Shareholders' Rights & Shareholder Activism 2020

Last Updated September 30, 2020


Law and Practice


Oppenheim Law Firm has a corporate and M&A practice that focuses mainly on the energy, manufacturing, financial services, media, private equity and venture-capital sectors. The intensive work of the corporate/M&A practice group contributes to the fact that, according to the recently published financial accounts of Hungarian law firms, Oppenheim is the second-largest law firm by turnover in Hungary, and the largest if international law firms are not considered. One of the main groups of the firm, the M&A practice group, has advised clients on a significant number of flagship transactions in various industries recently, including energy, banking and insurance, manufacturing, IT and media.

The following companies may be formed in Hungary:

  • unlimited partnership (közkereseti társaság, Kkt) is a company consisting of at least two members. The members’ liability is unlimited for the debts of the company. No minimum registered capital requirement exists;
  • limited partnership (betéti társaság, Bt) is a company consisting of at least two members. At least one member’s liability is unlimited for the debts of the company, while at least one other member’s liability is limited to the amount of this member’s capital contribution. A Bt has no minimum registered capital requirement;
  • limited liability company (korlátolt felelősségű társaság, Kft) is a company consisting of one or more members, whose interests in the Kft are represented in the form of business quotas (shares) corresponding to their capital contribution to the company’s registered capital, and expressed as a percentage of the registered capital. The liability of the members is limited to their capital contributions. The minimum registered capital required in respect of a Kft is HUF3,000,000;
  • private company limited by shares (zártkörűen működő részvénytársaság, Zrt) is a company having one or more shareholders, who subscribed to the shares issued in a pre-determined number and nominal value. The members’ participation interests take the form of shares; the liability of the shareholders is limited to providing their capital contribution (the issue value of their shares). The shares of a Zrt cannot be offered to the public. The minimum registered capital requirement of a Zrt is HUF5,000,000;
  • public company limited by shares (nyilvánosan működő részvénytársaság, Nyrt) is a company in which shares representing the company’s registered capital are offered and traded publicly. The minimum registered capital requirement of a Nyrt is HUF20,000,000.

Most companies are founded in the form of Kfts and Zrts. In this chapter, the focus will be on the regulation regarding Kfts, Zrts and Nyrts, due to the fact that unlimited and limited partnerships are economically less significant.

Investment in Companies

Both natural and legal persons may be members of companies.

However, a natural person can be a member having unlimited liability in only one company at a time (meaning, in practice, membership in a Kkt or a Bt). A person under 18 may not be a member with unlimited liability, and a Kkt or a Bt may not be members with unlimited liability in another Kkt or Bt. A person may be also restricted from being a member of a company – except for holding shares in an Nyrt – by the court, due to a criminal punishment.

A person becomes a shareholder by acquiring shares in a company by way of establishing a new company, or by acquiring shares or subscribing to new shares in an existing company. The membership in a company is constituted by the acquisition of the shares in the company. In Kfts, shareholders’ rights can be exercised after the company has been notified of such an acquisition; the registration by the director in the members’ list is not necessary for this purpose. However, in the case of Nyrts and Zrts, registry in the book of shares is also necessary in order to exercise the shareholders’ rights.

Screening of Foreign Investors

Measures screening foreign investments were introduced in January 2019 in Hungary. Under the relevant act, ministerial approval is necessary for the following transactions:

  • the investor qualifies as a foreign investor;
  • the relevant transaction relates to certain specific strategic sectors defined by the law; and
  • the relevant transaction qualifies as a triggering event.

These rules are relevant for natural or legal persons acting as direct investors, or indirect investors, holding a majority control in the investing company, who are registered or are resident outside the European Economic Area or Switzerland.

The law is only applicable if the current or planned activities of the Hungarian target company relate to certain strategic sectors as listed by the law. These include activities typically relevant to national security (eg, defence, dual-use products, cryptography and wire-tapping products), or government IT services, as well as key services in the financial, energy and telecoms sectors.

The law is applicable if any of the following triggering events occur:

  • if in an existing Hungarian company;
    1. a foreign investor acquires, solely or together with other foreign investor(s), a direct or indirect participation interest exceeding 25% (10% in the case of Nyrts);
    2. a foreign investor acquires, solely or together with other foreign investor(s), a dominant influence as defined by the Hungarian civil law; or
    3. a foreign investor whose ownership share already exceeds 25% wishes to extend the scope of activities of the company to the listed strategic activities;
  • if a foreign investor establishes a new Hungarian company, in which the participation interest of the foreign investor would exceed 25 % (10% for Nyrts); or
  • if a foreign investor registers for the purpose of carrying out the listed strategic activities a branch office in Hungary.

The minister shall be notified before the implementation of such transactions. He or she is entitled to block such a transaction if it “harms Hungary’s security interests”. This blocking decision may not be challenged before the Hungarian courts on substantive grounds (ie, questioning whether the transaction indeed has “harming” effects), only on the grounds of a serious procedural breach.

Within the framework of emergency measures resulting from the pandemic, the Hungarian government introduced changes to the aforementioned foreign investment screening rules, significantly extending the material scope of the relevant transactions requiring ministerial approval. These measures were effective from 26 May 2020 (ie, with regard to all transactions concluded from that date) until the termination of the emergency on 18 June 2020. However, depending on the pandemic, similar measures might be introduced again.

Regulation Regarding Kfts

In Kfts, members have business quotas, which usually correspond to their capital contribution. Generally, all members are entitled to the same rights and obligations. Those rights and obligations are usually proportionate to their quotas. However, members may deviate from this general rule in the articles of association, and are free to set out their rights and obligations as they see fit by mutual consent, with a few restrictions provided by the law. For further details, see 1.4 Main Shareholders’ Rights.

Regulation Regarding Zrts

In Zrts, various types of shares may be issued:

  • ordinary shares to which all main shareholders’ rights pertain;
  • preference shares that give certain advantages vis-à-vis other shares and may include different classes according to the shareholders’ rights to which the preference pertains; this preference may exist relating to one or more of the following:
    1. to dividends;
    2. to participation in remaining assets following liquidation;
    3. to voting rights;
    4. to the appointment of board or supervisory board members; or
    5. to pre-emption rights in relation to the transfer of shares;
  • employee shares issued to employees of the company without or for discounted consideration;
  • interest-bearing shares, the holders of which are entitled to an interest calculated from the untied retained earnings supplemented by the previous financial year’s after-tax profit;
  • redeemable shares that grant:
    1. the company the right to purchase the shares; or
    2. the shareholders the right to sell the shares; or
    3. the right to purchase for the company, and the right to sell for the shareholder;
  • other types of shares not listed here may be specified and set out in detail in the articles of association.

There are also certain legal restrictions on how high a percentage of the company’s share capital a certain type of share can constitute.

Shares may be printed or issued in dematerialised forms.

Regulation Regarding Nyrts

Unlike the Zrt, in a Nyrt it is not allowed to issue certain types of preference shares, and further restrictions apply to the preference shares that may be issued.

These restrictions include the following:

  • voting rights attached to a preference share ensuring priority voting rights may not exceed the voting rights corresponding to the face value of the share by a factor of ten;
  • no preference shares ensuring priority rights with regard to the appointment of members of the board of directors or supervisory board may be issued;
  • no preference shares providing pre-emption rights may be issued.

If any of these types of shares were issued in a Zrt that wishes to enter the stock market and, therefore, become a Nyrt, these shares must be converted to ordinary shares or to the types of preferential shares that may be issued by a Nyrt.

Shares may be issued only in dematerialised form.

The primary sources of law and regulation relevant to shareholders’ rights are the Civil Code (the general source of corporate law), the Act on Public Company Information, the Company Registration and Winding-up Procedure Act (mainly prescribing the registration of companies and their voluntary dissolution), the Bankruptcy Act (setting out the rules on liquidation), the Accounting Act (determining the accounting rules), the Act on Capital Markets (related to shares and their private and public offering), the Act on the Interim Rules relating to the Pandemic (setting out rules to be applied until 31 December 2020 due to the COVID-19 pandemic), the Act on Screening of Foreign Investments.

Furthermore, government decrees were issued during the pandemic (eg, regarding the screening of foreign investors, or the scope of competence of the directors), which are currently rendered ineffective. Although they are ineffective, consequences relevant for the present may result from activities done under their scope.

Main Rights Common to All Shareholders

The main rights common to all shareholders are:

  • participation in the decision-making of the company relating to essential business and personal matters via the shareholders’ meeting (voting rights);
  • the right to access to information relating to the company;
  • dividend rights;
  • a decision on enforcing a claim of damages vis-à-vis the director, the member of the supervisory board, or the auditor.

Variation of Shareholders’ Rights

It is possible to vary the shareholders’ rights, either in a shareholders' agreement or in the articles of association. However, variations included only in a shareholders’ agreement and not in the articles of associations, are not effective vis-à-vis third persons.

Hungarian regulation provides significant freedom to the shareholders in respect to alteration of shareholders’ rights (as well as in relation to variations from the structure of a company pre-set by the law) in the articles of association, in so far as all variations are allowed, except:

  • if the law explicitly forbids it; or
  • if the derogation from the law clearly violates the interests of the company’s:
    1. creditors;
    2. employees; or
    3. minority members; or
  • if it is likely to prevent the effective legal supervision over the company.

An explicit prohibition by the law is, for example, that no shareholder may be fully excluded from participation in the profits or the burden of losses in a company.

Shareholders’ agreements/joint-venture agreements are enforceable in Hungary with the limitations set out below. It is common to enter into such agreements.

A shareholders’ agreement is not disclosed to the public, and is binding only between its participants. Any breach of the agreement may result in consequences set out therein (eg, payment of a penalty) or in a legal dispute between the parties; however, the breaching act still remains valid vis-à-vis third parties.

In order to render the rules of the shareholders’ agreement binding in relation to third persons, the contracting parties must include it in the company’s articles of association, which also renders such rules public knowledge. Therefore, the shareholders usually conclude a shareholders’ agreement and (to ensure the enforcement of such rules vis-à-vis third persons) incorporate its rules into the articles of association, which they deem absolutely necessary and are willing to make public.

General Majority Rules

Regarding general majority rules, see 1.8 Shareholder Approval.

Minority Rights

The minority of shareholders holding separately or jointly at least 5% of the voting rights in a company’s shareholders’ meeting (or 1% of the votes in the case of Nyrts) may:

  • request that the director call a shareholders’ meeting by indicating its reason and aim. The director shall convene the shareholders’ meeting at the earliest possible date. Should the director fail to comply with this request within eight days of receiving this request, the shareholders in question may apply to the court, and the court may call the shareholders’ meeting or may authorise the requesting shareholders to call the meeting themselves;
  • request that the court of registry appoint an auditor if the shareholders’ meeting does not approve the proposal or fails to adopt a resolution regarding the appointment of an auditor in order to examine the last financial report of the company, or any act of the director of the company taking place within the last two years;
  • initiate a proceeding themselves in the name of the company, if the shareholders’ meeting does not approve the proposal or fails to adopt a resolution regarding the enforcement by the company of a claim against the director, the supervisory board members or the auditor of the company;
  • propose new items to the agenda of the shareholders’ meeting, and the meeting shall discuss those agenda items. For further details see 1.9 Calling Shareholders’ Meetings;
  • within one year of a payment, request that the court appoint an auditor, who will examine the relevant payment made by the company from its equity to the shareholders.

Right to Propose the Formation of a Supervisory Board

If the shareholders holding at least 5% of the votes so request, a supervisory board shall be formed in Zrts. (Supervisory boards are obligatory in Nyrts and optional in Kfts).

Obligation of Qualified Shareholders to Purchase Shares

Should a shareholder of a Kft or Zrt – directly or indirectly – acquire more than three quarters of the votes, the court shall be given notice of the acquisition of this qualified majority. Within 60 days of the publication of that qualified majority by the court, any minority shareholder of the company may request the shareholder who has the qualified majority to purchase the minority shareholder’s participation interest in the company at market value, which value may not be lower than the value these shares represent in the company’s equity.

Takeover Bids in Nyrts

It is possible to make takeover bids in Nyrts on a voluntary or obligatory basis. An obligatory takeover bid shall be made by the acquirer prior to:

  • acquiring a shareholding which will result in the acquirer holding at least a 25% influence – as defined by the law – in a Nyrt, if no other shareholder holds more than a 10% influence in the company;
  • acquiring a shareholding which will result in the acquirer holding an influence of more than 33% in the company.

Within the takeover bid, the acquiring shareholder shall make an offer to purchase the shares of all other shareholders, which offer shall be approved by the respective authority and be sent to and then published by the board of directors.

The other shareholders are entitled to accept this purchase offer within the period set out by the offer (which must be at least 30 days and a maximum of 65 days). The purchase price shall be determined according to the rules defined by the law.

The articles of association of a Nyrt may prescribe that, if as a result of the bid the offeror were to hold at least 75% of the shares to which voting rights are attached, the offeror would be entitled to convene a shareholders’ meeting in order to amend the articles of association or to remove or appoint board members and supervisory board members.

General Rules

Companies shall publish their annual financial reports to the public.

Beyond that, if required by any shareholder, irrespective of the amount of their participation interest, the director shall provide the shareholder with information regarding the operations of the company and allow access to the books and documents of the company. The director may request a written non-disclosure agreement before giving this information or providing access, and may refuse to provide information and/or access:

  • if this would violate the company’s trade secrets;
  • if the requesting shareholder exercises its information right in an abusive manner; or
  • if the shareholder refuses to sign a non-disclosure agreement despite the director’s request.

Further Disclosure Requirements in Respect of Nyrts

Generally, Nyrts shall disclose essential details to the public on a regular basis regarding their financial position and the general course of their business via publishing a half-yearly report and an annual report.

Nyrts shall also provide extraordinary disclosure of information to the public without delay or within the following business day regarding any information that concerns, directly or indirectly, the value or yield of their securities issue, and which may have any bearing on the reputation of the issuer. Nyrts shall also notify the public according to the above, if they receive notice from any shareholder on their acquisition of a certain participation interest (see 1.14 Disclosure of Shareholders’ Interests in the Company).

Decision-Making Levels

Decisions relating to the company are resolved at two levels. The shareholders decide essential strategic, business and personal matters via the shareholders’ meeting. The management (comprised of one or more managing directors in the case of a Kft or of a board of directors/a sole director in the case of a Zrt or Nyrt) decides in all matters not specifically referred to the competence of the shareholders by the law or the articles of association. The latter generally includes operative issues.

In addition to the above, further corporate positions or bodies may be created at a company, to which certain powers of the shareholders’ meeting and/or of the management may be delegated.

The shareholders are not entitled to instruct the management or to limit the management’s competence on an ad hoc basis. The management’s competence may only be limited by setting out any such limitation in the articles of association. This rule does not apply if the company is owned by a sole shareholder, who is entitled to instruct the management on any matter.

Matters Requiring Approval

Besides the list set out under the heading “Main rights common to all shareholders” in 1.4 Main Shareholders’ Rights, the following matters also require the shareholders’ approval:

  • merger and demerger;
  • termination;
  • increase or decrease of registered capital;
  • modifying the company’s articles of association;
  • approval of acquisition of shares in the company by a third person (if applicable), purchasing the shares in the company to be offered to a third person or designating another third person to purchase (if applicable);
  • appointment and dismissal of the management, the auditor and the members of the supervisory board (if applicable).

The company’s articles of association in Kfts or Zrts may set out that the shares of the company can be transferred to a third person only with the company’s consent, or that the company is entitled to a pre-emption right, which is to be exercised by the company itself or by a designated third person (for further details see 1.15 Shareholders’ Rights to Grant Security over/Dispose of Shares).

The articles of association may also determine further issues, in the case of which the pre-approval of the shareholders’ meeting is necessary.

Special Matters in Certain Company Forms

In addition to the foregoing, in Kfts the shareholders’ meeting shall approve contracts concluded by the company and one of its shareholders, its director, a supervisory board member, an auditor, or their close relatives.

Also, if in a Kft a shareholder wishes to transfer its share to two or more separate persons or if it wishes to retain a part of its share, that share needs to be divided (for further details see 1.15 Shareholders’ Rights to Grant Security over/Dispose of Shares).

In Nyrts, the shareholders’ meeting shall put the remuneration policy and the remuneration report of the directors to an advisory vote.

In Nyrts and Zrts, rights attached to a certain series of shares may be detrimentally altered only if the shareholders who hold shares in the given series specifically consent to the change. This approval is also necessary if a capital increase in the company would affect the rights attached to certain shares.

In Nyrts, the prior consent of the shareholders’ meeting is required for the transfer of assets, to be concluded within two years from the company’s registration between the company and its shareholders, if the value of the consideration to be provided by the company reaches one tenth of its share capital.

Further Requirements Set Out by the Shareholders’ Agreement

A shareholder agreement may also set out that a certain majority is necessary for rendering a decision, or an investor might veto a certain decision without incorporating that requirement into the articles. In this case, the contracting parties shall comply with any such requirements under the contract, and not doing so will be a breach of contract. However, unless those requirements are incorporated in the company’s articles of association, these breaching decisions are still valid under corporate law.

Interim Changes Caused by the Pandemic

Due to the emergency situation caused by the pandemic, interim rules on the governance of companies were introduced, commencing on 18 April 2020 and ending on 18 June 2020. Some interim rules also apply until 31 December 2020. Due to the fact that the second wave of the pandemic is currently building up in Hungary, it is plausible that all interim rules will be re-introduced.

Under the interim rules applied until June 18th, the directors were entitled to decide on matters that otherwise belong in the competence of the shareholders (eg, decisions on payment of dividends, decisions necessary to operate the company and manage the situation caused by the pandemic) with the condition that such decisions shall be approved within 90 days of the day the emergency ceases to exist.

Person Responsible for Calling a Meeting

Generally, the directors are responsible for calling a shareholders’ meeting. Nevertheless, it is also a minority right of the shareholders to call a meeting (in this respect, see 1.6 Rights Dependent Upon Percentage of Shares).

Invitation and Agenda

The director shall call the meeting by sending out an invitation including the date and place of the meeting, as well as its agenda. The agenda shall include sufficient detail to enable the shareholders to formulate an opinion on the subjects to be discussed. Additionally, in Nyrts the wording of the proposed resolutions and the original and whole documents to be disclosed to the shareholders’ meeting, as well as the reports of the supervisory board on the respective matters, shall be accessible by the shareholders. In Kfts and Zrts, this invitation shall be sent at least 15 days in advance, and in Nyrts it shall be published on the company’s website at least 30 days in advance.

Proposing New Agenda Items

Shareholders may propose new items to the agenda, provided that this proposal includes sufficient detail to enable the other shareholders to formulate their opinion on the matter.

In Kfts, any shareholder may propose a new agenda item by sending this proposal at least three days in advance of the meeting to the other shareholders and the directors.

In Zrts, shareholder(s) holding jointly at least 5% of the votes are entitled to propose new agenda items by sending the proposal to the board and the other shareholders within eight days of receiving the invitation.

In Nyrts, shareholder(s) holding jointly at least 1% of the votes may also exercise this right by sending the proposal to the board within eight days of when of the invitation was published. In this case, the invitation shall be re-published by the company with the new agenda item included.

Shareholders’ Meeting

The shareholders’ meeting often makes its resolutions at a session, ie, a physical meeting of the shareholders. However, it is also possible to resolve on issues in writing, or to hold a virtual meeting (see below), which possibilities have been frequently used during the pandemic. Generally, both options are allowed, if included in the articles of association. However, according to the interim rules to be applied in course of the pandemic (currently until 31 December 2020, but it may be prolonged, depending on the situation) the shareholders’ meeting may pass resolutions in writing or at a virtual meeting without them being allowed in the articles of association, provided that the articles of association do not specifically exclude such options.

Resolution in Writing

A resolution in writing may be initiated by the directors by sending the draft of the resolution to the shareholders. They shall be given at least eight days from the time of receipt to send their vote to the management. This vote may be sent via post or via mail or electronically (for the latter, see details below). The general rules of quorum and voting majorities apply. The directors determine the outcome of the voting within three days after the receipt of all votes (or after the deadline for casting votes has expired), and shall convey the results in writing to the shareholders within an additional three days.

Resolutions may not be rendered in writing in Nyrts.

Virtual Meeting

Shareholders can also hold a virtual shareholders’ meeting by means of electronic communication instead of attending in person, if the articles of association define the electronic communications equipment that allows the identification of the shareholder, as well as the mutual and unrestricted communication between them. (During the pandemic, but at least until 31 December 2020, this is also possible without the above being included in the articles, unless the articles specifically exclude this way of making resolutions.) The virtual meeting and the resolutions rendered therein shall be recorded in a way that may be inspected later, and the directors shall prepare minutes thereof.

The rules of a virtual meeting are set out in detail by the law in the case of Zrts and Nyrts. These include that the shareholders may decide whether they wish to participate in person or virtually, and shall indicate their decision to the management five days in advance. No virtual meeting may be held if the shareholders holding at least 5% of the voting rights object.

Electronic Communication

Shareholders may communicate with the company and the company may communicate with the shareholders via e-mail if incorporated into the articles of association, or even without any such specific rule in the articles, according to the interim rules to be applied during the course of the pandemic. Such communication must include an electronic authorised signature, except in the case of private persons, who may send a simple e-mail, provided that their identification data are included.

Majority Requirements

As a general rule, the decisions pertaining to the company require the simple majority (50% of the votes + one vote) of the shareholders. According to the law, significant decisions, eg, changing the company form, termination of the company, capital increase of the company, modification of the company’s articles of association, require a qualified majority of three quarters of the shareholders present. Nevertheless, the company’s articles of association may specify other matters which require a qualified majority of three quarters of the votes.


Generally, a quorum is present when more than one half of the total votes are present or represented. All members and shareholders are entitled to vote, with some exceptions as defined in the Civil Code; for example, the company in respect of its own shares or the shareholders who are affected by the given resolution are not allowed to vote, and those shall not be calculated when establishing the quorum for the relevant decision. In Zrts and Nyrts, voting rights may not be attached to certain types or classes of shares. Naturally, in the articles of association, the shareholders may specify stricter rules for a shareholders’ meeting to have a quorum of certain matters. Quorum requirements may also include the presence of a certain shareholder.

If no quorum exists, a new shareholders’ meeting shall be called, which (unless otherwise regulated in the articles of association) shall have quorum with regard to the original agenda items, irrespective of the number of votes present. This new shareholders’ meeting shall be held within three to 15 days in the case of Kfts, three to 21 days in the case of Zrts and ten to 21 days in the case of Nyrts.

Voting Electronically or in Writing

Shareholders are entitled to vote electronically or in writing; for details of the procedure see 1.9 Calling Shareholders’ Meetings.

Shareholders’ Proposals

Shareholders have a right to require that a specific issue be considered, or a specific proposal for resolution be put forward at a shareholders’ meeting. Shareholders may propose items to the agenda (see the applicable rules in 1.9 Calling Shareholders’ Meetings).

Generally, shareholders may not instruct the management, as described in 1.8 Shareholder Approval.

However, a shareholder may also act as a director in the company, if elected by the shareholders’ meeting. Moreover, legal-person shareholders may also be directors, in so far as the natural person fulfilling this role in person on behalf of the legal person shall also be designated.

There is one partial exception, namely, more than half of the members of the management board (igazgatótanács), incorporating both the functions of the management and the supervisory board in the case of an Nyrt shall be independent persons. In this case, a shareholder who has – directly or indirectly – at least 30% of the votes does not count as an independent member.

Appointment of Directors

The directors (managing directors in Kfts, members of the board of directors or CEO in the case of Zrts) are elected and removed by the shareholders’ meeting.

Although this decision requires a simple majority of the votes, the articles of association may require a greater majority. In Zrts, priority rights with regard to appointing and removing members of the board of directors may pertain to preferential shares issued by the company. This is, however, prohibited in Nyrts.

When a board of directors is appointed, this operates as set out in its by-laws, which are usually determined by the shareholders’ meeting. Its members elect one of their members as the chairman of the board.

Removal of Directors

Directors may be removed at any time without any reasoning via a resolution rendered by the shareholders’ meeting.

Directors can be elected either for a definite term, or for an indefinite term (as set out in the articles of association of the company).

Challenging Directors

Directors shall manage the company in accordance with the laws, the articles of association and the resolutions of the shareholders’ meeting, along the statutory requirements of prioritising the interests of the company. Generally, the directors may not be instructed by the shareholders (with the exception of solely owned companies).

A shareholder may challenge the resolution of the director by requesting the court to annul the decision, if in the shareholder’s opinion the decision breaches the law or the articles of association. This action may be brought against the company for the annulment of the resolution within 30 days after the time when the shareholders had become, or could be expected to have become, aware of the decision. No action may be brought after a preclusive period of one year from the date of the resolution. No action may be brought by a shareholder who contributed to the adoption of the resolution with its vote, unless the shareholder voted this way due to a mistake, misrepresentation or duress. This action does not automatically suspend the enforcement of the challenged resolution; suspension of enforcement must be requested separately.

Directors are liable towards the company for the breach of their legal obligations as a director. Generally, the shareholders’ meeting decides on the enforcement of such claims, but it may also be initiated by the minority of the shareholders (for detailed rules see 1.6 Rights Dependent Upon Percentage of Shares).

Should a Kft have more than one managing director, they may handle management issues independently. However, they may object to the planned or executed actions of any other managing director. This objection shall be decided by the shareholders’ meeting, and the planned measure cannot be carried out pending that decision.

The shareholders’ meeting is entitled to appoint and remove the auditor.

An auditor can be appointed for a definite term of up to five years. An auditor may be appointed for the minimum term of a period commencing with appointment and lasting until the date of the meeting of the shareholders’ meeting approving the next annual report.

In addition to appointing and removing the ordinary auditor, minority rights also pertain to requesting the appointment by the court of a special auditor to examine a certain event or period in the life of the company (for detailed rules, see 1.6 Rights Dependent Upon Percentage of Shares).

The form of the company determines whether and at what ownership level the shareholders’ interest shall be disclosed.

Rules on Kfts

In Kfts, the online and publicly accessible company register indicates all shareholders, irrespective of their ownership level. The change of ownership shall be registered and publicly disclosed.

The percentage of ownership is indicated in the members’ list and may be indicated in the articles, which are also publicly available by electronic means.

Rules on Zrts and Nyrts

In Zrts and Nyrts, shareholders are generally not disclosed in the company register. Nevertheless, shareholders holding more than 50% or at least 75% of the votes are publicly disclosed and registered as having that voting right in the company after acquiring this portion of interest.

Also, the book of shares includes all shareholders exercising shareholders’ rights in the company. This, in turn, is publicly accessible and may be inspected by any third person at the registered seat of the company.

Moreover, the court of registration requested in a recent case that the Zrt’s shareholders – irrespective of the level of their shareholding – are to be indicated and updated in the articles of association upon the amendment of this document. This would result in revealing the identity of the shareholders, since the articles of association submitted to the court of registry are available to the public by electronic means.

In Nyrts, special disclosure obligations apply. Namely, shareholders of a Nyrt shall notify the company, as well as the Hungarian National Bank acting as supervisory authority, should the shareholders’ voting rights – directly or indirectly – reach, exceed or fall below the following ratios: 5%, 10%, 15%, 20%, 25%, 30%, 35%, 40%, 45%, 50%, 75%, 80%, 85%, 90%, 91%, 92%, 93%, 94%, 95%, 96%, 97%, 98%, 99%. Moreover, the company shall notify the Hungarian National Bank if it receives any such shareholder’s notice, and shall also publish that notice. Specific requirements regarding disclosure are applicable to the process of acquiring participation via a public takeover bid.

The regulation on granting security and disposing of shares differs in the case of Kfts and Zrts/Nyrts.

Regulation in Kfts

The disposal of shares (called business quotas) is usually restricted, in the event that they are sold to third persons. In this case, the other shareholders, the company, as well as a third person designated by the company – in this order – have a pre-emption right regarding the quota to be sold. The other shareholders are entitled to exercise their pre-emption right in proportion to their existing participation interest in the company. The shareholders’ meeting decides on whether the company shall exercise the pre-emption right by the company or designate a third person. The selling shareholder is not entitled to participate in this vote.

The articles of association may also prescribe that the transfer of the shares to a third person is to be first approved by the company, which approval shall be given by the shareholders’ meeting – again, without the vote of the selling shareholder.

Furthermore, if a shareholder wishes to transfer its share to two or more separate persons or if it wishes to retain a part of its share and transfer another part, that share needs to be divided. This division is approved by the shareholders’ meeting, where the dividing shareholder cannot vote.

Therefore, the other (non-transferring and non-dividing) shareholders actually allow or reject the transfer to third persons and the division of business quotas.

Although the transfer among shareholders is not restricted by the law, in the articles of association a pre-emption right may also be established for this case.

Also, further transfer restrictions or restrictions to grant security over the shares may be agreed in the articles of association. Such restrictions shall be included in the articles of association, and also be indicated in the list of shareholders, in order to be enforceable vis-à-vis the company and third parties. If the shareholders’ agreement includes such restrictions or securities, but the shareholders do not wish to make it public by including it in the articles of association, they may set out contractual obligations for the shareholders, prescribing them to vote in a certain way in the shareholders’ meeting, should such an occasion arise.

Shareholders are also entitled to grant security interests over their shares by a separate agreement, but the aforementioned restrictions shall be taken into account.

Regulation in Zrts and Nyrts

Shares in Zrts are not publicly offered, while in Nyrts they are sold over the stock market.

If the transfer of shares is limited or subject to the company’s approval according to the articles of association, these restrictions shall apply in dealings with third parties if the restriction, including the details, is clearly indicated in the printed share, or in the securities account in the case of dematerialised shares. The articles shall specify the circumstances under which such approval may be refused. The approval shall be given by the board of directors. If the board fails to respond within 30 days, the consent shall be considered to have been granted. Such a limitation is allowed by the law, both in case of Nyrts and Zrts, although in the case of Nyrts this is usually prohibited by the rules of the given stock market.

Shareholders may also grant securities over their shares under a separate agreement, but any such pre-emption rights, redemption rights or purchase options are only valid vis-à-vis the company or third parties, if this security is clearly indicated in the printed share, or in the securities account in the case of dematerialised shares.

The shareholders’ rights in this area have not changed as a result of the pandemic.

Director’s Duties in the Case of Insolvency

The directors are obliged to call a shareholders’ meeting, if the company is threatened by imminent insolvency (ie, if it becomes apparent to the director that the company’s financial obligations cannot be satisfied on time) or has stopped its payments. In this case, the shareholders’ meeting shall decide on how to solve the financial problem (eg, by providing further capital contributions), or may decide on the merger or dissolution of the company.

Moreover, in a threatening insolvency situation, the director’s general obligation to focus on the interests of the company is supplemented with the obligation also to take into consideration the interests of the company’s creditors (ie, preserving as many liquidation assets as possible, collecting receivables and cutting costs). Should the director fail to comply with this obligation, this results in so-called wrongful trading and the director may be held personally liable to the company's creditors.

Possible Scenarios

If the company is solvent, the company may be terminated by way of a voluntary dissolution resolved by the shareholders’ meeting.

If the company is insolvent, the shareholders’ meeting may decide on the commencement of the liquidation procedure, resulting in the termination of the company and the satisfaction of the creditors. Should the shareholders’ meeting not approve this decision, a single shareholder – if it is also a creditor to the company – may also initiate this proceeding in its role as creditor.

It is also possible for the company to initiate a bankruptcy proceeding, in which the company is granted a payment moratorium in order to seek an arrangement with its creditors. This procedure is initiated by the directors but requires the pre-approval of the shareholders’ meeting.

Participation in Remaining Assets

The liquidator satisfies, during the course of the liquidation process, the creditor’s claims in the statutory order:

  • claims secured by pledge;
  • liquidation costs;
  • alimony and life-annuity payments, compensation benefits, and similar claims;
  • claims of private individuals not originating from economic activities (eg, claims resulting from insufficient performance), claims of small and micro companies and small-scale agricultural producers;
  • debts owed to social security funds, taxes;
  • other claims;
  • default interests and late charges, as well as penalty and similar debts;
  • claims, other than wages under a certain limit, held by:
    1. any shareholder with majority control;
    2. any director, executive employee;
    3. family members of the persons previously listed;
    4. a company under the debtor’s majority control;
    5. a person benefiting from the debtor’s gratuitous commitments.

As is apparent from the above, the company’s debts vis-à-vis the shareholders that have majority control (eg, shareholder’s loan) are to be paid last.

The company’s assets remaining after settlement of all debts, if any, shall be allocated to the shareholders proportionally to the capital contribution they provided. Persons holding preferential shares may have priority rights regarding the participation in the remaining assets.

Shareholders’ Liabilities

Generally, the shareholders of Kfts, Zrts and Nyrts shall be held liable up to their respective capital contribution represented by shares (or business quotas) for the debts of the dissolved company. Nevertheless, this corporate veil may be pierced in certain special cases.

However, if a shareholder abuses its limited liability, and as a result any outstanding creditors’ claim remains unsatisfied following the liquidation, the shareholders in question shall be subject to unlimited liability for such debts. This liability shall apply, in particular, if that shareholder disposed over the assets of the company as if they were its own, or if the shareholder reduced the assets of the company for the benefit of others or their own in a way that they knew, or should have known with due care, that the company would not be able to satisfy its obligations towards third parties as a result thereof.

Furthermore, if a shareholder of a Kft or a Zrt - directly or indirectly - controls at least three quarters of the votes, this shareholder is obliged to satisfy the creditors’ claims remaining unsatisfied after liquidation of the company. This only applies if the liquidation was due to poor business decisions made by the majority shareholder.

The foregoing liability of majority shareholders also applies if they transferred their shares within three years immediately before the commencement of a liquidation, and if the debts of the company under liquidation exceed 50% of its registered capital (which is easily reached as the registered capital requirements are quite low – see 1.1 Types of Company). This obligation may be avoided if the shareholder in question verifies that the company was still solvent at the time of the transfer, or even if it was insolvent, that the transferring shareholder proceeded in good faith, taking the creditors’ interests into consideration.

The same law applies to shareholder activism, as listed under 1.3 Primary Sources of Law and Regulation.

As a general rule – also applying to shareholder activism – the law states that rights may not be abusively exercised. This rule specifically appears in the regulation on requesting access to information (see 1.7 Access to Documents and Information).

If a shareholder takes an action which also includes passing a resolution that harms the company, the company may sue for damages. A shareholder (except for one shareholder of a total of two shareholders in the company, and a shareholder having a qualified majority in the company) may also be excluded from the company, if its membership significantly jeopardises the objective of the company (see 3.4 Legal Remedies Against Other Shareholders).

Also, shareholders affected by a certain decision may not vote while rendering the decision of the shareholders’ meeting, which might also decrease the chances of the activist. The following shareholders qualify as affected:

  • any person for whom the resolution contains an exemption from any obligation or responsibility, or for whom any advantage is to be provided by the company;
  • any person with whom an agreement is to be concluded according to the resolution;
  • any person against whom legal proceedings are to be initiated according to the resolution;
  • any person whose family member – who is not a shareholder of the company –has a vested interest in the decision;
  • any person who maintains any relationship on the basis of majority control with an organisation that has a vested interest in the decision; or
  • any person who himself or herself has a vested interest in the decision.

Shareholder activism does not have significant momentum in Hungary.

Nevertheless, there are cases where groups of minor shareholders of Nyrts intend to solicit information from the company, to influence the decision-making process of the concerned companies, or to challenge certain decision of the management board, supervisory board or general assembly.

As shareholders’ activism is relatively rare in Hungary, there are no strategies or agendas specific to this jurisdiction. Consequently, there were also no changes due to the pandemic.

Theoretically, the agenda of activist shareholders may be divided into two categories: financial and non-financial. Financial agendas may, eg, aim to increase the value of shares through changes in corporate policy or in the company’s financial structure, or may aim to maximise profits by cutting costs. Non-financial agendas may, eg, aim to encourage domestic investments.

Also, theoretically, activist shareholders may – among others – use the following tools/strategies:

  • request information from the directors;
  • make use of minority rights listed under 1.6 Rights Dependent Upon Percentage of Shares;
  • make proposals to be discussed by the shareholders’ meeting;
  • contact the board or other shareholders privately in order to establish a common agenda.

As shareholders’ activism is not common in Hungary, no targeted industries or sectors can be listed. Theoretically, the tools available to activist shareholders may be applied in companies of any size (although they may differ due to the form of the company in question).

Financial investors are more active than other types of shareholders, and use the options provided by the law more consciously and effectively in order to reach their goals.

Due to the emergency situation caused by the pandemic, interim rules have been applied and still apply on the governance of companies broadening the management's rights for an interim period (for further details see 1.8 Shareholder Approval).

In 2020, it has also been difficult for activist shareholders to pursue other means, as the activities of the courts were also suspended for a period, and a partial curfew applied, hindering meetings in person.

Consequently, shareholders’ demands could theoretically have been met less often in 2020 than usual due to the pandemic.

However, if a company has been in need of additional financials, which may not be rare due to the economic effects of the pandemic, financing shareholders may be in a better position to discuss their agenda and/or make achievements with their shareholder activism.

Companies are expected to deal with shareholder activism on the basis of applicable laws and with due respect to the equality of shareholder rights. Nevertheless, business negotiations and the conciliation of interests may also be of relevance in this respect.

Generally, directors are obliged to focus on the interests of the company (or in certain cases the interests of the creditors – see 1.16 Shareholders’ Rights in the Event of Liquidation/Insolvency). However, the interests of the company do not necessarily mirror the interests of its shareholders. Also, directors may not be instructed by the shareholders, or have their competence interfered with by the shareholders, with certain exceptions (see 1.8 Shareholder Approval).

Therefore, the directors must consider the foregoing while responding to shareholder activism and may, as a result, comply or not comply with the activist’s goals. If the directors decide not to comply, this may result in the shareholder seeking different remedies, as set out in 3 Remedies Available to Shareholders, or challenging the directors' decision, as set out in 1.12 Shareholders’ Rights to Appoint/Remove/Challenge Directors.

In Hungary, companies have a separate legal personality distinct from their shareholders, and the shareholders’ liabilities with regard to the company are, in the case of the Kft, Zrt and Nyrt, generally limited to their contribution paid to the company. Nevertheless, the corporate veil may be pierced, ie, the shareholders’ liability may turn unlimited, under special circumstances involving the wrong-doing of the shareholders (see 1.16 Shareholders’ Rights in the Event of Liquidation/Insolvency).

Shareholders’ liability is unlimited in the case of certain, economically less significant types of company (see 1.1 Types of Company).

Challenging Decisions of the Company’s Bodies

All shareholders may challenge the validity of a resolution of the shareholders’ meeting, the management or the supervisory board of a company, if the resolution violates the law or the articles of association (provided that the challenging shareholder did not approve the given resolution with its vote). This type of action may be initiated within 30 days of having become aware of the resolution, but no later than one year following the day the resolution was rendered.

Challenging Registration in the Companies Registry

If a change affecting the shareholder is registered in the companies registry based on unlawful documents, the affected shareholder may initiate a claim against the company for annulment of the change. This may be initiated within 30 days of publication of the change.

Claim for Providing Information

If the director unlawfully prohibits the shareholder’s access to the company’s documents and related information (for further details see 1.7 Access to Documents and Information), the shareholder may request that the court oblige the company to provide such access.

Claim for Dividend

The shareholder may also enforce its claim for dividends vis-à-vis the company, if it is legally entitled to such dividends, based on the shareholders resolution.

The directors and other officers such as supervisory board members may be held liable in certain cases vis-à-vis the shareholders or the company’s creditors, or even the company itself.

Liability vis-à-vis the Company

Firstly, the director may be held liable vis-à-vis the company for the damages caused to the company through the breach of his or her managerial duties. The shareholders’ meeting decides whether to enforce this claim and to initiate a legal proceeding. The initiation is also available as a minority right (see 1.6 Rights Dependent Upon Percentage of Shares).

Liability vis-à-vis the Shareholders

Secondly, the director may be liable vis-à-vis the shareholders: the shareholders may initiate a claim for damages against the director after the termination of the company. This may be initiated within one year following the termination of the company by any shareholder, irrespective of its participation interest, who was shareholder of the company at the time of the termination of the company. The shareholder is entitled to this claim in proportion to its earlier capital contribution.

Liability vis-à-vis the Creditors of the Company

Thirdly, any creditor – or the liquidator in the company’s name – may initiate a proceeding during the liquidation process before the court to establish that the company’s former management failed to exercise its management functions in the interests of the creditors in the span of three years prior to the commencement of the liquidation proceedings following the onset of a situation carrying potential danger of insolvency. This liability applies, if as a direct result of this misconduct, the company’s assets have diminished, or the creditors’ claims may not be fully satisfied due to other reasons.

The foregoing applies also to de facto directors, meaning any person who had significant power to influence the decisions of the company. Should the damage be caused by several persons together, their liability shall be joint and several.

If the aforementioned liability of the directors or de facto directors is established by the court, the creditors may claim the satisfaction of their unsatisfied claims up to the amount of the damages caused by the directors and established by the relevant court decision, following the termination of the liquidation proceedings.

Exclusion of Shareholders

A shareholder may be excluded from the company by a court ruling based on a claim launched by the company against that shareholder, if the continued membership of the shareholder in question would seriously jeopardise the company’s objective. Membership shall terminate upon the member’s exclusion from the company by a court order, based on the resolution adopted by the shareholders’ meeting by at least a three-quarters' majority of all shareholders, and indicating the reasons for initiating the exclusion. The shareholder affected may not vote on that issue. The initiation is also available as a minority right (see 1.6 Rights Dependent Upon Percentage of Shares).

Action for exclusion may not be brought in two-member companies. A shareholder of an Nyrt and any shareholder holding three quarters or more of the votes in the shareholders’ meeting may not be excluded.

Enforcement of a Shareholders’ Agreement

If a shareholders’ agreement was concluded, the shareholders may also initiate a proceeding against the breaching shareholder to comply with the agreement or to claim the payment of damages.

The auditor may be held liable vis-à-vis the company for the damages caused to the company through the breach of its duties as auditor. The shareholders’ meeting decides whether to enforce this claim and to initiate a proceeding. The right of initiation is also available as a minority right (see 1.6 Rights Dependent Upon Percentage of Shares).

Generally, the company itself represented by its director(s) is entitled to initiate litigation in its own name.

However, as a minority right it is possible to bring derivative actions on behalf of the company vis-à-vis another shareholder, the director(s), the members of the supervisory board, or the auditor, if the shareholders’ meeting rejects the enforcement of claims against those persons. For further details see 1.6 Rights Dependent Upon Percentage of Shares.

The shareholders may consider the following main factors while seeking remedies in Hungary:

  • the goal of seeking remedy and its consequences (eg, a claim for damages might prove to be more effective than a claim for simply ascertaining the breach of law) or the potential achievement;
  • the period within which each proceeding may be initiated, as many limitations in time apply;
  • the amount of time the conclusion of such a proceeding may take;
  • the costs of the proceeding;
  • who takes the burden of proof;
  • whether the initiation of the proceeding has a suspending effect on the challenged action or decision.
Oppenheim Law Firm

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+36 1 486 2200
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Law and Practice


Oppenheim Law Firm has a corporate and M&A practice that focuses mainly on the energy, manufacturing, financial services, media, private equity and venture-capital sectors. The intensive work of the corporate/M&A practice group contributes to the fact that, according to the recently published financial accounts of Hungarian law firms, Oppenheim is the second-largest law firm by turnover in Hungary, and the largest if international law firms are not considered. One of the main groups of the firm, the M&A practice group, has advised clients on a significant number of flagship transactions in various industries recently, including energy, banking and insurance, manufacturing, IT and media.

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