How to become a shareholder in a well-run company?
If we are entrepreneurial, it is advisable to turn our ideas into reality in the form of an appropriate business company, or if our goal is simply to invest and we do not necessarily want to be actively involved in the life of the company, investing in a well-structured company can be a great way to do this. In this article, we deal with investing in a private limited company and thereby acquiring shareholder rights, the legal background for which is the increase in share capital through the issue of new shares. Let’s see what we need to know step by step. The content of this article is based on the relevant provisions of the Civil Code and the Civil Code, but each case is different, so please note that the following provisions are general and not necessarily applicable to specific, individual situations. Let’s clarify the most important basic concepts first! 1. WHAT IS SHARE CAPITAL? For public limited companies, share capital is the specific legal equivalent of subscribed capital, which is the sum of the nominal value of all shares. In the case of joint-stock companies – and it should be noted here that a joint-stock company (abbreviated to „rt.”) can be formed primarily in the form of a private limited company – the minimum amount of share capital is HUF 5 million. 2. WHAT IS A SHARE? A share is a security issued by the company, the most important characteristics of which are that it represents membership rights, is registered, has a nominal value and is negotiable. Shares can be produced either by printing or electronically in dematerialised form. In the latter case, the key details of the share are contained in a separate securities account. The only central securities depository in Hungary, KELER Zrt., is responsible for the creation of shares by electronic means. 3. WHO IS THE SHAREHOLDER? A member, i.e. an owner, of a limited liability company, who is entitled to a certain number of shares of the company’s issued stock. Hence the name shareholder, which is a term used only for a limited liability company and is often wrongly applied to a limited liability company. Depending on whether the shares constituting the share capital of the limited liability company are held by one or more persons, it may be a single or a multiple company. 4. HOW CAN WE BECOME SHAREHOLDERS? In short, we either set up a limited company ourselves or join an existing one. In this article we look at what legal steps are required to become a shareholder of the limited liability company, even if you are only an investor. Here is the timetable we have developed in our own practice: 0. STEP: Let’s look into the company you want to join, and you will need to obtain the following documents from the company: the articles of association in force (in the case of a limited liability company, this is called the articles of association) – you can get them here using the online company overview last published report – here you can find published reports Why do we even need these? Isn’t it enough to know that the company has a good turnover, a lot of customers, surely it’s worth investing in? Of course, this is a good thing, but it is important to be aware of what is on the books of the company you want to join with a lot of money and what the legal basis of their whole operation is. This step zero is nothing less than a legal due diligence with the simultaneous involvement of an accountant and/or a tax adviser, so that the prospective shareholder does not find out something unexpectedly „turpisslichkeit”. In addition to this, it is also a good idea to request a current company statement, which will tell you whether your favourite company has been seized by a body or authority, had its tax number cancelled, is in liquidation or has been the subject of other proceedings that are not favourable to your investment. If everything is clean and in order, the first step is to take the next step. STEP 1: After successful negotiations with the shareholders of the limited liability company, we should set out the amount of the financial contribution we wish to make to the company. After that, the legal steps should be taken. STEP 2: If a new shareholder wishes to join the company, the general meeting of the company’s highest decision-making body must decide on the increase of the company’s share capital. Although there are several ways of increasing the share capital, and each of them can even be carried out simultaneously, let us see what rules apply if the increase is carried out by placing new shares. Precondition: the share capital of a public limited liability company may be increased by the issue of new shares only if the nominal value or the issue value of all its previously issued shares has been paid up and the non-cash contribution has been fully paid up to the company. The increase of the share capital by the issue of new shares must be decided by a general meeting of shareholders, which must include: the way the share capital is raised; the amount of the increase in share capital or the minimum planned amount; the draft amendment to the articles of association relating to the increase in the share capital, including the number and series of new shares to be issued, the rights attaching to the type, class or series of shares, the method of creation, nominal value or issue value of the shares and the conditions for payment of the nominal value or issue value of the shares; the subject matter, value, number and other characteristics of the non-cash contribution, the name (company), domicile and registered office of the contributor and the name, domicile (registered office) of the auditor who performed the preliminary valuation, the date of the contribution; the period or subscription deadline for
5 Hints on How to Establish a Company in Hungary
Due to the fact that in the EU Hungary has one of biggest growth of GDP Hungary came into the spotlight of foreign investors. On the other hand Hungary has one of the lowest company tax rate. These two key factors resulted in the fact that there is a demand on the market to establish companies in Hungary. There are several factors that should be taken into account before any step made forward. You can find 5 hints below to make sure everything goes as it should. Proper Legal Support In Hungary, in order to have the proper legal effect of your company establishing deeds it should be made by a public notary or an attorney at law, however, an attorney at law can have a wider scope of representation. Hint No 1: Be careful if anyone advises you to enter into an agreement without any attorney or public notary. Legislation Regarding Companies The Act V of 2013 the Hungarian Civil Code regulates the main points regarding the companies. In Hungary it is strictly regulated what type of companies you can establish. You can establish a partnership, an Ltd, company limited by shares, and a public limited company irrespective of your citizenship. Generally speaking the differences among the types are in relation to the scope of liability, and the rights and obligations of the shares. Hint No 2: If you do not have any Hungarian address than you should have a person as a delivery agent registered into the Company Registry. Please find below the link to the Hungarian Civil Code in English: http://njt.hu/translated/doc/J2013T0005P_20180808_FIN.pdf How to Start: Necessary Basic Steps I would recommend hiring a lawyer from the very first moment in order to have a professional legal support which assists you to go to the right direction and avoid any time wasting. Regarding each type of company there are some things that should be considered and determined. We see the list below: company name: it should differ from the already existing ones Hint No 3: In the following link you can check by yourself easily at the official Company Registry if there is any company with the same or similar name: https://www.e-cegjegyzek.hu/?index minimum share amount: it is different type by type seat: each company has to have a registered seat where all the official documents can be received. In case you need any company seat service we can support you through our business partners. managing director: each type of company has to have appointed a person who is responsible for the control of the company Hint No 4: The same regulation applies here: if you don’t have any Hungarian address than you should have a delivery agent. scope of activities: By the establishing procedure you should determine the exact scope of activities, which is crucial since you can issue your invoice in relation to the activities you provide through your company. I would advise contacting an accountant who can support you picking the applicable activities for your company. Further Specific Questions In relation to a company there are further steps that should be discussed when contacting an attorney. The voting rights, the rate of the right for the dividend should be also considered. Hint No 5: In Hungary you can establish your company with state-provided templates which can reduce the process of drafting the necessary documents. You may also establish it with specified documents. Generally speaking the process of establishing a company is quite quick after submitting it, and the state fees are also low. Our law firm along with our cooperating accountants and tax advisors can support you in the process of establishing a company, and we also accompany your operations from the very first time with drafting your contract templates, employment contract templates, reviewing your partners’ draft contracts or even in the process of M&A. Disclaimer Articles posted on present page shall not be deemed as legal consultation more over shall not be deemed as the official declaration of the Attorney at law. The Attorney at law operating present website may issue its official legal declaration based on only a written fully executed engagement agreement. The Articles posted on present website were issued based on the applicable law of the time of the post therefore it may happen that sue to any change in legislation part or the whole of the articles may not be applicable furthermore based on a certain case the competent authorities or court may determine such case differently. The Articles posted on present page are under the protection of copyright law thus any use of them without permission is banned.