HUNGARY Law and Practice Contributed by: Mihály Barcza and József Bulcsú Fenyvesi, Oppenheim Law Firm
company and the Hungarian National Bank if their voting rights exceed certain thresholds (see 3.4 Dis- closure of Interests ). Similar obligations apply where shareholders act in concert or enter into shareholders’ agreements affecting control (see also 2.12 Institu- tional Shareholder Groups ). These disclosures are then published to the market to ensure transparency. Failure to comply may result in administrative fines, suspension of shareholder rights or invalidation of votes. A company that exercises dominant influence or con- trol over another company (typically through a majority shareholding or decisive contractual rights) has spe- cific statutory duties towards the controlled entity. The controlling company must not abuse its position to the detriment of the controlled company. Formal Group of Companies Where a formal group of companies is established and registered, the controlling company may issue binding instructions to the controlled company. Such instructions must: • comply with the group agreement and serve the group’s common business policy; • respect the rights of the controlled company’s minority shareholders and creditors; and • ensure that any disadvantages to the controlled company are offset by group-level benefits within the agreed period. Additional obligations of the controlling company include: • reporting to its own shareholders’ meeting; • reporting to creditors of the controlled company whose claims exceed the statutory threshold; • purchasing the shareholdings of minority share- holders who request to exit when the group is formed; and • providing security to creditors who request it when the group is formed. 8. Controlling Company 8.1 Duties of a Controlling Company
The controlling company is liable for the uncovered debts of the controlled company if the latter is liqui- dated, unless the controlling company proves that the insolvency was not caused by the group’s common business policy. De Facto Control Control may also exist without a registered group, for example through majority shareholding or contractual rights. In such cases, the controlling company cannot issue binding instructions to the controlled entity. Any abuse of influence – eg, decisions which benefit the parent to the detriment of the subsidiary – may give rise to civil liability. If the conditions for a group agreement exist continu- ously for at least three years, the court may, upon request of any interested party, order the controlling and controlled companies to conclude such a formal group agreement. 9. Insolvency 9.1 Rights of Shareholders If the Company Is Insolvent In a threatening insolvency situation (ie, if it becomes apparent to the director that the company’s financial obligations cannot be satisfied on time), the direc- tor’s general obligation to focus on the interests of the company is supplemented with the obligation to take into consideration the interests of the company’s creditors (ie, preserving as many liquidation assets as possible, collecting receivables and cutting costs). The directors are obliged to call a shareholders’ meet- ing if the company is threatened by imminent insol- vency or has stopped making its payments. In this case, the shareholders’ meeting shall decide on how to solve the financial problem (eg, by providing further capital contributions or approving the commencement of a bankruptcy procedure), or may decide on the merger or dissolution of the company. If the insolvency situation is not resolved, the com- pany may go into liquidation. Where a liquidation is opened (ie, ordered by the court), from thereon the rights of the shareholders’ meeting are restricted by
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