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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

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa, and Asia Pacific. This positions us to help clients with their legal needs around the world.

With more than 60 lawyers, including 14 partners, and a staff of over 140, DLA Piper Hungary is one of the largest international law firms operating in Hungary. What makes us stand out is that we offer not only legal services but also tax and business advisory support in a fully integrated manner. We maximize synergies between legal, tax, and business advisory services to offer a unique service for our clients, particularly in regulated industries such as energy, infrastructure, life sciences, banking, and telecommunications.

We are a true full-service firm, providing our private and public sector clients with advice on all aspects of their business. This includes transaction-related advice, people and employment, commercial dealings, litigation, information technology, media and communications, intellectual property, insurance, tax, real estate, and restructuring plans.

DLA Piper Hungary has received numerous professional awards and is consistently ranked among the top law firms in Hungary by international rankings. We are ranked #1 by Mergermarket among the law firms active in Hungary based on the volume of M&A deals handled between 2005 and 2024.

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