Prof Dr Papp Tekla Ph D Dr Auer

Prof. Dr. Papp Tekla Ph. D Dr. Auer Ádám National University of Public Service Faculty of International and European Studies Department of European Public and Private Law Group Interest in Hungary Budapest, 20 November 2015

I. Fundamentaland general statements in connection with the Hungarian group of corporations law of groups of corporations is regulated by Code Civil, Capital Market Act (Firm Act, Liquidation Act) types of concerns: recognized (qualified) and de facto (actual / real) legal base of concern situation: ipso iure or succesion subjects of concern situation: controlling (parent) company and controlled companies (subsidiaries) participants of group of corporations: stock companies, limited liability companies, groupings, cooperative societies

I. Fundamental and general statements in connection with the Hungarian group of corporations conjunctive conditions of recognized group of corporations: - 1 controlling member - 3 controlled members - control contract - common business strategy recognized group of corporations: - not legal entity - not legal person - owner relation ≠ existence of concern

II. The group interest Sárközy Tamás’s opinion: - minimum autonomy for subsidiaries - performance of business political conception >> instruction role of control contract Section 3: 50 (3) of Code Civil Decision of the High Court of Appeal: FÍT 2. Pf. 21. 729/2010/4. recognition of group interest: control contract common business strategy (≠ group interest) ≈ action programme tangentially expressed: Section 3: 55 (4) of Civil Code

II. The group interest The executive officer of a controlled member shall manage the controlled member in accordance with the control contract, under the governance of the dominant member, based on the primacy of the business policy of the group of corporations as a whole. The executive officer shall be exempt from liability to members if his conduct is found to be in compliance with the provisions set out in the relevant legislation and in the control contract.

II. The group interest ? = interest of parent company - instruction right of dominant member - binding resolution by controlling member - executive officers + supervisory board members = executive officers + supervisory board members at controlled member - in single-member company: instruction right of sole member cost-sharing « decision of the Supreme Court: LB Kfv. I. 35. 550/2008/5. + decision of the Budapest City Court: Főv. Bír. 16. K. 31. 115/2007/8.

III. The disadvantageousgroup’s common business strategy and the liability Section 3: 59 of Civil Code [Liability of the dominant member] If any controlled member of the group is undergoing liquidation, the dominant member shall be held liable for any debt the member may have outstanding. The dominant member shall be relieved of liability if able to verify that the controlled member’s insolvency did not arise as a consequence of the group’s common business strategy. Court orders: BH 2007. 418. ; BH 2005. 187.

III. The disadvantageous group’s common business strategy and the liability reason for liability of dominant member (ÍH 2004. 36. ) casual relation (2013. P. 4. ) jurisdiction: BH 2008. 91. EBH 2005. 1228. ÍH 2006. 126. EBH 2004. 1038. BDT 2012. 2645. Curia Gfv. X. 30. 082/2012. Section 63 (2) Liquidation Act (Act XLIX of 1991) Section 118/A (1), (2) firm Act (Act V of 2006)

IV. Consequences no recognition of group interest √: mandatory / in articles no recognition of group interest : no difference between private and public companies no recognition of group interest : no difference between whollyowned subsidiaries and others at single-member companies management must follow instructions by parent company no provision for management of controlled member to obey unlawful instructions of dominant member safeguards: transparency (§ 3: 51 (3)-(5) CC), buy-out right of subsidiaries’ members (§ 3: 52 (1) CC), guarantee-right of subsidiaries’ creditors (§ 3: 52 (3) CC), protection for minority (§ 3: 57 CC), employee participation (§ 3: 58 CC), measures of Court of Registry (§ 3: 60 CC) etc.

V. Group Interest – Public Companies - role of state - fundamental law of Hungary: state (Hungarian National Asset Management Inc. ) local self-government - no special rules in public law - concerns – public companies examples jurisdiction (EBH 2013. P. 4. ) - main problem or solution? group interest vs public interest

Thank you for your attention!