Coronavirus affects shareholder meeting rules
The appearance and spread of COVID-19 in Hungary force businesses to rethink their methods of operation, including the way shareholder meetings are conducted, according to a press release by law firm Noerr.
The government declared a State of Danger through Government Decree No. 40/2020. (III.11.) and provided other provisions on the operation of legal entities in Government Decree No. 102/2020. (IV.10.) in connection with the current situation. The latter decree outlines how shareholder meetings could be held.
The rules of the decree are not applicable if the shareholders’ meeting or the sole shareholder is not obstructed at the decision-making while complying with the stay-at-home order. However, in case the shareholders are obstructed, the shareholders’ meeting may not be held, even if the meeting has already been convened.
The decision-making by the shareholders may be held with the participation of the shareholders by electronic means or via written consent procedure.
If the number of shareholders is between two and five, the shareholders’ meeting may be held by electronic means or via written consent procedure with the participation of all the shareholders.
If the company has six-10 shareholders, the majority of the shareholders may request an electronic or written decision-making and if the number of the shareholders’ exceeds 10 the management is entitled to initiate it.
The sole shareholder companies may still make the resolutions in writing which takes effect upon its communication to the management, Noerr says.
For the use of electronic means, the management is entitled to set the rules in accordance with the decree and communicate them with the shareholders. The agenda and the draft of the resolutions shall be communicated to the shareholders.
The management is entitled to initiate a written consent procedure (decision-making without meeting) and shareholders shall be given at least 15 days to send their vote to the management.
The vote is valid if the number of the draft decision, the content of the vote and the shareholder is identifiable from the vote.
The process shall be considered effective if the number of votes sent to the management corresponds to at least the number of shareholders with voting right required to attend for a quorum if the meeting was in fact held in session. The shareholder may also send the vote by e-mail.
The above-mentioned rules are not applicable to public limited companies.
Declarations via email
The bodies of the legal entity may also send written legal declarations to the shareholderʼs e-mail address signed by a qualified electronic signature or an advanced electronic signature based on a qualified certificate or by means of document certification with regress to identification (ADVH).
Shareholders may also communicate their legal statements to the legal entity by e-mail. However, if a shareholder is a legal entity it shall sign its declaration by a qualified electronic signature or an advanced electronic signature based on a qualified certificate or by means of document certification with regress to identification.
In case the shareholder is a natural person, a simple e-mail without an electronic signature is also sufficient, but the declaration shall contain data necessary for identification.
Management is entitled to make decisions instead of the shareholder’s meeting if the decision-making is not possible by electronic means or via written consent procedure. Therefore the management is entitled to approve the annual report for 2019, decide on the distribution of after-tax profit and also on other matters normally falling under the competence of the shareholder’s meeting, if those decisions are urgent and necessary for the uphold of lawful operation.
Noerr notes that the government appears not to extend the deadline for submission of annual reports.
Decisions may be made by the management if those shareholders who hold shares of more than 25% object to the proposal of the management via prior written opinion by at least 51% of the votes.
If a shareholder has a majority control or qualifying holding in the company, the decision cannot be made if this shareholder objects to it via their prior written consent.
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