal personality and carries out service provision activities for which the AIFM received operational approval. All places of business established by an AIFM in another Member State or third country are considered one branch;
25. close links denote the connection between two or more natural or legal persons, or entities, in one of the following ways:
    a) participation relationship denoting a person's participation in another legal entity through direct or indirect investments entitling them to 20% or more of the capital or voting rights; or b) control relationship denoting a parent-subsidiary relationship or similar relationship between any natural or legal person and an entity. A subsidiary of a subsidiary is also considered a subsidiary of the parent entity at the top of that chain. A situation where two or more legal or natural persons are permanently linked to the same entity through a control relationship is considered a close link between those entities;
26. qualified share is any direct or indirect share in an AIFM representing 10% or more of the capital or voting rights, or a smaller share enabling significant influence over AIFM management. When calculating voting rights, relevant provisions of the capital market law regarding information on changes in voting rights in issuers whose securities are listed on a regulated market apply accordingly, including exceptions for calculating voting right percentages;
27. management of AIF means performing at least one activity under Article 11(3)(2) or (3), for one or more AIFs;
28. trading means any direct or indirect distribution of AIF shares, on the initiative of or on behalf of the AIFM, to investors with residence or seat in the Republic of Croatia and/or another Member State;
29. financial instrument is a financial instrument as defined by the capital market law;
30. issuer is a legal entity with its registered office in an EU Member State, including the state, whose securities are listed on a regulated market as prescribed by the capital market law; in the case of depositary receipts, the issuer of the underlying shares is considered the issuer;
31. legal representative is a natural person with residence in the Republic of Croatia or a legal entity with its seat in the Republic of Croatia, authorized by an AIFM from a third country to represent it before the Agency, other competent authorities, investors, other bodies and other contracting parties, regarding obligations and powers that the third-country AIFM is required or authorized to fulfill under this Law;
32. financial leverage is any method by which an AIFM increases the exposure of an AIF it manages, whether through cash borrowing or financial instruments, by taking positions in derivatives embodying financial leverage, or otherwise. Leverage methods are prescribed by Articles 6–11 of Delegated Regulation 231/2013;
33. performance fee means a share of AIF profits allocated to the AIFM as remuneration for managing the AIF, excluding any share of AIF profits allocated to the AIFM as a return from any investment by the AIFM in the AIF;
34. feeder AIF is any AIF that:
    a) invests at least 85% of its assets in shares of another AIF (master AIF); b) invests at least 85% of its assets in more than one master AIF, when those master AIFs have the same investment strategies; or c) has its assets otherwise exposed to at least 85% towards the master AIF;
35. master AIF is an AIF in which another AIF invests or towards which another AIF has exposure in accordance with point 34;
36. parent undertaking is a parent undertaking as defined by regulations governing business accounting and the application of international financial reporting standards;
37. subsidiary undertaking is a subsidiary undertaking as defined by regulations governing business accounting and the application of international financial reporting standards;
38. prime broker is a credit institution, investment firm or other entity subject to prudential supervision that distributes services to professional investors, primarily for financing or executing transactions with financial instruments as the other contracting party, and may additionally provide other services such as settlement and clearing, custodial services, securities lending, specially tailored technology and operational assistance facilities;
39. unlisted company is a joint-stock company with its seat in the Republic of Croatia or another Member State, whose shares are not listed on a regulated market as defined by the capital market law;
40. Member State is an EU Member State or a state party to the Agreement on the European Economic Area;
41. third country is a state that is not a Member State as defined in point 39;
42. competent authority is:
    a) the authority of an individual Member State responsible, under that state's regulations transposing Directive 2011/61/EU, for issuing approval for the establishment and operation or supervision of an AIFM or AIF; or b) the authority of a third country responsible for issuing approval for the establishment and