The legal differentiation between recognized and de facto corporate groups has been newly introduced.
The prerequisite for a recognized corporate group is that the controlling company is obliged to prepare the consolidated annual financial statements, or that a control agreement has been concluded, which was submitted to the commercial registry court for registration within 15 days of its conclusion.
As of July 1, 2006, the legislature has provided for considerably simpler standards for the acquisition of influence.
NEW CONCEPT OF INFLUENCE
While previously the number of votes of the controlling shareholders was used to differentiate between “significant” (25%+ of the votes), “majority” (50%+ of the votes) and “direct” (75%+ of the votes), in the future only an “influence securing a qualified majority” of 75% of all votes will be assessed.
The controlling shareholder who has such influence is obliged to acquire the voting rights of the minority shareholders at the market price upon their request within 60 days of acquiring the controlling influence. This regulation is subsequently no longer limited to stock corporations, but applies to all types of company.
The companies agree to operate as a recognized group of companies, or on the relationship between the parties, i.e. that the independence of the controlled company can even be restricted for internal group reasons. However, a recognized group of companies does not have its own legal personality.
However, concluding a control agreement and registering as a recognized company is not mandatory.
Companies are still free to carry out their economic activities as a de facto group of companies. Affiliated companies are considered to be such if they have been working together as cooperation partners on the basis of a uniform economic concept for at least 3 years without interruption. The regulations for recognized groups of companies are also applicable to de facto groups of companies. CHANGED LIABILITY OF THE MANAGING DIRECTOR
LIABILITY RELEASE POSSIBLE
By means of a shareholders’ resolution, the managing director can now be released from liability once a year, provided, however, that
a corresponding provision is included in the articles of association. This liability relief is ineffective if the managing director has provided false information about his activities.
EXTENSION OF LIABILITY IN THE EVENT OF IMPOSED INSOLVENCY
In the event of imminent insolvency of the company, the liability of the managing directors is increased.
During bankruptcy proceedings (“felszámolás”), the creditors or the bankruptcy administrator of the company can
apply to the court to establish the liability of the person(s) who acted as managing director of the company in the three years prior to the start of the bankruptcy proceedings (piercing the corporate line of liability) for specified losses in the company’s assets, on the grounds that the managing director did not perform this activity primarily with the interests of the creditors in mind after the occurrence of imminent insolvency.
Exculpation is sometimes only possible if the managing director can prove that he did everything that could be expected to protect the interests of the creditors after the occurrence of imminent insolvency. However, if the managing director has not fulfilled his obligation to file the company’s annual report with the registry court, the interests of the creditors are assumed to have been violated.
MANAGEMENT ONLY ON THE BASIS OF A MANDATE CONTRACT
From July 1, 2006, a managing director mandate may not be held within the framework of an employment relationship. Contracts concluded before this date expire in a maximum of 5 years – since there is a statutory maximum period of 5 years for managing director employment relationships.
If the employment relationship is to be maintained for the longest period possible under the law, a new employment contract for a further 5 years must be concluded before July 1, 2006. The company documents must also be adjusted.
SCOPE OF ACTIVITIES
Only the main activities or those requiring approval are to be included in the partnership agreement.
NEW POSSIBILITY OF CHANGE
The managing director may – if the partnership agreement allows it – change the partnership agreement regarding the company name, business activity (with the exception of the main activity) or registered office.
APPOINTMENT OF MANAGING DIRECTOR FOR AN INDEFINITE PERIOD
The legal restriction of a maximum of 5 years does not apply if the partnership agreement provides otherwise.
BAN ON DOUBLE-DECKED SINGLE-PERSON COMPANY LIFTED
This restriction also no longer applies.
KFT. (UNG. GMBH) CAN ONLY BE FOUNDED WITH CONTRIBUTIONS IN KIND
However, if the contributions in kind represent more than 50% of the company’s assets, all of them must be contributed at the time of foundation.
NEED FOR ADJUSTMENT
The partnership agreements must be adapted to the new regulations at their next amendment, but no later than September 1, 2007.
INDIRECT CONTROL ALSO COUNTS
Now, when calculating influence, indirect control must also be taken into account in the case of Kft.-s, i.e. shares in affiliated companies must also be included, so in the case of the Hungarian subsidiary, not only the foreign parent company, but also the foreign “grandmother” could be liable as a shareholder under group law.
LIABILITY OF THE SHAREHOLDERS
Due to the amended company law, the shareholders are now liable for the company’s debts in the following 3 cases:
- if in bankruptcy proceedings (“felszámolás”) the court finds that the shareholder who has more than 75% of the votes is pursuing a permanently disadvantageous business policy and the company’s assets are therefore not sufficient to satisfy the debtors;
- in the event of a creditor’s withdrawal of cover, if the debtor has accumulated a debt exceeding 50% of its equity capital at the time of the bankruptcy proceedings, the court may, at the creditor’s request, establish that the shareholder sold his share within 3 years before the start of the liquidation and is therefore liable for the company’s debts;
- the shareholder cannot invoke his limited liability if he has abused this or the company’s own legal personality to the detriment of creditors.
POSSIBILITY OF HOLDING A SHAREHOLDERS’ MEETING VIA VIDEO CONFERENCE
If this is provided for in the partnership agreement, it is possible to hold the shareholders’ meeting via video conference.
OBLIGATION TO APPOINT AN AUDITOR LIMITED
The appointment of an auditor is now only mandatory in the following cases:
- if it is required by the accounting regulations,
- the partnership agreement provides for it,
- for Rt.-s (AGs),
- if it is provided for by law in the interest of public property.