Approval to acquire a qualifying holding in a credit institution

Published: 31/1/2015 Modified: 15/6/2018
The acquisition of shares of a credit institution which account for at least 10% of the capital or voting rights and the acquisition of shares exceeding 20%, 30% or 50% of the capital or voting rights is possible only provided a prior approval is obtained from the Croatian National Bank. The acquirer is obligated to sell the shares acquired without approval of the Croatian National Bank and cannot exercise any rights arising from such shares. Described in the text below are the contents of the application for approval to acquire a qualifying holding in a credit institution, the procedure of taking a decision on the application, the reasons for refusing the application, the reasons for annulment and revocation of approval to acquire shares of a credit institution and the legal consequences of the acquisition of a qualifying holding without approval.

Approval to acquire a qualifying holding in a credit institution

Article 24, paragraphs (1) and (2) of the Credit Institutions Act prescribes the obligation of obtaining prior approval for the acquisition of shares of a credit institution in the following cases:

  1. legal and natural persons and persons acting in concert that acquire shares of a credit institution on the basis of which they, individually or jointly, directly or indirectly, acquire a qualifying holding in a credit institution (a qualifying holding is a direct or indirect investment in an undertaking which accounts for a minimum 10% of the capital or voting rights or which enables the gaining of dominant influence over that undertaking),
  2. holders of qualifying holdings that have already obtained the approval of the Croatian National Bank for acquiring holdings in a credit institution equalling or exceeding 10%, but not exceeding 20%, must submit an application for prior approval for each further direct or indirect increase of a qualifying holding in the amount equalling or exceeding 20%, 30% or 50% of the capital or of the voting rights of a credit institution,
  3. if, after acquiring shares of the credit institution, shareholders of the credit institution become two or more persons acting in concert, owing to which they as persons acting in concert jointly hold 10%, 20%, 30% or 50% of the capital or of the voting rights of the credit institution, they must submit an application for approval to acquire a qualifying holding within 30 days of the date when they became persons acting in concert,
  4. where an individual person or one of the persons acting in concert acquires shares exceeding 10%, 20%, 30% or 50% of the capital or voting rights by inheritance, or in another case when the person did not know, or should not have known that they would exceed the stated percentages, the person will submit an application for such an acquisition within 30 days of the day on which that person became aware or should have become aware of such an acquisition,
  5. should qualifying holdings increase due to the reduction in the initial capital of the credit institution or other similar action by the credit institution so as to equal or exceed 10%, 20%, 30% or 50% of the capital or voting rights, holders of qualifying holdings will submit an application for further acquisition of a holding in the capital or of the voting rights of the credit institution within 30 days of the date when they became aware or should have become aware of the increase in their holdings due to the credit institution's action.

Persons who obtained the prior approval are obligated to complete the acquisition of a qualifying holding and notify the Croatian National Bank of the acquisition within 12 months of the adoption of the decision on the prior approval. If the person who obtained prior approval will not complete the acquisition of a qualifying holding within the period referred to above, they may, no later than 15 days before the expiry of that period, submit a reasoned request to the Croatian National Bank for an extension of that period, which may be extended up to six months.

Should persons who obtained prior approval take a decision to sell or otherwise dispose of their shares so as to reduce their holdings below the threshold for which they obtained prior approval, they are obligated to notify the Croatian National Bank in advance.

Persons who have obtained prior approval to acquire a qualifying holding, and who have thereafter sold or otherwise disposed of their shares and thereby reduced their holdings below the threshold for which they obtained prior approval, are obligated to submit an application to the Croatian National Bank for prior approval to acquire a qualifying holding if, following the expiry of a period of 12 months of the adoption of the decision on the prior approval, they again intend to acquire a qualifying holding in the amount for which they obtained prior approval.

Legal consequences of the acquisition of a qualifying holding without approval

Where a person directly acquires a qualifying holding in a credit institution without approval of the Croatian National Bank, the Croatian National Bank will issue a decision ordering the person to sell the shares acquired without the necessary approval, and to submit evidence on the sale and, if known, data on the buyer. Where persons acting in concert directly acquire a qualifying holding without approval of the Croatian National Bank, regardless of the percentage of the holding in the credit institution held by each person and regardless of whether that individual holding is a qualifying holding, the Croatian National Bank will issue a decision ordering the persons to sell the shares acquired without the prior approval so that their joint holding does not exceed the qualifying holding for which approval was granted. These persons are obligated to submit evidence of the sale and, if known, data on the buyer to the Croatian National Bank.

As of the date of enforceability of the decision ordering the sale of shares of a credit institution acquired without prior approval of the Croatian National Bank, the acquirer may not exercise any rights arising from any share ordered to be sold, and the quorum for taking valid decisions and the necessary majority for taking decisions of the general meeting will be determined in relation to the initial capital reduced by the amount of shares on the basis of which the acquirer cannot exercise any voting rights.

If a legal or natural person or persons acting in concert indirectly acquire a qualifying holding in a credit institution without approval of the Croatian National Bank, the Croatian National Bank will issue a decision ordering that the thus acquired indirect qualifying holding in a credit institution without the required approval be reduced by the holding for which no approval was granted within a time limit which may neither be shorter than three nor longer than nine months.

Application for approval to acquire a qualifying holding in a credit institution

A legal or natural person and persons acting in concert will submit to the Croatian National Bank an application for prior approval for the acquisition of shares of a credit institution on the basis of which they, individually or jointly, directly or indirectly, acquire a qualifying holding in the credit institution. In exceptional cases, for persons who are not the direct acquirers of a qualifying holding or the ultimate acquirers of a qualifying holding, the application for the prior approval to acquire a qualifying holding in a credit institution may be submitted by the ultimate acquirer of a qualifying holding.

The application for issuing prior approval to acquire a qualifying holding in the capital or voting rights in the credit institution is to be submitted in Croatian on the form Application for approval to acquire a qualifying holding in a credit institution together with the documentation specified in the Decision on the prior approval to acquire a qualifying holding in a credit institution.

If the acquirer is a natural person, the completed Questionnaire for natural persons acquiring a qualifying holding in a credit institution or connected with an acquirer of a qualifying holding in a credit institution must be enclosed with the application for the acquirer and any natural persons connected with the acquirer.

If the acquirer is a legal person, the completed Questionnaire for legal persons acquiring a qualifying holding in a credit institution must be enclosed with the application, along with the completed Questionnaire for natural persons acquiring a qualifying holding in a credit institution or connected with an acquirer of a qualifying holding in a credit institution for any natural persons connected with the acquirer.

Deciding on the application

The Croatian National Bank will, within two working days of the receipt of the application for prior approval to acquire or increase a qualifying holding, acknowledge the receipt of the application in writing, determining the validity of the application. A valid application is considered to be an application accompanied by the documentation specified in the Decision on the prior approval to acquire a qualifying holding in a credit institution. When acknowledging the receipt of a valid application, the Croatian National Bank will notify the applicant on the date of expiry of the decision-making period.

If the application is not valid, the Croatian National Bank will invite the applicant to supplement the application within a reasonable time frame. If the applicant supplements the application within the specified time frame, the Croatian National Bank will confirm the receipt of a valid application.

As an exception, if the Croatian National Bank, after having acknowledged the receipt of a valid application, establishes any deficiencies in the documentation rendering the application invalid, it may refuse or reject the application.

When deciding on the application, the Croatian National Bank may (within 50 days from the date of application) request from the acquirer and the credit institution additional documentation that the Croatian National Bank deems necessary to decide on the application for prior approval, including information prescribed in the law governing the prevention of money laundering and terrorist financing, which is being collected by the persons subject to that law. The applicant is obligated to submit additional documentation within the time limit specified by the Croatian National Bank, which may not be longer than 20 working days or 30 working days in exceptional cases. The time limit for the decision-making procedure will not run within the time limit for the submission of additional documentation.

The Croatian National Bank will complete the decision-making procedure regarding prior approval to acquire a qualifying holding within 60 working days of the submission of a valid application and deliver the decision to the applicant within two working days following the decision on the application and within the time limit of 60 working days. At the request of the applicant whose application to acquire or increase a qualifying holding has been refused, the Croatian National Bank will issue a press release thereon stating the reasons for the refusal.

If the Croatian National Bank fails to adopt a decision on an application within 60 working days of the receipt of a valid application, the application will be deemed to have been approved.

If the Croatian National Bank receives two or more applications to acquire a qualifying holding in the same credit institution, it will provide equal treatment to all proposed acquirers.

Before adopting a decision on whether to grant prior approval to acquire a qualifying holding, the Croatian National Bank will consult the competent supervisory authority if the acquirer is one of the following:

  1. a credit institution, an insurance or reinsurance undertaking or a management company within the meaning of the law governing the operation of open-ended investment funds (hereinafter referred to as 'UCITS management company'), a pension company within the meaning of the law governing the operation of pension funds (hereinafter referred to as 'pension company'), an investment firm authorised in another Member State, or if the acquisition falls within the competence of another supervisory authority;
  2. the parent undertaking of a credit institution, insurance or reinsurance undertaking, UCITS management company, a pension company or an investment firm authorised in another Member State, or if the acquisition falls within the competence of another supervisory authority; or
  3. a natural or legal person controlling a credit institution, insurance or reinsurance undertaking, UCITS management company, a pension company or an investment firm authorised in another Member State, or if the acquisition falls within the competence of another supervisory authority.

In the context of the decision-making procedure regarding prior approval to acquire a qualifying holding the Croatian National Bank may carry out verification of data submitted by the acquirer of the qualifying holding.

When deciding on the application for the approval to acquire a qualifying holding, the Croatian National Bank will appraise the suitability and financial soundness of the acquirer of a qualifying holding according to the following criteria:

  1. the reputation of the acquirer, taking into account the reputation of all of its shareholders, as well as indirect holders of qualifying holdings and their influence on the acquirer;
  2. the reputation, adequacy of knowledge, skills and experience of each person that the acquirer intends to propose for the functions of management board and supervisory board members of the credit institution;
  3. knowledge, skills and experience of any member of senior management who will direct the business of the credit institution;
  4. the financial soundness of the acquirer, taking into account the financial soundness of all of its shareholders, as well as indirect holders of qualifying holdings and their financial influence on the acquirer, in particular in relation to the type of business pursued by the credit institution in which the qualifying holding is acquired;
  5. whether the credit institution will be able to comply and continue to comply with regulations, in particular, whether the group of which it will become a part has a structure that makes it possible to exercise effective supervision, effectively exchange information among the competent supervisory authorities and determine the allocation of responsibilities among the competent authorities; and
  6. whether there are reasonable grounds to suspect that, in connection with the acquisition, money laundering or terrorist financing, within the meaning of regulations on the prevention of money laundering and terrorist financing, is being or has been committed or attempted, or that the acquisition could increase the risk thereof.

The Croatian National Bank shall refuse an application for prior approval to acquire a qualifying holding where it assesses that the suitability or the financial soundness of the acquirer of a qualifying holding does not comply with the specified criteria.

Revocation of approval to acquire a qualifying holding

Pursuant to Article 32 of the Credit Institutions Act, the Croatian National Bank may revoke legal approval to acquire a qualifying holding where:

  1. a holder of a qualifying holding breaches the obligations referred to in Title XXII of the Credit Institutions Act or fails to act in accordance with a decision of the Croatian National Bank or the competent authority of another Member State responsible for supervision on a consolidated basis, ordering him to eliminate deficiencies;
  2. a holder of a qualifying holding obtained approval by providing false or inaccurate data;
  3. the conditions referred to in Article 28 of the Credit Institutions Act on the suitability and the financial soundness of the acquirer of a qualifying holding are no longer met; or
  4. the influence exercised by a holder of a qualifying holding operates to the detriment of the prudent and sound management of the credit institution or the holder does not act with the due diligence of a prudent businessperson.