THE CROATIAN PARLIAMENT DECISION PROMULGATING THE ACT ON INVESTMENT FUNDS WITH A PUBLIC OFFERING

Transcription

1 THE CROATIAN PARLIAMENT Pursuant to Article 89 of the Constitution of the Republic of Croatia, I hereby pass the DECISION PROMULGATING THE ACT ON INVESTMENT FUNDS WITH A PUBLIC OFFERING I hereby promulgate the Alternative Investment Funds Act, adopted by the Croatian Parliament at its session on 25 January Class: /13-01/02 Reg.No.: / Zagreb, 31 January 2013 The President of the Republic of Croatia Ivo Josipović, m.p. ACT ON OPEN-ENDED INVESTMENT FUNDS WITH A PUBLIC OFFERING Part One Title 1 General provisions Article 1 This Act lays down the conditions for the establishment and operation of UCITS and investment fund management companies, and regulates the method of issue, redemption of units of investment funds, marketing of units of investment funds, delegation of duties to third parties and supervision over the operation and management of investment funds, investment fund management companies, depositary and persons offering units in investment funds. Transposition of EU legislation Article 2 1

2 (1) This Act transposes the following Directives into the legal system of the Republic of Croatia: 1. Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (Directive 2009/65/EC); 2. Commission Directive 2010/42/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions concerning fund mergers, master-feeder structures and notification procedure (Commission Directive 2010/42/EU); 3. Commission Directive 2010/43/EU of the European Parliament and of the Council of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company (Commission Directive 2010/43/EU); 4.Directive 2010/78/EU of the European Parliament and of the Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), the European Supervisory Authority (European Insurance and Occupational Pensions Authority) and the European Supervisory Authority (European Securities and Markets Authority) (Directive 2010/78/EU). (2) This Act regulates in more detail the implementation of the following EU Regulation: 1. Commission Regulation (EU) No. 583/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website (Commission Regulation (EU) No. 583/2010); 2. Commission Regulation (EU) No. 584/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards the form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations and the exchange of information between competent authorities (Commission Regulation (EU) No. 584/2010). 3. The Agency shall be competent to implement and to monitor the application of the provisions of the European Union referred to in points 1 and 2 of this Article. Definition of individual terms Article 3 (1) For the purpose of this Act, individual terms shall have the following meanings: 2

3 1. Investment fund means an undertaking for collective investment whose sole purpose is raising capital through a public or private offering and investment of this capital in different types of assets in accordance with a predefined investment strategy of the investment fund, but to the exclusive benefit of unit-holders in the investment fund in question. An investment fund my either be a UCITS or an alternative investment fund. The term investment fund hereinafter used shall relate to a UCITS. 2. UCITS means an open-ended investment fund with a public offering: (a) the sole object of which is the collective investment in transferable securities or in other liquid financial assets of capital raised from public offering of units in the fund and which operates on the principle of risk-spreading; (b) the units of which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of the fund s assets. Action taken by the management company to ensure that the value of units does not significantly vary from net asset value of the fund shall be regarded as equivalent to such repurchase or redemption, and (c) which has been established according to Part Ten of this Act or a Member State s laws, regulations or administrative provisions adopted on the basis of Directive 2009/65/EC of the European Parliament and of the Council. 3. Alternative investment fund means an investment fund defined as such by the regulation that envisages establishment and management of the alternative investment funds. 4. Open-ended investment fund means a separate pool of assets, without legal personality, constituted by the management company and managed by the management company in its own name and for the joint account of holders of units in such assets in accordance with the provisions of this Act, the prospectus and the fund rules. Units in an open-ended investment fund are, at the request of unit-holders, repurchased or redeemed, directly or indirectly, out of the assets of the open-ended investment fund. 5. Units shall include shares of a UCITS fund. 6. Investor means a unit-holder or a shareholder of a UCITS fund. 7. Depositary means a credit institution or a branch of a credit institution entrusted with the duties set out in Article 215 of this Act. 8. Management company means a legal person with a registered office in the Republic of Croatia which pursues, on the basis of authorisation granted by the Agency, the business of management of UCITS funds. 9. Management company from another Member State means a legal person with a registered office in a Member State which pursues, on the basis of authorisation granted by the competent authority of another Member State, the business of management of investment funds. 3

4 10. Management company from a third country means a legal person with a registered office in a third country which pursues, on the basis of authorisation granted by the competent authority of the third country, the business of management of investment funds. 11. Management company s home Member State means the Member State in which the management company has its registered office. 12. Management company s host Member State means a Member State, other than the home Member State, in which a management company has a branch or provides services directly. 13. UCITS home Member State means the Member State in which the UCITS has obtained, from the competent authority, authorisation corresponding to that referred to in Article 238 of this Act. 14. UCITS host Member State means a Member State, other than the UCITS home Member State, in which the units of the UCITS are marketed. 15. Branch means a place of business which is a part of the management company, which has no legal personality and which provides the services for which the management company has been authorised. 16. Competent authority means: (a) an authority of a Member State which is responsible, under the Member State s laws, regulations or administrative provisions by virtue of which Directive 2009/65/EC is transposed into national law of that Member State, for the issue of authorisation for the establishment and operation, as well as supervision of investment funds and management companies; (b) an authority of a third country which is responsible for the issue of authorisation for the establishment and operation, as well as supervision of investment funds and management companies. 17. Close links means a situation in which two or more natural or legal persons or entities are linked by either: (a) participation or (b) control. 18. Participation means participation of a person in another legal person if: (a) the person has direct or indirect investments on the basis of which he owns 20% or more of the capital or voting rights of that legal person, or (b) the person owns less than 20% of the capital or voting rights of that legal person, which has been acquired with the intention to make it possible, through permanent links with that legal person, to exercise influence over its operation. 4

5 19. Control means the relationship between the parent undertaking and a subsidiary or a similar relationship between any natural or legal person and an undertaking. 20. Parent company means a parent company as defined by legislation governing the accountancy of an undertaking and application of financial reporting standards. 21. Subsidiary means a subsidiary company as defined by legislation governing the accountancy of an undertaking and application of financial reporting standards. 22. Qualifying holding means any direct or indirect holding in a management company which represents 10% or more of the capital or of the voting rights or a smaller percentage of the capital or of the voting rights which makes it possible to exercise a significant influence over the management of the management company. When calculating the proportion of voting rights, the provisions on information on changes in the proportion of voting rights set out in legislation governing the capital markets shall apply accordingly. 23. Durable medium means paper or other instrument which enables an investor to store information addressed personally to that investor in a way that is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored. 24. Transferable securities means: (a) shares and other securities equivalent to shares; (b) bonds and other forms of debt securities; (c) any other negotiable securities which carry the right to acquire any transferable securities referred to in (a) or (b) by subscription or exchange. 25. Money market instruments means financial instruments normally traded on the money market which are liquid and have a value which can be accurately determined at any time. 26. Third country means a country which is not a Member State of the European Union in terms of point 25 of this Article. 27. Member State means a Member State of the European Union and a signatory to the Treaty on the European Economic Area. 28. Agency means the Croatian Financial Services Supervisory Agency, the competences and scope of activity of which are prescribed by the Act on the Croatian Financial Services Supervisory Agency and this Act. 29. Approval or authorisation means a positive decision of the Agency on the application that has been submitted and which is always sought and issued prior to taking certain actions or concluding a deal. 5

6 30. Without delay or immediately means taking certain action or closing a deal no later than the following day. 31. Public offering means any information given in any form and by use of any means, which contains sufficient information on the terms and conditions of the offering and on the offered units in the investment funds to enable an investor to make a decision to subscribe such units. 32. Auditor is an independent external certified auditor defined by respective regulations. 33. Relevant person in relation to the management company means: (a) a person in a managing position in the management company or a person who is a member of the company; (b) a member of the supervisory board of the management company; (c) a person in a managing position or a person who is a member of the company in each legal person authorised for offering of units in investment funds; (d) an employee of the management company or an employee of the legal person authorised for offering of units in investment funds, as well as any other natural person whose services are placed at the disposal and under the control of the management company or the legal person authorised for offering of units in investment funds and who is involved in the activities carried on by the management company; (e) a natural person who is directly involved in the provision of services to the management company or to the legal person authorised for offering of units in investment funds based on an agreement on delegation of duties of the management company. 34. Person with whom a relevant person is related to means: (a) the spouse of the relevant person or any other person considered by national law as equivalent to a spouse; (b) supported child or stepchild of the relevant person; (c) any other relative of the relevant person who has shared the same household with the relevant person for at least one year. (2) Where an investment fund from a Member State or a third country does not have a management company which manages its operation, the provisions of this Act that relate to a management company from a Member State or a management company from a third country shall apply directly to that investment fund. (3) For the purposes of points 18 and 20 of paragraph 1 of this Article, the following shall apply: 1. a subsidiary of a subsidiary shall also be considered to be a subsidiary of the parent undertaking which is at the head of those undertakings; 2. situations in which two or more natural or legal persons are permanently linked to the same person by a control relationship shall also be regarded as constituting close links between such persons. 6

7 (4) For the purposes of point 23 of paragraph 1 of this Article, transferable securities shall exclude the investment techniques and instruments referred to in paragraph 6 of Article 248 of this Act. Article 4 This Act shall not apply to the following undertakings: 1. investment funds of the closed-ended type; 2. investment funds which raise capital without promoting the sale of their units to the public; 3. investment funds the units of which, under the investment fund prospectus, may be sold only to the public in third countries; 4. categories of investment funds prescribed by the laws, regulations or administrative provisions of the Member States in which such investment funds are established, for which the rules laid down by Article 54, paragraphs 3 to 6, Article 95, paragraphs 1, 2 and 5 and Articles 247 and 248 are inappropriate in view of their investment and borrowing policies. UCITS funds in the Republic of Croatia Article 5 (1) In the Republic of Croatia, only an open-ended investment fund with a public offering may be established as a UCITS. (2) UCITS may not be transformed into alternative investment funds. Conditions for permissibility of the public offering Article 6 (1) A public offering of UCITS funds shall be permitted in the Republic of Croatia to: 1. management companies with their registered office in the Republic of Croatia which establish and manage an UCITS fund established upon the authorisation of the Agency; 2. management companies from member state which manages an investment fund established upon the authorisation of the member state relevant authority ; (2) By way of exception from paragraph 1., management company from a third country shall be permitted a public offering of an open-ended investment funds from third countries which operate in accordance with the provisions of this Act regulating the operation of UCITS funds, or in accordance with regulations offering the equal level of protection to investors as UCITS funds do. 7

8 Prohibition against management, offering and sale of units without authorisation of the competent authority Article 7 (1) No person, whether legal or natural, may establish or manage an investment fund, unless it has been authorised by the Agency or competent authority. (2) Only the persons referred to in Article 152 of this Act may carry on agency activities in the offering of units of investment funds. Tax status of an UCITS fund Article 8 The tax status of UCITS funds shall be determined in accordance with special regulations and international agreements applicable in the Republic of Croatia. Subsidiary regulations Article 9 The provisions of the legislation governing the establishment and operation of companies shall apply accordingly to the operation of management companies, unless this Act or another regulation provides otherwise. Register of investment funds and management companies Article 10 (1) The management companies and the UCITS funds to which authorisation for the establishment and operation has been issued by the Agency shall be registered in the register of management companies and investment funds of the Republic of Croatia which is kept by the Agency. (2) Management companies and the UCITS funds shall be registered and all the particulars shall be entered in the register of management companies and investment funds as provided for by this Act and the Ordinance on the Contents and Method of Keeping the Register of Management Companies and Investment Funds to be adopted by the Agency, as well as the changes in these particulars. 8

9 (3) The Agency shall provide access to the Register of UCITS funds and management companies on its website. Article 11 The Agency shall also make available on its website the list of all management companies from the Member States and third countries which provide services or carry on their activities within the territory of the Republic of Croatia, and of their branches, as well as the investment funds from the Member States and third countries which are offered in the Republic of Croatia. Part Two Management company Title 1 Section 1 Form of the management company Article 12 (1) A management company shall be established and operate as a limited-liability company or a joint-stock company with a registered office in the Republic of Croatia, in accordance with the provisions of legislation governing the establishment and operation of companies, unless this Act provides otherwise. (2) A management company may also be established as the European Society Societas Europea (SE) with a registered office in the Republic of Croatia. (3) The term UCITS management copany, for the purposes of the company name, part of the company name of promotional purposes, may be used only by management companies authorised by the Agency or the competent authority to establish and manage UCITS. (4) The term investment fund management company, for the purpose of the company name, part of the company name or promotional purposes, may be used only by management companies authorised by the Agency or the competent authority to establish and manage UCITS and alternative investment funds. (5) All provisions of this Act relating to the board of directors that is the supervisory board of the management company shall apply accordingly to the management board and executive directors of the management company. Activities of management companies 9

10 Article 13 (1) The activities of a management company shall be as follows: 1. the core activity: (a) establishment and management of an investment fund (UCITS fund management); (b) establishment and management of an alternative investment fund in accordance with legislation regulating the establishment and management of alternative investment funds (AIF management). 2. ancillary activities: (a) portfolio management in accordance with the provisions of the legislation governing the capital markets (portfolio management); (b) establishment and management of a voluntary pension fund where this is permitted by the regulations governing the establishment and operation of voluntary pension funds; (c) investment advice concerning financial instruments specified in the legislation governing the capital markets (investment advice); (d) safe-keeping and administration in relation to units in the investment fund (safekeeping and administration). (2) The management of an UCITS fund shall comprise: 1. establishment of the investment fund; 2. management of assets of UCITS; 3. administrative tasks; 4. marketing of units of the investment fund. (3) The administrative tasks referred to in paragraph 2, point 3 of this Article shall comprise: 1. legal and accounting services in relation to the investment fund management; 2. receipt and processing of investors and clients inquiries; 3. valuation and calculation of the price of units (including calculation of tax liability); 4. regulatory compliance monitoring; 5. distribution of income or profits; 6. unit issues and redemptions; 7. settlement of contractual obligations; 8. keeping of business records; 9. maintenance of unit-holder register, where applicable; 10. disclosures and notifying investors Article 14 In the Republic of Croatia, the following entities may pursue the activities of a management company: 1. a management company which has been authorised by the Agency; 10

11 2. a management company from another Member State which, pursuant to the provisions of this Act, establishes a branch in the Republic of Croatia or is authorised to carry on the core and ancillary activities of management companies in the Republic of Croatia on the basis of authorisation granted by the competent authority of the management company s home Member State; 3. a branch of a management company from a third country which has been authorised by the Agency. (2) The management company referred to in paragraph 1 point 2 of this Act may carry out the activities referred to in Article 13 of this Act in the Republic of Croatia in accordance with the provisions of Part Five, Title 1 Section 3 of this Act, and shall not need additional approval of the Agency to do so. Article 15 (1) Management companies may carry on the activities of management companies as referred to in Article 13 of this Act for which they have obtained authorisation from the Agency and which have been entered in the court register as their business activities. (2) Management companies may not engage in activities other than those referred to in paragraph 1 of this Article. (3) Management companies may pursue the business of investment fund management (UCITS and alternative investment fund) for those investment funds which are subject to supervision by the Agency or competent authorities of Member States or third countries. (4) Management companies may carry on their activities within the territory of: 1. the Republic of Croatia; 2. another Member State (management company s host Member State), through a branch or directly, provided that the requirements laid down in Part Five, Title 1, Section 1 of this Act have been met; 3. a third country, provided that the requirements laid down in Part Five, Title 1, Section 2 of this Act have been met; Article 16 (1) Management companies which pursue the business of management of an alternative investment fund shall, in addition to the provisions of this Act, comply with the legal provisions regulating the establishment and management of alternative investment funds. (2) Management companies which pursue the business of portfolio management in accordance with mandates given by investors on a discretionary, client-by-client basis, providing investment advice and safekeeping and administration shall, in addition to the provisions of this Act, comply with the provisions of the legislation governing the capital markets and the provisions adopted under such regulation which relate to the amount of own funds, organisational requirements, operating conditions and client protection, dealing with the client s order and execution of orders, rules of business conduct towards 11

12 their clients in the provision of these investment services, and protection of investors and supervision over the provision of investment services. (3) Management companies which pursue the business of establishment and management of a voluntary pension fund shall, in addition to the provisions of this Act, comply with the legal provisions regulating the establishment and operation of voluntary pension funds. Article 17 (1) A management company which has not obtained authorisation for the investment fund management may not be granted authorisation to take up the business of management companies, which covers authorisation for conducting the business of portfolio management in accordance with mandates given by investors on a discretionary, clientby-client basis, establishment and management of voluntary pension funds, providing investment advice and/or safe-keeping and administration. (2) A management company may not be granted authorisation for taking up business which covers authorisation for providing investment advice and/or safe-keeping and administration if the company does not have authorisation for the business of portfolio management in accordance with mandates given by investors on a discretionary, clientby-client basis. Section 2 Initial capital of management companies Article 18 The minimum amount of initial capital of a management company shall amount to HRK Own funds of management companies Article 19 (1) The own funds of a management company shall consist of the sum of initial capital and an additional amount of own funds in accordance with the capital limits, less any deductible items. (2) The Agency shall adopt an ordinance specifying the method of calculation of own funds, the characteristics of initial capital and additional amount of own funds and the characteristics of the items of which these consist, deductible items and the capital limits referred to in paragraph 1 of this Article. Additional amount of own funds of management companies 12

13 Article 20 (1) When the net value of the assets of the investment funds managed by the management company exceeds HRK 2 billion, the management company shall be required to provide an additional amount of own funds which is equal to 0.02% of the amount by which the net value of the assets of the investment funds managed by the management company exceeds HRK 2 billion, but the required total of the initial capital and the additional amount must not exceed HRK (2) For the purpose of paragraph 1 of this Article, the following assets shall be deemed to be the assets of the investment funds managed by the management company: 1. open-ended investment funds with a public offering managed by the management company, including the assets for which it has delegated the management function to another management company, but excluding the assets that it is managing under delegation; 2. alternative investment funds managed by the management company, including the assets for which it has delegated the management function to another management company, but excluding the assets that it is managing under delegation. (3) Management companies which pursue the business of portfolio management, the business of establishment and management of and alternative investment fund and the business of establishment and management voluntary pension fund shall, in addition to the provisions of this Act, comply with the provisions of the regulation regulating the capital markets area and of those regulating the establishment and business of alternative investment funds and those regulating the voluntary pension funds. (4) The Agency may, by virtue of an ordinance, specify additional capital requirements for management company which, in addition to managing UCITS funds pursue the business of establishment and management of alternative investment funds and the business of establishment and management of voluntary pension funds. Minimum amount of own funds of the management company Article 21 (1) The own funds of the management company shall at any time be higher than or equal to the higher of the two amounts: 1. the amount of initial capital referred to in Article 18 of this Act or the total amount of initial capital and additional amount of own funds referred to in Article 20, paragraph 1 of this Act; 2. one quarter of the preceding financial year s fixed overheads of the management company. 13

14 (2) In case that the own funds of the management company fall below the level of minimum amount of the own funds referred to in paragraph 1 of this Act, the Agency may allow the management company in question a certain period in which to rectify the situation or may impose any supervisory measure prescribed by the provisions of this Act. (3) When less than a year has passed from the start of business of the management company, the own funds of the management company must be higher or equal to the following two amounts: a) amount stated in paragraph 1 point 1 of this Article b) one quarter of fixed overheads envisaged by the business plan of management company, unless an adjustment to that plan is required by the Agency. (4) The Agency shall adopt an ordinance regulating the items of the fixed overheads referred to in paragraph 1, point 2 of this Article. Reporting on compliance with capital requirements Article 22 (1) The management company shall report to the Agency on its compliance with the capital requirements referred to in Article 21 of this Act at least once in three months. (2) The Agency shall specify, by virtue of an ordinance, the types and contents of the reports on calculation of own funds, as well as the method of and deadlines for their submission. Section 3 Requirements and procedures for issuance of authorisation to management companies with registered office in the Republic of Croatia Article 23 (1) The Agency shall issue authorisation to the management company. (2) The authorisation shall be granted for indefinite period, may not be transferred to another person and shall not apply to the legal successor. (3) The application for authorisation shall be submitted by the founders or the board of directors of the management company. The management company shall specify in the application the type of investment fund the company intends to manage. (4) The authorisation referred to in paragraph 1 of this Article shall comprise approval for the provision of the activities referred to in Article 13, paragraph 1 of this Act, as well as for the management of the types of investment funds for which the management company 14

15 has submitted application and in respect of which it meets the requirements laid down by this Act and the regulations adopted on the basis of this Act. (5) Prior to entry of the establishment of the management company in the court register, and prior to every later entry of additional activities subsequently applied for, the management company shall obtain authorisation to take up the business or an extension to the authorisation to take up the business. (6) The Agency shall adopt an ordinance regulating the contents of the application for authorisation to be granted to the management company, the documentation that must accompany the application, as well as the contents of that documentation. Extension to authorisation to take up the business Article 24 (1) After the authorisation referred to in Article 23 of this Act has been issued to the management company, the latter may request extension to authorisation to take up the business referred to in Article 13 of this Act or to manage other types of investment funds to which the previously issued authorisation does not relate. (2) The provisions of this Act that relate to the authorisation to take up the business shall apply accordingly to the extension to authorisation to take up the business. The application for extension to the authorisation to take up the business shall be submitted by the board of directors of the management company. Article 25 (1) A joint-stock company or a limited-liability company which has already been established may also apply for authorisation, whereby application for issuance of authorisation to take up the business shall be submitted by the board of directors of the company. (2) The company referred to in paragraph 1 of this Article shall obtain authorisation to take up the business prior to entry of the change in the company s business in the court register. Deciding on application for issuance of authorisation to take up the business Article 26 (1) The Agency shall issue authorisation to take up the business to the management company if the requirements have been met in relation to: 1. the form, shares and initial capital of the company; 2. acquisition of qualifying holdings in respect of all holders of qualifying holdings, and close links; 15

16 3. the members of the management company; 4. the members of the supervisory board of the management company; 5. issuance of approval to the members of the board of directors for the exercise of their functions; 6. organisational and other requirements with regard to the type of investment funds it intends to manage. (2) The Agency shall decide on the application for issuance of authorisation to take up the business within two months of the date of receipt of a proper application. An application shall be deemed to be proper if, consistent with the provisions of the ordinance referred to in Article 23, paragraph 6 of this Act, it contains all stipulated information and is accompanied by the complete required documentation. (3) If the applicant for authorisation to take up the business does not rectify, within the time specified by the Agency, the deficiencies of the application in accordance with the notice received from the Agency, the applicant shall be deemed to have given up the application. (4) All provisions of this Act that relate to shares, shareholders and acquisition of qualifying holding in the management company which has been established as a jointstock company shall apply accordingly to the management company which has been established as a limited-liability company. Joining decision-making procedures concerning authorisation to take up the business Article 27 The Agency may at the same time decide on the following applications for issuance of authorisation to take up the business to the management company: 1. the management company s application for issuance of authorisation to take up the business; 2. application by a member possessing a qualifying holding for approval of acquisition of a qualifying holding in the management company; 3. application for issuance of approval for performance of the duties of a member of the board of directors of the management company; 4. application for the establishment and issuance of authorisation to take up the business of an investment fund; 5. application for approval of the prospectus and 6. application for issuance of approval of the investment fund rules. Requirements for members of management companies Article 28 The following persons shall be eligible for the members of the management company: 16

17 1. persons who, in the period of three years prior to acquiring membership in the management company, did not have more than 10% holding of the initial capital in a management company, credit institution authorised for carrying on the business of a depositary, an alternative investment fund, investment company or a credit institution authorised for carrying on the business of purchasing and selling financial instruments or an insurance undertaking, at the time when authorisation to take up the business was withdrawn from these companies; 2. persons who are capable of effectively conducting the business activities; 3. sole trader or craftsman whose assets have not been subject to bankruptcy proceedings based on the provisions of the Bankruptcy Act; 4. persons who have not held a managing position in a company against which bankruptcy proceedings have been instituted or completed or from which authorisation to take up the business has been withdrawn, except where the Agency establishes that the persons in question have not contributed, by their actions or failure to act, to these circumstances; 5. persons who currently do not hold a public service office and who are currently not employees of the central government or local and regional self-government or of the authorities responsible to the Government of the Republic of Croatia or to Croatian Parliament. 6. persons from whom approval or authorisation for the performance of relevant duties has not been withdrawn as a result of non-compliance with the relevant regulations in accordance with the laws falling within the competence of the Agency, the Croatian National Bank or the competent authority; 7. persons who have not been under investigation or against whom criminal proceedings have not been brought on account of a criminal offence for which they are prosecuted ex officio; 8. persons who have not been convicted, on the basis of judgement with final force and effect, of criminal offences prescribed by the ordinance referred to in Article 38 paragraph 6 of this Act; 9. persons who have not been convicted, on the basis of judgement with final force and effect, of misdemeanour or criminal offence which represents a gross and permanent violation of regulations related to the business activities of the Agency, the Croatian National Bank or another competent authority. Persons possessing qualifying holdings Article 29 (1) When submitting application for issuance of the authorisation to take up the business to the management company referred to in Article 23, paragraph 1, the applicant shall submit to the Agency information about the identities of the shareholders or members of the management company, whether direct or indirect, that have qualifying holdings, the amounts of these holdings, as well as additional documentation prescribed by the ordinance referred to in Article 73, paragraph 4 of this Act. 17

18 (2) The Agency shall assess appropriateness, suitability and financial stability of the persons referred to in paragraph 1 of this Article taking into account all of the following criteria: 1. reputation of the shareholders or members of the management company and persons possessing qualifying holdings; 2. reputation and experience of the person who will conduct the business of the management company; 3. financial stability of the persons possessing qualifying holdings; 4. whether the management company will be able to comply with and continue to comply with the requirements laid down in this Act, as well as other legislation where this is applicable on individual and consolidated basis, and in particular whether the management company has the structure which enables effective exercise of supervision, effective exchange of information among competent authorities, and whether the competences can be divided between a number of competent authorities. 5. existence of a reasonable doubt as to whether the members of the management company, shareholders or persons possessing qualifying holdings committed or attempted a criminal offence of money laundering or financing of terrorism according to the provisions regulating such criminal offences. (3) The provisions of Article 73 of this Act shall apply accordingly to the application referred to in paragraph 1 of this Article. Close links Article 30 (1) Where close links exist between the management company and other natural or legal persons, the Agency shall issue authorisation to the management company only if those close links do not prevent exercise of supervision over the management company. (2) The Agency shall refuse authorisation if the laws, regulations and administrative provisions of a third country that relate to one or more natural or legal persons with which the management company has close links, or their application and enforcement, prevent the exercise of supervision over the management company. Article 31 (1) The management company shall comply, on a continuous basis, with the conditions under which the Agency has granted authorisation to the company. (2) The management company shall notify the Agency within three days of any material change in the information given in the application for authorisation to take up the business. Article 32 18

19 (1) The management company shall not be permitted to have a controlling influence or a qualifying holding in an investment company, a credit institution providing investment services and conducting investment activities in accordance with provisions of regulation which regulates capital markets area that is which conducts the respective services in accordance with regulation regulating the establishments and business of credit institutions, insurance compan, reinsurance company, authorised for the performance of activities involving financial instruments, an insurance undertaking, a pension company or a leasing firm. (2) The management company shall not be permitted to have shares or holdings in the depositary. The respective businesses of the depositary and the management company may not be interconnected in organisational terms and the same employees may not be involved in these business activities. (3) The management company shall not be permitted to have shares or holdings in the entity to which the depositary has delegated the activities referred to in Article 213 of this Act. Article 33 Prior to issuing authorisation to the management company, the Agency shall consult the competent authorities of the other Member State involved if the management company is one of the following: (a) a subsidiary of another management company, a pension company, an investment company, a credit institution or an insurance undertaking authorised in another Member State; (b) a subsidiary of the parent undertaking of another management company, a pension company, an investment company, a credit institution or an insurance undertaking authorised in another Member State; (c) a company controlled by the same natural or legal persons as control another management company, a pension company, an investment company, a credit institution or an insurance undertaking authorised in another Member State. Lapse of authorisation Article 34 (1) The authorisation issued to a management company shall lapse: 1. if the management company does not start the business of management of UCITS funds within 12 months of the date of issuance of the authorisation, on expiry of the said period; 2. if the management company does not carry on, for six consecutive months, the activity for which the authorisation has been granted, on expiry of the said period; 3. at the management company s own request, upon submission of the Agency s decision; 19

20 4. upon submission of the Agency s decision to withdraw the authorisation. 5. as of the date when bankruptcy proceedings are instituted against the management company; 6. upon completion of the liquidation of the management company. (2) If any of the reasons referred to in paragraph 1, points 1 and 2 of this Article exist, the Agency shall take a decision establishing that the issued authorisation has lapsed. (3) The Agency shall notify the depositary of the lapse of authorisation referred to in paragraph 1, points 1 to 6 of this Article. 20

21 Status changes of management companies Article 35 (1) If a management company is involved in a merger, consolidation or division of the company, it shall obtain approval of the Agency for such merger, consolidation or division. (2) The provisions of this Act regulating issuance of authorisation to take up the business to the management company shall apply accordingly to the decision-making concerning the issuance of approval for the company s status changes referred to in paragraph 1 of this Article. (3) Where due to a status change of a management company, a new management company is formed, that company shall obtain authorisation from the Agency prior to registration of the status change in the court register. (4) Paragraphs 1 to 3 of this Article shall apply accordingly to other status changes in which a management company is involved. Section 4 Bodies of management companies Article 36 (1) The bodies of a management company shall be: (a) in the case of a joint-stock company annual general meeting of shareholders, board of directors and supervisory board, or management board; (b) in the case of a limited-liability company general meeting of shareholders, board of directors and supervisory board; (2) Minutes shall be kept of the meetings and sessions of the management company s bodies. Subsection 1 The management company s board of directors Article 37 (1) The board of directors of a management company must have at least two members who direct the business activities of and represent the management company. One member of the board of directors shall be appointed Chairman of the board of directors. 21

22 (2) Unless the instrument of incorporation of the management company provides otherwise, the members of the board of directors shall direct the business activities and jointly represent the management company. (3) The members of the board of directors shall direct the business activities of the management company from the territory of the Republic of Croatia. (4) The board of directors of the management company may authorise one or more persons with a special-purpose power of attorney (procurators) to represent the company, i.e. conclude agreements and effect legal transactions, on behalf and for the account of the management company, which arise from the business activity for which the management company has been authorised, but they may only act together with at least one member of the board of directors of the management company. (5) The type and method of authorising procurators and the scope of powers under the special-purpose power of attorney shall be specified in the instrument of incorporation of the management company. (6) In the case that the management company is managed by the management board, the latter must appoint at least two executive directors. The provisions of this Act and of the legislation enacted on the basis of this Act, which relate to the members of the board of directors of a management company shall apply accordingly to executive directors. Requirements for performance of the function of a member of the board of directors Article 38 (1) The following persons shall be eligible for the members of the board of directors of the management company: 1. persons who have sufficient professional qualifications, skills and experience necessary for directing the business of a management company; 2. persons who have not been supervisory board members or board of directors members in a management company or a company at the time when bankruptcy proceedings have been instituted against the company or when a decision on compulsory liquidation of the company was taken or in a company from which authorisation to take up the business has been withdrawn; 3. persons against whose property no bankruptcy proceedings have been instituted; 4. persons of good reputation; 5. persons who have not been convicted, of misdemeanour which represents a gross and permanent violation of regulations related to the business activities of the Agency, the Croatian National Bank or another competent authority; 6. persons whose former conduct points to the reasonable conclusion that they will perform the duties of the member of the board of directors of the management company honestly and with due care and diligence; 22

23 7. persons who meet the requirements for the position of a member of the board of directors referred to in the regulation which regulates establishment and business of commercial companies; 8. persons who are not members of the board of directors or procurators of another company; 9. A member of the board of directors of the management company may not be a person whose request for performing a duty in the board of directors was declined by the Agency, at least a year from issuance of a decree declining a request for issuing permission for performing a duty in the board of directors. (2) The experience referred to in paragraph 1, point 1 of this Article shall be deemed to be experience of at least three years in managing positions in a management company or a five-year experience in directing the business activities comparable to the activities of a management company. (3) It shall be deemed that a natural person who is not a national of the Republic of Croatia meets the requirements for a non-conviction record referred to in paragraph 1, points 5 of this Article if he has not been convicted, on the basis of judgement with final force and effect, for acts which, according to their description, are equivalent to these acts. (4) The members of the board of directors of a management company shall direct the business of the management company on a full-time basis and shall be employed with the management company. (5) At least one member of the board of directors must have a good command of the Croatian language and is required to pass the exam for an investment adviser. (6) The Agency shall adopt an ordinance specifying in more detail the requirements referred to in paragraphs 1 and 2 of this Article for membership in the board of directors of a management company, the procedure for issuance of approval and the documentation that must be enclosed with the application for issuance of approval for the performance of the duties of a member of the board of directors. (7) The provisions of this Subsection shall apply accordingly to a procurator of a management company, who must obtain approval from the Agency for the performance of this function. The procurator of the management company must have a good command of the Croatian language, but is not required to pass the exam for an investment adviser. Article 39 A member of the board of directors and the procurator of the management company shall not be a member of the supervisory board or the procurator of: 1. any other management company; 2. alternative investment funds management company, 3. the depositary; 4. a credit institution; 23