Shareholders’ and board meetings during the ’state of danger’
In order to mitigate the consequences of the COVID-19 pandemic the Hungarian Government declared a ‘state of danger’ which allows the Government to derogate from the provisions of certain Acts of Parliament by adopting decrees.
Several such decrees were adopted, among others, to take measures for social distancing by imposing restrictions on the gathering of people. Due to the pandemic companies and other organizations faced challenges in holding shareholders’ meetings. Although the new Civil Code of Hungary that came into effect in 2014 allowed the shareholders of companies (and other organizations) to hold electronic meetings or to adopt resolutions in writing without holding a meeting those options were only open to the shareholders if the Articles of the company (constitutional document of the organization) expressly allowed them.
Government decree no. 102/2020 (IV.10.) has eased the rules of holding electronic meetings and voting in writing from April 11, 2020 until the state of emergency is in force. According to the decree in most cases the directors can convene electronic shareholders’ meetings or request the shareholders to vote in writing even if it is expressly prohibited by the Articles (constitutional document) or the Articles is silent about it. For companies/organizations with no more than five shareholders electronic meetings or voting in writing are universally allowed if a quorum may foreseeably be secured that way. In companies having more than five but no more than ten shareholders, the shareholder(s) may so request with a simple majority of the votes, while in case there are more than ten shareholders then the board/directors can initiate the same.
If those conditions are met, then the board of directors / managing director(s) need to establish the procedural rules for convening and holding such meetings or the rules of voting in writing within the framework of the requirements laid down in the decree and must inform the shareholders of those rules.
If those conditions are not met, then the shareholders can neither hold electronic nor physical meetings, but the board of directors / managing director(s) can make certain decisions in pressing matters instead of the shareholders (except for the most substantial corporate decisions such as about an amendment to the Articles, the termination or merger of the company etc.)
Majority shareholders or at least two shareholders that each hold more than 25% of the votes can still block such decisions of the board / directors.
The decree also regulates the form of electronic communication between the board / directors and the shareholders. Such communication may be made by e-mail; however, the sender must authenticate his communication and documents with his electronic signature (or may use electronic authentication through the electronic government portal, “Ügyfélkapu”). Such formal authentication is not required for private individual shareholders who need to identify themselves otherwise.
The decree contains similar rules for holding board meetings electronically and certain specific rules for public corporations.