HUNGARY Law and Practice Contributed by: Mihály Barcza and József Bulcsú Fenyvesi, Oppenheim Law Firm
• the registered capital of a private company limited by shares (Zrt) must be at least HUF5 million; and • the registered capital of a public company limited by shares (Nyrt) must reach at least HUF20 million. 1.6 Minimum Number of Shareholders In general, companies must have two or more mem- bers. If a partnership (Kkt or Bt) remains with one member, the law allows a grace period for the com- pany to introduce a new member or to transform into another company form; otherwise, the company must be terminated. However, a limited liability company (Kft) or a private company limited by shares (Zrt) may be established or may, as a result of changes in the shareholders, continue to operate as a one-member company. In a one-member company special rules apply – eg, the single shareholder has the right to directly instruct the company’s management and, under certain circum- stances, if the company terminates without a legal successor, the single member/shareholder will bear extended liability for the company’s uncovered debts. Shareholders may be resident in Hungary or other jurisdictions. Residents of foreign jurisdictions shall mandate and register a Hungarian resident private person or entity to serve as a delivery agent, for receiv- ing and forwarding to the foreign resident shareholder the official deliveries sent to it by the commercial court or other authorities in matters concerning the com- pany’s operation. For further regulations with respect to foreign share- holders, see 1.2 Types of Company Used by Foreign Investors . 1.7 Shareholders’ Agreements/Joint Venture Agreements It is common in Hungary to enter into shareholders’ agreements or joint venture agreements for private companies, especially where the shareholders have special drivers regarding the company, or where the shareholders want to set forth special rights or proce- dures regarding the operation of the company, which they do not necessarily want to disclose to the public.
A shareholders’ agreement is not disclosed to the public and is binding only between its participants. Any breach of the agreement may result in conse- quences set out therein (eg, payment of a penalty) or in a legal dispute between the parties; however, the breaching act still remains valid vis-à-vis third parties. In order to render the rules of the shareholders’ agree- ment binding in relation to third persons, the contract- ing parties must include it in the company’s articles of association, which also renders such rules public knowledge. Therefore, the shareholders usually con- clude a shareholders’ agreement and (to ensure the enforcement of such rules vis-à-vis third persons) incorporate its rules into the articles of association, to the extent deemed absolutely necessary and suit- able to be made public. 1.8 Typical Provisions in Shareholders’ Agreements/Joint Venture Agreements Shareholders’ agreements or joint venture agreements usually regulate the entire scope of the company’s organisation and operation, and the exercising of rights in and with respect to the company. They often include additional arrangements on voting rights, board composition, decision-making procedures, and other corporate governance matters. Where such arrangements result in joint control or a change in control over the company, they may be subject to merger control review under Hungarian or EU com- petition law. Shareholders of a Nyrt acting in concert may also be subject to disclosure regulations under the capital market law. 2. Shareholders’ Meetings and Resolutions 2.1 Types of Meeting, Notice and Calling a Meeting Public Company Limited by Shares (Nyrt) In a Nyrt, matters that fall within the competence of the shareholders’ meeting must be resolved at a meeting. Therefore, the company must hold an annual general meeting (AGM). Usually, decisions are made at the AGM on the fol- lowing matters:
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