COVID-19- HUNGARY- Annual Financial Statements: Deadlines Postponed until 30 September 2020

Extraordinary Rules as to Corporate Decision Making

Pursuant to a government decree published on 21 April 2020, the deadlines of preparation, publication, depositing and submission of annual financial statements which fall between 22 April and 30 September 2020 are extended until 30 September 2020.

This does not apply to public-interest entities, i.e. to entities whose transferable securities were admitted to trading on a regulated market of any Member State of the European Economic Area and to other entities which are deemed to be a public-interest entities on the basis of law.

The Government also adopted Governmental Decree No. 102/2020 (IV. 10.) (the “Decree”) which entered into force on 11 April 2020 and set out several provisional rules concerning the corporate governance of legal entities some of which are explained hereunder.

Those decision-making bodies (e.g. general assemblies) of legal entities may operate in accordance with their normal procedures, which can adopt decisions and still comply with lockdown rules. Otherwise, no physical meetings of decision-making bodies can take place during the current state of emergency.

Instead, meetings can be held via electronic means or – if it is not prohibited by law concerning the entity concerned – voting can occur in writing (the “Alternative Means”). In case the Alternative Means are not provided for in the articles of association or they are differently regulated than the rules set out in the Decree, the management has the right to set the rules of these procedures while respecting certain requirements mentioned by the Decree.

Further conditions of the use of Alternative Means vary based on the number of the legal entity’s members:
maximum five members: the quorum may foreseeably be ensured by the Alternative Means and all members could participate in the decision making;
from 6 to 10 members: the members having more than 50% of the votes request the application of the Alternative Means;
more than 10 members: the management initiates the use of Alternative Means.

If none of the above conditions are met, the powers to decide on the following matters are transferred to the management:
(i) approval of the annual financial statements,
(ii) use of after-tax profit,
(iii) matters being necessary to maintain lawful operation,
(iv) matters being necessary to handle the situation created due to the state of emergency,
(v) urgent matters arising within the reasonable and responsible management.

However, there are certain limits to the management’s powers.
It cannot adopt certain decisions (e.g. liquidation, merger, demerger, decrease of capital in case of limited liability companies and companies limited by shares, amendment of the articles of association (except if it is necessary based on law entering into force during the state of emergency).

In addition, it can only adopt a decision if
(i) the members holding individually more than 25% of the votes do not contest the decision beforehand in their written opinion and these non-contesting members represent together at least 51% of the votes or
(ii) the member holding more than 50% of the votes does not contest the decision beforehand in its written opinion.

All the decisions adopted by the management pursuant to the above rules are to be discussed at an extraordinary meeting of the decision-making body to be held within 90 days after the end of the state of emergency. If such meeting amends or repeals the management’s decision, this does not affect the rights and obligations arising before the meeting.

It must be pointed out that if the mandate of an executive officer, a member of any boards or the statutory auditor expires during the state of emergency or the person concerned resigns, the mandate will remain in force until the 90th day following the end of the state of emergency. This also applies to persons whose mandate expired or who resigned before the entry into force of the Decree but their mandate was not renewed or no other person was appointed.

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