Companies as the most important economic units are established as independent legal entities separate from their members. The establishment and organization of companies is regulated by the Companies Act. The Company Act in Croatia contains complete information about the types of companies available in the country and regulates possible status and legal changes of the same. This paper defines and describes the application of the Institute of Transformation, that is change of the legal form of a company in which there is no universal legal succession and termination of labor relations. We distinguish the Institute of Transformation from status changes that result in the termination of the company and the transfer of assets and liabilities. In accordance with Croatian legislation, a company may change its legal form and continue to operate as a company of another legal form. The Institute of Transformation seeks to eliminate financial, market and other difficulties that companies face in their business.