HUNGARY Law and Practice Contributed by: Mihály Barcza and József Bulcsú Fenyvesi, Oppenheim Law Firm
6.3 Rights to Appoint and Remove Auditors The shareholders’ meeting has the authority to appoint and remove the auditor. An auditor can be appointed for a definite term of up to five years. An auditor may be appointed for the minimum term of a period commencing with the appointment and lasting until the date of the meet- ing of the shareholders’ meeting approving the next annual report. In addition to appointing and removing the ordinary auditor, minority rights also pertain to requesting the appointment by the court of a special auditor to exam- ine a certain event or period in the life of the company (for detailed rules, see 1.4 Variation of Shareholders’ Rights ). The management, the supervisory board (if estab- lished), and the auditor (if appointed) are required to report regularly to the shareholders. Reporting typical- ly occurs at the shareholders’ meeting or through ad hoc written reports, as may be necessary in specific circumstances. These reports generally cover: • financial performance; • conflicts of interest; • significant transactions; and • compliance with statutory obligations. Failure to fulfil these reporting duties may result in per- sonal liability for the individuals concerned. In private companies (Kft and Zrt), shareholders gen- erally have no statutory reporting obligations towards the company, unless such duties are provided in the articles of association or arise under specific regula- tions (eg, UBO reporting, related-party transactions, or engaging in competing activities). In contrast, public companies (Nyrts) are subject to detailed shareholder reporting obligations under capital market law. Shareholders must notify both the 7. Corporate Governance Arrangements 7.1 Duty to Report
require a greater majority. In Zrts, priority rights with regard to appointing and removing members of the board of directors may pertain to preferential shares issued by the company. This is prohibited in Nyrts. When a board of directors is appointed, this operates as set out in its by-laws, which are usually determined by the shareholders’ meeting. The board members elect one of them as the chair of the board. Directors can be elected either for a definite term or for an indefinite term (as set out in the articles of asso- ciation of the company). Removal of Directors Directors may be removed at any time without any reasoning via a resolution rendered by the sharehold- ers’ meeting. The voting threshold for the resolution is the same as for the appointment of directors. 6.2 Challenging a Decision Taken by Directors Directors shall manage the company in accordance with the law, the articles of association and resolu- tions of the shareholders’ meeting, in accordance with the statutory requirements of prioritising the interests of the company. Generally, the directors may not be instructed by the shareholders (with the exception of one-member companies). A resolution of the director (or board of directors) may be challenged by requesting the court to annul the decision, if the requesting party believes that the deci- sion breaches the law or the articles of association. No action may be brought by a person who contributed to the adoption of the resolution with its vote. This action does not automatically suspend the enforcement of the challenged resolution; suspension of enforcement must be requested separately. Directors are liable towards the company for the breach of their legal obligations as a director. General- ly, the shareholders’ meeting decides on the enforce- ment of such claims, but it may also be initiated by the minority of the shareholders (for detailed rules, see 1.4 Variation of Shareholders’ Rights ).
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