Current Issues Of The Hungarian Company Law

Current Issues Of The Hungarian Company Law Presented by: Prof. Dr. Veress Date: 9 May 2024 “Layers” of the Regulation - Super monist system - 10 years of company law included in the CC - "Layers": • General rules on legal persons • General rules on companies • Specific rules on the 4 company types Section 3:4 CC – “Rule Of The Default Rules” - (2) The members or founders of a legal person may deviate from the provisions of this law concerning legal persons in their mutual relations and in their relations to the legal person, as well as in regulating the organization and operation of the legal person, as stipulated in the founding document - except as provided in paragraph (3). - (3) The members or founders of a legal person may not deviate from the provisions of this law if: • The deviation is prohibited by this law; or • The deviation evidently infringes the rights of the creditors, employees of the legal person, or the minority of the members, or hinders the enforcement of the supervision over the lawful operation of legal persons. “Deviation Is Prohibited By This Law” - Theoretically easy: • "If this law prescribes unanimity for the adoption of a resolution, any provision in the founding document that deviates from this is null and void." (3:19) or • "The articles of association of a publicly traded joint stock company cannot provide for additional payments. Any provision of the articles of association that deviates from this is null and void." - In practice: are there virtual nullities? "Anyone may inspect the share register." (3:247) • Articles of association: "Anyone may inspect the share register, provided that they demonstrate a legal interest in accessing the data of the share register. The legal interest of a creditor of the company in accessing the data of the share register must be considered justified." - "A share is a negotiable security that embodies membership rights exercisable within the issuing joint-stock company, issued in the name of the holder, and with a nominal value." - Registered shares... - Definitions: mandatory? - this is the prevalent interpretation... - LLC: • "Every member can have one core contribution. Every member can have one business share." - perceived as definition of the LLC... - The legislator intervened, now the CC states: • Criticism: LLC formal characteristics in dissolution? “The Deviation Evidently Infringes The Rights…” - Complexity: to check in the moment of adoption / registration if a deviating rule is against these rights... - Examples • Rights of the creditors • Rights of the employees • Rights of the minority of the members Minority Shareholders? - 3:277. § [Consent to General Assembly Resolution] • A resolution of the general assembly that adversely modifies a right associated with a series of shares can only be made if the shareholders of the affected series of shares also give their separate consent in the manner specified in the articles of association. During this process, provisions related to any possible limitation or exclusion of voting rights associated with the shares - excluding the prohibition on exercising voting rights related to treasury shares - are not applicable. • (2) Any provision of the articles of association of a publicly traded company that deviates from the rule specified in paragraph (1) is null and void. - Pub Lidy traded? - Closed joint stock company? Usefulness Of The Per A Contrario Interpretation - “LLC - The articles of association cannot validly exclude the transfer of business shares for monetary consideration to an external party." (3:167) - "The right to acquire a business share intended for transfer in exchange for monetary consideration shall, in this order, be entitled to the other members, the company, or a person designated by the company, with priority over others according to the appropriate application of the provisions on the right of preemption. The transfer of this right is void....” - But: exchange contract, donation contract? Testing Our Knowledge - 3:257. § [Right to Participate in the General Assembly] A shareholder is entitled to participate in the general assembly, request information, make comments and proposals, and vote if in possession of shares with voting rights.