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Hungary: Introducing the Managing Director Without Representation Rights

Hungary: Introducing the Managing Director Without Representation Rights

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Hungarian law has always permitted shareholders of a company to limit the power of the company's managing director(s). Thus, it has also been allowed to appoint a managing director without any right to represent the company.

However, so far, the limitation on the representation rights of a managing director could not be registered in the Companies Register (other than individual or joint signing authority), and therefore, it could not be regarded as publicly available information. Consequently, the limitation was not valid in respect of third parties.

Based on the most recent amendment to the relevant law, which became effective on 1 July 2018, a new section was added to the Companies Register for the registration of managing directors without representation rights. According to this change, three kinds of representation rights may appear in the Companies Register:

  • individual right of representation; 
  • joint right of representation; and
  • [complete] lack of representation rights.

The change is positive since it enables the Companies Register to properly reflect what has already been the practice especially at large companies (e.g. private companies limited by shares and public limited companies), where the members of the board of directors have often been appointed without representation rights, and solely to serve management purposes during the internal decision-making process of the company.

In order to actually introduce a managing director without signing authority at a company, the shareholders must resolve on the respective amendment to the company's articles of association (or deed of foundation). The amendment must then be filed with and registered by the relevant company court. All these steps require the assistance of a Hungarian licenced attorney at law

By Kinga Hetenyi, Managing Partner, Adrian Menczelesz, Associate, Schoenherr 

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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