This content is from: Local Insights

Hungary

In June 1998, a completely new version of the Act on Company Law Act No. 144/1997 (1997 CXLIV tv a gazdasági társaságokról) will take effect, replacing the old Act No.6/1988. The changes are partly formal, but also of a substantive nature. The new law contains a longer general part, while the special parts are leaner because the repetitive sections on individual company forms have been moved forward into the general part.

The most important company forms continue to be the limited liability company and the joint stock corporation, which have a legal personality, as well as the general partnership and the limited partnership, which do not have a legal personality.

With regard to the general partnership, the partners have unlimited joint and several liability for the debts of the company. As for the limited partnership, the limited partners are liable only up to the amount of their limited partnership interest, and the general partners have unlimited joint and several liability for the debts of the limited partnership. In the limited liability company and the joint stock corporation, the shareholders are liable only up to the amount of their capital contribution.

At the moment, only the statutory provisions on a joint stock corporation are mandatory law. With the new Act, the provisions concerning other corporations also become obligatory.

The minimum capital requirements have also been raised under the new Act. For a limited liability company, the minimum capital is now Ft3 million and for a joint stock corporation it is now Ft20 million.

Representation of a company has been made simpler. Company employees will be given a general power of representation. There is no longer a general requirement under law that two persons are necessary to exercise control over bank accounts.

According to the new Act, a partner or shareholder can be expelled only by court decision. A partner or shareholder who holds at least three-quarters of the votes of the company, or who is active in a two-man company, or who is a shareholder in a joint stock corporation, cannot be expelled from the company.

The supervisory boards of the limited liability company and the joint stock corporation will also be given limited decision-making powers by the articles of association or incorporation, to compliment their existing purely supervisory roles.

The provisions with regard to the joint stock corporation and, above all, the types of shares are more detailed than before.

Antitrust law has also changed. A controlled company can be either a limited company or a joint stock corporation; a controlling company can take any company form. The decisive threshold levels of influence are more than 25%, 50% or 75% of the votes. The law attaches differing legal consequences to influence, accordingly.

A completely revised Act Concerning the Registration of Companies was passed at the same time as the Act on Company Law. Act No. 145/1997 prescribes that companies without legal personality must be registered with a commercial court (Cégbíróság) within 30 days from the date of application, and companies with legal personality must be registered within 60 days. This is intended to avoid registrations taking several months or even years, as has sometimes been the case in Budapest.

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