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Summary of the Special Rules Regarding the Operation of Legal Persons During the State of Danger

Summary of the Special Rules Regarding the Operation of Legal Persons During the State of Danger

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With respect to the declared state of danger and in order to alleviate the economic difficulties resulting from the Covid-19 epidemic, the government has taken several measures, the following document summarizes the most significant provisions of governmental decrees in the field of labour law and related to the operation of legal persons.

Governmental Decree no. 102/2020. (IV. 10.) establishes special rules regarding – among others - the operation of legal persons and non-legal person organizations established on the bases of civil law rules (hereinafter legal persons), which special rules are to be applied during the state of danger.

Provisions related to the supreme body and the management’s decision making:

The meetings of the supreme body may not be held with the personal participation of the members or their representatives, even if the meeting was convened prior to the Decree’s entry into force. The supreme body’s meeting shall be held by means of electronic communications or the resolutions shall be adopted without holding a meeting, even in those cases, when the articles of association does not regulate the possibility to do so or regulates differently than established by the Decree.

If the rules of holding the meeting by means of electronic communications or of adopting resolutions without holding a meeting are not established in the articles of association, the management of the legal person is entitled to establish the relevant rules and to provide information to the members about them. If the legal person has more than one executive officer entitled to act independently, it is the responsibility of the executive officer exercising the employer’s rights to establish the rules and communicate them to the members. Detailed information on the agenda shall not be omitted during the establishment of the rules and drafts of the resolutions shall be communicated to the members. With regard to participating by means of electronic communications, the means of electronic communications and IT applications used shall be defined. If the management is not familiar with the members (or with their representatives) personally, the method of their identification shall be specified as well. In case of adopting resolutions out of session, members shall be given at least 15 days for sending their votes. The rules of the Civil Code related to the effectiveness of the decision making and the determination of the outcast of the voting shall be applied after the Decree’s entry into force. Members may not request to convene a meeting or to hold a meeting by means of electronic communications. The member’s vote shall be considered valid if it identifies the member and contains the draft of the resolution in question and the vote casted to the resolution. The member may send its vote by means of e-mail, with respect to the rules of “Making legal statements” established below.

The meeting of the supreme body shall be held by means of electronic communications or resolutions shall be adopted out of sessions, if

  • the legal person has a maximum of 5 members and a quorum can be foreseen (the conditions and methods of the decision-making process shall be defined in a way that all members have the opportunity to participate);
  • the legal person has more than 5, but not more than 10 members, for the request of the members holding a majority of votes; or
  • the legal person has more than 10 members and the management initiates to do so.

The meeting of the supreme body shall be governed by the appointed executive director, whose task includes the preparation of minutes. The previously summarized provisions are not applicable to public limited companies, the Decree establishes special rules related to the decision-making process of these legal persons.

In the event if it is not possible to hold a meeting by means of electronic communications or to adopt resolutions without holding a meeting, the management shall decide

  • on the adoption of the annual report;
  • on the use of the after-tax profit;
  • on urgent matters within the competence of the decision-making body, necessary for the maintenance of the lawful operation of the legal person and in matters related to the handling of the situation related to the state of danger and in urgent matters to uphold responsible management.

The management is entitled to adopt the listed decisions if the members holding the amount of vote specified in the Decree - or the member with a qualified majority or majority influence - do not submit a prior objection in writing.

The management

  • generally, may not amend the articles of association; 
  • may not decide on the dissolution of the legal person without succession;
  • may not decide on the transformation, merger or division of the legal person and may not adopt decisions instead of the decision-making body in ongoing proceedings;
  • may not decide on the reduction of subscribed capital in case of private limited-liability companies and limited companies and
  • may decide on additional payments or capital injections only with the prior written consent of the members obliged to pay and the payments shall not affect the extent of the members' shareholding in the legal person.

The annual report may be audited if it was adopted by the management. If a supervisory board operates at the legal person, the management shall adopt its decision after the receipt of the written report of the supervisory board.

The decisions made by the management shall be put on the agenda of the extraordinary meeting of the supreme body, which shall be convened no later than the 90th day after the end of the state of danger. Subsequent modification or revocation of the resolution shall not affect any rights and obligations obtained prior to it.

The management shall take any measures necessary in order to inform the members about its decisions.

If a resolution made by the supreme body or the management is reviewed by the court, the resolution in question may not be set aside by the court for conflicting with the articles of association if the conflict is solely because of the application of legal regulations with respect to the state of danger.

The provisions summarized above shall not be applied to those legal persons, in which the decision-making body or the single member – in compliance with the rules of curfew - has not been prevented from adopting decisions.

Provisions related to other bodies of legal persons:

The legal person’s management body, supervisory board, audit committee, and any other body set up by law or by its articles of association (“body”) may hold its meetings by means of electronic communications or by any other electronic means providing identification or they may communicate in writing. They are entitled to adopt their decisions related to the management of the legal person in writing. In the event of lack of relevant regulation, the president of the body shall establish the rules of meetings and adopting decisions. Written consultations and decisions may also be adopted by electronic message exchange ("e-mail"). If the number of members of the body decreases under the number prescribed by law or by the articles of association during the state of danger or the member is unable to carry out its duties because of the Covid-19 pandemic, the other members are entitled to adopt decisions. The rules regarding the quorum shall be determined with respect to the number of members able to adopt decisions, and resolutions shall be adopted with a simple majority. Only one person may adopt decisions, if other members become unable to do so.

If the mandate of an executive officer or another body’s member or the auditor terminates during the course of the state of danger – with the exceptions established in the Decree -, the mandate shall remain in force without a resolution adopted by the decision-making body or by the founder[s], until the 90th day after the end of the state of danger. The executive officer, the member of another body or the auditor shall carry out its tasks until this date at latest.

Making legal statements:

The bodies of the legal person may also send written legal statements (including documents related to the operation of the decision-making body), to the member's e-mail address with a qualified security electronic signature or with a qualified security electronic signature based on a qualified certificate or with an electronic stamp based on a qualified certificate, or - in case of lack of the prior - signed with a document authentication service.

The members may submit their legal statements related to the legal person by e-mail to the legal person. If the member is a legal person itself, the statement shall be signed with a qualified security electronic signature or with a qualified security electronic signature based on a qualified certificate, or - in case of lack of the prior - signed with a document authentication service. If the member is a natural person, its legal statement may not be signed with an electronic signature, although the legal statement must include the data necessary for the identification of the member.

Statements made in electronic messages shall be considered written electronic legal statements.

Special provisions related to public limited companies:

The Decree establishes further special provisions related to state-owned enterprises, private limited-liability companies and limited companies. The special provisions related to public limited companies are summarized below.

Public limited companies shall publish the invitation for the general meeting and proposals related to the matters listed on the agenda with the reports of the supervisory board and the drafts of the resolutions on their website. The management is entitled to adopt decisions in every resolution listed on the agenda and in matters referred to the competence of the management by the Decree – in lack of a supreme body’s decision.

The management of the public limited company shall adopt its decision related to the annual report until 30 April, 2020. At the same time, the management may adopt a decision related to the use of after-tax profit, including dividends.

Within a 30-day preclusive period of the cessation of the state of danger, shareholders holding at least 1 % of voting rights may request that the general meeting to be convened for the subsequent validation of decisions adopted by the management during the state of danger. One exception is established by the Decree from this period: the decision related to the annual report and related to the use of after-tax profit may be validated in a general meeting, in which case the convening of the general meeting may be initiated until 31 May, 2020.

By Zóra Lehoczki, Associate, Nagy és Trócsányi

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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