The new Hungarian Civil Code will come into force on 15 March 2014 and it comprises eight separate books which deal with different aspects of civil law. The new Civil Code reorganises the whole Hungarian civil law into a consolidated structure, integrating regulations from corporate law and family law that were previously in separate acts.
From the abovementioned date the following relevant changes will apply:
- Private limited companies may issue their shares in either physical or dematerialised form in line with their purposes.
- For public limited companies it will be obligatory for their shares to be admitted to trading on a stock exchange and such shares can be issued in dematerialised form only. Public companies have until 15 March 2016 to request their shares to be admitted to a stock exchange if they intend to continue operating publicly. As of 15 March 2014 companies can be established in private limited form only and become public after being admitted to trading on a stock exchange.
- Continuous registration of shareholders will not be required by the new Civil Code, however a separate Government Decree will incorporate the regulations applicable to such registration. This Decree has not been adopted by the Government yet - according to the draft though, custodians will remain obliged to report position changes to registrars within two days of settlement and register the shares prior to corporate actions and when the issuer or the supervisory authority ask for an update in the book of shareholders.
- The definition of securities is extended to include instruments in written or in electronic form, provided that they contain, among other things, the name and the address of the issuer, a declaration that the instrument is considered a security, the entitlements embodied by the securities, the serial number and the number of securities in the series, if applicable, the place and the date of issue and the signature of the issuer, in case of physical securities.
- The general power of attorney referred to in the new Civil Code shall be valid for a period of at most five years. However, this provision is not applicable to the Power of Attorney issued for special purposes such as the annual one used for proxy voting - the applicable specialised legislation contains provisions regarding these documents.
- The new Civil Code also introduces the definition of trust and trustee as well as the requirements to the applicable agreements.
Further new regulations and rules are expected to be adopted and introduced with reference to the new Civil Code.
Impact on investors: As of 15 March 2014 all new contracts have to be in compliance with the provisions of the new Civil Code, however the agreements concluded earlier do not need to be renewed. It is also expected that the current practice for securities registration will remain unchanged and thus the new Civil Code will bear no impact on investors. Regardless of the changes in the Civil Code in terms of the validity of the general Power of Attorney, the ones used currently by investors will continue to be valid for a period of twelve months after their issuance.