August 03, 2018

Changes in the company registration

Several provisions of Act no. 5 of 2006 on Public Company Information, Company Registration and Winding up Proceedings has been amended as of 1 July 2018. Among these changes we would like to highlight the following:

1. Executive officers without representation rights

The executive officers are the legal representatives of the legal entity. As the dispositive rules of the Hungarian Civil Code allow for the limitation of executive officers’ powers, there is also possibility for an executive officer to hold a mandate with no representation rights.

The restriction of representation rights can primarily occur in case of a management board operated company (mostly in case of Ltd., or cooperative). In such cases, not all board members shall be entitled to represent the legal entity vis-a-vis third persons, this task may only be performed (i) either by a few appointed board members, or (ii) by a single person, such as chairman of the board.

With regard to the above, a new subsection had been added to the commercial register, according to which all three types of representation rights can be entered into the commercial register, namely: sole, joint, or the fact that the executive officer shall not be entitled to exercise the right of representation, if applicable. This new category was introduced in the commercial register based on an international recommendation against terror, money-laundering and terrorism financing.

2. Changes and protection of personal data

The Court of Registration automatically registers changes in the identity data and residential address of a natural person in the commercial register, based on notifications received from the body keeping the register of natural persons.
The body keeping the register of natural persons notifies the Court of Registration, without delay, of the fact and date of death of a natural person. If the deceased person is registered as an executive officer of a company, has a right of representation or is a member of a supervisory board, the Court of Registration shall automatically delete the deceased person from the commercial register.
For the purposes of examining if there are any grounds for exclusion regarding executive officers or supervisory board members included in the application, the Court of Registration requests records from the criminal database electronically. The Court of Registration verifies if there are grounds for exclusion on a yearly basis by repeatedly checking criminal records.
In case of receiving a notification about grounds for exclusion by the body keeping the criminal database, the Court of Registration initiates, ex officio, a judicial oversight proceeding against the company.

Dr. Zóka-Ujhelyi Zsófia

Dr. Zóka-Ujhelyi Zsófia