AGMs of Hungarian companies in the time of coronavirus

AGMs of Hungarian companies in the time of coronavirus

The coronavirus outbreak in Hungary and restrictions on public gatherings have imposed challenges on every Hungarian company planning to hold a scheduled annual general meeting (“AGM”) of its supreme body.

There are, however, alternatives to physical AGMs. Hungarian law allows for AGMs to be held virtually (i.e. electronically or in writing) if the company's constitutional documents allow for this. If a company's constitutional document does not have the necessary provisions, this document can be amended.

General rules of holding annual meetings

Under Hungarian law, the supreme body (i.e. a members meeting in the case of limited liability companies and a general meeting in the case of public and private companies limited by shares) of each company must hold at least one AGM in each financial year when the members or shareholders adopt the annual financial report and decide on the appropriation of after-tax profit. If the financial year corresponds to the calendar year, this report must be approved and published by 31 May 2020 (i.e. the end of the fifth month following the balance-sheet date of the company).

As a main rule, the AGM is to be held with the physical presence of the members/shareholders at the company's registered seat. In light of current restrictions on pubic gatherings, note that it is also possible to hold an AGM via electronic means or to pass member or shareholder resolutions in writing without holding a physical or electronic meeting if the company's constitutional document so permits.

Electronically held AGMs

If the AGM is held electronically, the invitation letter must specify the code required to join and the telephone number required to reach the videoconference. The invitation must provide members and shareholders with sufficient information on how to vote and speak during an electronic meeting. The technology used must be able to identify each member or shareholder and ensure mutual and unrestricted communication between participants. The words said and the resolutions made during an electronic meeting must be recorded on a data carrier and if the resolutions are to be submitted to a court, written minutes must be prepared based on the records.

Passing written resolutions without holding an AGM

If the constitutional document enables the members/shareholders to pass resolutions in writing without holding a physical or an electronic AGM, management must initiate this decision by sending the draft resolutions to the members/shareholders. Members or shareholders should then send their votes to management for each resolution. Voting must be completed within the deadline specified in the constitutional document and once all votes arrive, management will conduct a tally and inform members or shareholders of the results.

Conclusion

Although many Hungarian companies are already authorised by their constitutional document to hold an AGM electronically, this practice is not yet widespread, since the AGM has served as a good occasion for members and shareholders to meet personally. Similarly, the constitutional documents of many companies contain provisions for allowing written resolutions, but the written decision-making process is more often used for resolving on smaller issues with companies still preferring to have at least one physical meeting a year.

Given the present situation, however, we anticipate many members and shareholders will want to avoid attending an AGM and will prefer to have an electronic meeting or pass resolutions in writing.

As for Boards of Directors and Supervisory Boards, unless otherwise stipulated in the by-laws of these bodies or the constitutional documents of the respective companies, these bodies may also hold electronic meetings or pass resolutions in writing.

If the constitutional document of your company does not provide for electronic meetings or passing resolutions in writing, we suggest amending this document. For more information on how to amend your Hungarian company's constitutional documents to avoid the need to hold a physical AGM, contact your regular CMS advisor or local CMS experts: Anikó Kircsi and Dóra Czeglédi.

Article co-authored by Szabina Marsi.