Many people could be in for a nasty surprise when trying to set up a company: the company court refuses to register the majority owner or managing director on grounds that the person is subject to a ban. While the banned persons sometimes know that they have “been up to no good”, in other cases they are baffled as to the reasons for the ban. A lot is at stake: a person who is banned could end up on the “black list” for up to 7-8 years.

While dividends are the result of a happy process, namely the profitable operation of one’s business, the restrictions and difficulties associated with dividend payment have always given grounds for frustration. Particularly troublesome is the treatment of dividends in the course of corporate acquisitions, as the buyer and the seller need to elaborate special techniques for sharing the dividends among themselves. 

One of the most efficient ways to motivate employees is to make them owners. In Hungary, however, plenty of legal and tax obstacles have restricted the introduction of such incentive so far. Changes made to the legal and tax environment in the recent years may yet boost the spread of employee stock programmes in the future.

The corporate law is based on the “majority principle”: the majority shareholder can control the decisions at the shareholders’ meeting. While the old Companies Act already contained certain exceptions to this principle the new Civil Code broadens the scope of the exceptions. The new Civil Code declares that if a shareholder is “personally interested” in a decision, it is not allowed to vote on the given question. Although the courts’ interpretation of this new provision is not yet known, a conservative interpretation could lead to a substantial weakening of the “majority principle”.