HUNGARY LAW AND PRACTICE Contributed by: Pál Szabó, Barnabás Simon, Eszter Katona, Ádám Simon, Mihály Harcos, Karim Laribi, Gábor Kutai and István Szalay-Csala, Bird & Bir d
olds as long as it does not violate the rights of the minority shareholders. The Hungarian Civil Code recognises minority pro - tection rights for shareholders holding at least 5% of the voting rights in Zrts and Kfts and for shareholders holding at least 1% of voting rights in Nyrts . These minority rights are as follows: • requesting the convening of the shareholders’ meeting; • requesting that an agenda item not included on the agenda is discussed; • requesting special audits of the last financial state - ments of the company or any economic event in connection with the actions of the company’s management in the previous two years; and • initiating the enforcement of claims on behalf of, and for the benefit of, the company against the members of the company, members of the com - pany’s supervisory board, the company’s executive officers, or the company’s auditor. There are also certain decisions that can only be passed by a three-quarter majority of the votes (eg, changing the form of the company or decreasing the company’s registered capital), and a decision on amending the articles of association that changes the rights of one or more shareholders to the detri - ment of such shareholder(s) may be vetoed by such shareholder(s). No different or additional rights for institutional inves - tors and other shareholder groups are set out in the Hungarian Civil Code, however as companies may deviate from the rules set out in the Hungarian Civil Code, it is common that certain protective rights (eg, transfer restrictions, drag along, tag along or veto rights) are implemented at the level of the target com - pany to protect the institutional investor’s investment. 4.3 Disclosure and Reporting Obligations Disclosure obligations apply to both listed companies and, in certain cases, companies that are not listed on any markets and their investors (eg, the Ultimate Beneficial Owner (UBO) register described below).
Any investor acquiring more than 5% of voting rights in a listed company must disclose this to the target company and the National Bank of Hungary within two calendar days of the acquisition. The target company is required to publish the same information within two calendar days. In share buyback transactions, the dis - closure must be made by the company itself. The disclosure obligation extends to the purchase of financial instruments that entitles its holder to acquire voting rights in the company at the holder’s discre - tion, such as an option for shares or share futures. The investor and the company are required to make similar disclosures when the investor exceeds or falls below 5% or other thresholds prescribed by law (eg, 10%, 15%). According to the relevant EU Anti-Money Launder - ing Directives, member states were required to set up UBO registers, a database that was not present in Hungary until 2021. In Hungary, the UBO database is maintained by the tax authority and, currently, it is the financial service providers who are required to provide information on their clients obtained during their KYC and AML screenings by forwarding the relevant data to the central UBO register. The UBO register is, how - ever, not an official database and the tax authority is not responsible for the accuracy of its content. The FDI screening regime requires foreign investors to report investments in certain sectors to the competent minister. Please see 7. Foreign Investment/National Security and 8.1 Other Regimes for a more detailed discussion of the FDI screening regimes in Hungary.
5. Capital Markets 5.1 Capital Markets Overview
Hungarian companies have had a tendency to rely on debt financing usually provided by banks and other financial institutions, while capital markets, especially equity markets, are rarely used. Nevertheless, if a Hungarian company decides to go public, it can choose to have its shares registered on
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