21 April 2020 – In view of the "state of danger" (in Hungarian: "veszélyhelyzet") the Hungarian Government adopted a Government Decree No. 102/2020. (IV. 10.) (the "Decree") and introduced new corporate law measures to facilitate the decision-making process of the companies in compliance with the curfew restrictions. The new provisions – inter alia - address the following topics:
- Members' Meetings and General Meetings via videoconferences and written resolutions;
- Decision-making by the management in lieu of the shareholders with respect to certain matters;
- Operation of other corporate bodies of the company;
- Communication via electronic means (email).
Scope of the new measures
It is not mandatory to apply the provisions regarding the decision-making process of the new Decree if the decision-making body in question is able to operate in compliance with the curfew restrictions adopted by the Government. It is not clarified by the Decree what shall fall into this category and the related provisions are slightly inconsistent, however we believe this refers to scenarios in which for instance the members of the decision-making body live in the same household or the articles of association of the company includes decision-making process which can be carried out in compliance with the curfew restrictions. Additionally, as was already the case pre-crisis, in case of a sole member company, the sole member or shareholder is entitled to adopt resolutions in writing which are effective towards the company upon the notification of the management on such resolutions.
Members' Meetings and General Meetings via videoconferences and written resolutions
Pursuant to the new rules, a member's meeting or a general meeting shall not be held in a way which would require the personal presence of the members.
To comply with the above, the members' or the general meeting may be held by electronic means of communication or the members may adopt a decision without holding a meeting (written resolution), even if the company's articles of association do not provide for such decision-making or regulates its process otherwise.
In case of companies with 2-5 members where the quorum for decision-making foreseeably could be ensured by the above measures, the meeting must be held electronically (e.g. telephone conference or video conference), or the decision shall be adopted in writing , provided that:
- the terms and process of such decisions shall comply with the provisions stipulated in the Decree
- all members must have the possibility to participate.
Such decision-making processes shall be applied in case of companies with 6-10 members if the majority of members request electronic/written decision-making or, in case of companies with more than 10 members, if the management initiates such process.
Additional mandatory details are set out in the Decree, e.g. the agenda and draft resolution shall be circulated to the members, the members shall be identified etc.
Decision-making by the management
If it is not possible to hold a members' or general meeting by videoconference/telephone conference or make a decision by a written resolution, the management is entitled to decide on (i) the approval of the financial statements and the use of the profit, (ii) certain matters required to maintain the lawful operation of the company or of urgent nature arising in the context of responsible operation.
However, this decision-making competence of the management is limited as it cannot, among other things, amend the articles of association or decrease the registered capital of the company.
Additionally, the management may take decisions referred above only if 51% of the members holding more than 25% of the votes do not object to the proposed resolution in their written opinion prior to the decision. If the company has a member with a majority influence or a qualified majority, the decision may not be made if such member objects it in writing.
Operation of other corporate bodies of the Company
The board of directors, the supervisory board or other body of the company may also hold its meetings via electronic means (i.e. video or telephone conference) or hold a written consultation and adopt its decisions in writing. The Decree explicitly provides that written consultations and decision-making of these bodies can also be done via a simple e-mail exchange.
If the number of the members of one of the company's bodies falls below the number prescribed by law or by the articles of association (e.g. the number of supervisory board members falls below 3), or the member is unable to act due to the COVID-19 epidemic, the other members are entitled to take a decision and the quorum requirements shall be applied to the number of members available.
If the term of office of the executive officer, member of the supervisory board or auditor expires or the person resigns during the state of danger, he or she must remain in his or her position for 90 days after the end of the state of danger and is obliged to perform the related duties, unless a resolution of the members provides otherwise.
Communications via electronic means (email)
Company bodies and the members or shareholders of the company may send written statements to each other by e-mail. Importantly, however, the bodies of the company and the legal person members of the company must sign the written declarations and send the e-mails with a qualified electronic signature, advanced electronic signature based on a qualified certificate or electronic stamp. In the absence thereof, the documents may be authenticated by a document authentication service (in Hungarian: "azonosításra visszavezetett dokumentumhitelesítés szolgáltatás", "AVDH-szolgáltatás"). Such service is also offered by the Government available to all Hungarian citizens on the following website: https://niszavdh.gov.hu/index.
We are happy to provide further information regarding the implementation on the above regulations. The Decree also sets out additional provisions in relation to state-owned entities and public companies, which we are also glad to discuss.
Originally Published 21 April, 2020
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