tag: corporate governance

A shareholder’s ownership percentage does not always reveal who truly controls a company. In an acquisition, joint venture or minority investment, influence depends as much on negotiated governance rights as on the shares held. This is particularly relevant for foreign investment in Hungary. An investor may want existing management to run the business while retaining a say over decisions that could materially affect its investment. The aim is to protect the investment without slowing the company down.

Tax-efficient forms of remuneration, serving at the same time, as a means of motivating management have never been more popular. And the range of options available for doing this has expanded this summer to include what’s known as a Special Employee Co-Ownership Program (“KMRP” in Hungarian), a vehicle that can be used for in certain situations that cannot be handled in the context of an Employee Part-ownership Program, MRP. In addition, KMRPs are an excellent vehicle for implementing management buyouts. 

Since 2014, the “new” Civil Code has allowed companies to deviate from statutory rules in terms of their operation and organization. Up until now, however, it wasn’t clear what was included and what wasn’t: what they could actually deviate from and what they had to adhere to. A new amendment expected to enter into force in January next year will clear the rules up while also easing them off at the same time, thus increasing Hungary’s competitiveness in terms of company law as well.

“The tax number of one of my companies was deleted due to some blunder, but we corrected it” – so begins a widely-known and innocent story that could happen to anyone. Then we realise in terror that due to this “blunder”, the Court of Registration refuses to register our company, or that the tax authority wants to delete the tax number of one of our existing companies. Could this have been avoided? What can be done?

To this day, the domestic legal system has remained silent on how contracts concluded by email should be treated. However, legislation recently adopted in relation to the COVID-19 pandemic explicitly allows communication via email between a company and its private-individual members. Could this be the first step towards a more comprehensive legal acceptance of emails?

Everything that used to be simple and straightforward when concluding or completing M&A transactions poses major challenges to market participants in today’s crisis circumstances. New legal and technical solutions have been designed to overcome these difficulties, some of which are expected to remain with us even after the crisis.

The impending economic crisis is expected to upset the financial position of many businesses. At these companies, the responsibilities of the company manager will also change: in a near-bankruptcy situation, the manager is obliged to take into account not only the interests of the company but those of the creditors as well. But what is simple on paper is not so straightforward in practice.

Do you need a company to be established in Hungary? You will find below some hints and tips that will make your life easier.