HUNGARY Law and Practice Contributed by: Mihály Barcza and József Bulcsú Fenyvesi, Oppenheim Law Firm
• If a shareholder adopts a resolution that causes damage to the company, the company may sue for damages. • A shareholder (except in a public company, or in a private company if there are only two shareholders or where a shareholder holds a qualified majority in the company) may be excluded by the court from the company if its continued membership signifi- cantly jeopardises the company’s purpose. • Under the conflict of interest rules, a shareholder may not vote on resolutions in which they have a vested interest. A vested interest exists, among others, if the resolution concerns: (a) granting the shareholder an exemption from any obligation or liability; (b) providing the shareholder with any benefit from the company; (c) concluding an agreement with the shareholder; (d) initiating legal proceedings against the share- holder; or (e) a matter affecting an entity that exercises majority control over the shareholder or an entity over which the shareholder exercises majority control. 11.2 Aims of Shareholder Activism Shareholder activism does not have significant public momentum in Hungary, but may occur, and can be tracked especially in Nyrts. In private companies (Zrt or Kft), shareholder activism is harder to track; it often takes the form of informal negotiations, private share- holders’ agreements or even litigation. Shareholder activism most often aims at increas- ing the value of the company’s shares and securing higher dividends, which can be drivers for attempts to change corporate governance, restructure capital or influence the company’s business strategies (such as expanding to other markets, introducing new business lines, cutting costs, etc). Beyond direct financial inter- ests of the shareholders, activist shareholders may also have non-financial agendas such as promoting environmental matters or social causes. 11.3 Shareholder Activist Strategies Shareholder activist strategies may include: • requesting information from the directors;
• exercising shareholders’ rights, even minority rights listed under 1.4 Variation of Shareholders’ Rights , to call shareholders’ meetings; • proposing agenda items, and making proposals to be discussed by the shareholders’ meeting, either formally as regulated by the law or even informally; • building coalitions with other shareholders; • commencing legal action against the company (see 10.1 Remedies Against the Company ); and • using financing leverage to influence the compa- ny’s governance or strategies. 11.4 Recent Trends In principle, the tools available to activist shareholders may be applied in companies of any size and type. Activism is likely to appear in companies owned by numerous shareholders, and may be relevant espe- cially if decision-making requires the co-operation of more shareholders. Shareholder activism often gains importance if the company faces restructuring, finan- cial difficulties, or a shareholder is preparing for an exit. Recently, exercising information rights has increased, and minority initiatives and attempts to influence cor- porate control have been on the rise. Shareholders also tend to turn to court supervisory proceedings or regulatory authority proceedings (see 10.1 Remedies Against the Company ). 11.5 Most Active Shareholder Groups Financial investors are generally more active than other groups of shareholders. They use shareholders’ rights strategically, have greater legal and financial resources, and are often willing to escalate matters to regulatory authorities or pursue legal procedures to reach their goals. 11.6 Proportion of Activist Demands Met No comprehensive data is publicly available regarding the success of activist demands. In practice, activism is more likely to succeed if the activist shareholder holds a 5–10% stake or more in the company, the shareholder can build a material coalition with other shareholders, or can submit a grounded regulatory complaint or commence legal action. If a company is in financial need or is threatened by insolvency,
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