here - Weil, Gotshal & Manges

Hungary
Weil, Gotshal & Manges
overseeing the operation of the capital markets and financial institutions.
PSZAF must approve or reject the offer within 10 business
days from submission. It must approve it if it meets certain legal
requirements (for example, minimum offer price, security for the
consideration and non-discrimination among shareholders) that are
set out in the Capital Markets Act. The Capital Markets Act and
the listing rules of the Budapest Stock Exchange require listed public
companies to publish material information relating to a business
combination they participate in, but combinations are not subject to
stock exchange or PSZAF approval (except for financial institutions
where PSZAF’s approval is required).
In regulated industries, such as energy, communications and
media, a notice to, or approval by, the competent regulatory authority
is required before a combination may take effect.
Other than the relevant registration court fees, competition clearance
fees and PSZAF fees, no material governmental fees are payable
on a business combination. While there are no stamp duties, transfer
taxes (which are similar to stamp duties) may apply to the transfer
of real properties whether structured in an asset transaction or a
share transaction.
See question 18 for more information on the applicable capital
gains tax, transfer tax and VAT rates in Hungary.
5 Information to be disclosed
What information needs to be made public in a business
combination? Does this depend on what type of structure is used?
Different information must be made public depending on the structure
of the business combination and on whether the companies
involved are public or private.
Private or public companies involved in a merger must publish,
in the Companies Gazette, an announcement containing the main
details of the merger, including:
• the name, seat and company number of each company involved
in the merger;
• the name, seat and company form of the merged entity;
• the date of the articles of association of the merged entity;
• certain key information from the balance sheet of each company
involved in the merger and the merged entity;
• the main business activity of the merged entity;
• the name and address of each director of the merged entity; and
• a notice to creditors advising them of certain of their rights in
connection with the merger (such as the right to request security
for their claims).
The publication of the announcement must be initiated within eight
days from the execution of the articles of association.
A purchaser who directly or indirectly acquires at least 75 per
cent of the voting shares of a private limited company must notify
the court of registration of its acquisition within 15 days of its occurrence.
Share acquisitions below this threshold need not be notified.
Asset acquisitions by private companies do not need to be publicly
disclosed. Public companies must disclose the relevant details of
any business combination by way of asset acquisition to the extent
that such information may affect listed share prices.
Please also see question 4 in relation to the publication requirements
of a public tender offer, and question 6 in relation to disclosure
requirements when a significant shareholder increases or reduces its
shareholding in a public company.
6 Disclosure of substantial shareholdings
What are the disclosure requirements for owners of large
shareholdings in a company? Are the requirements affected if the
company is a party to a business combination?
Shareholders acquiring or ceasing to hold voting rights exceeding 5
per cent of the voting shares (and every multiple of 5 per cent up to
50 per cent, then 75, 80, 85, 90 per cent and then every further 1
per cent) in a public company limited by shares must notify PSZAF
and the issuer of the shares within two days. The above disclosure
requirements do not apply if the parent company has already complied
with the obligation, or if the parent company is also a controlled
company and its own parent company has already complied
with the obligation.
7 Duties of directors and controlling shareholders
What duties do the directors or managers of a company owe to
the company’s shareholders, creditors and other stakeholders in
connection with a business combination? Do controlling shareholders
have similar duties?
As a general rule, a director must act with the degree of care reasonably
expected of a person in his or her position. A director must act
primarily in the company’s interests.
In certain circumstances (for example, imminent insolvency of
a company) directors primarily owe fiduciary duties to a company’s
creditors and employees (see question 20). The managing director is
subject to civil liability towards the company for damages caused by
a breach of his or her fiduciary duties.
A managing director of a limited liability company cannot be
instructed by the shareholders’ meeting or the individual shareholder.
However, in the case of a wholly owned company, the sole
shareholder may withdraw authority for certain matters from the
managing director and instruct the managing director regarding such
matters in writing. In such case, the managing director must comply
with such instructions; however, he or she is exempt from civil liability
towards the company as described above.
If the dominant shareholder continuously makes business decisions
detrimental to the controlled company, and thus endangers the
fulfilment of the obligations of the controlled company, the court
of company registration may – upon request of any creditor of the
controlled company – instruct the dominant shareholder to provide
security, or may impose judicial supervisory sanctions specified in
the Companies Registration Act upon the dominant shareholder. If,
upon the request of creditors, the court rules that a dominant shareholder
has unlimited liability owing to its permanently detrimental
business conduct, such dominant shareholder will have unlimited
liability for all debts of the controlled company not covered by the
controlled company’s assets in the event of the liquidation of the
controlled company.
Dominant shareholders may exercise control over their subsidiaries
in a regulated manner; that is, they may establish a recognised
group of companies (which is established if a private limited liability
company over which the dominant shareholder effectively exercises
a dominant influence decides to enter into a control contract for
the pursuit of common business interests and operates in the form
of a recognised group), or be deemed to have a de facto group of
companies.
In order to establish a recognised group of companies, a control
contract is concluded by the respective parties. Basically, control
contracts are tools for the control of a subsidiary under increased
– though not unlimited – liability. In a de facto group of companies,
however, the dominant shareholder has unlimited liability for the
controlled company’s obligations if it is established in a liquidation
procedure of the controlled company that the dominant shareholder
implemented business policies detrimental to the controlled company
on a continuous basis. A de facto group of companies is deemed to
exist if the dominant shareholder has control over the controlled
company without concluding a control contract, provided that the
following conditions are met: the companies belonging to such group
are engaged in operations under a common business strategy for
at least three consecutive years, there is collaboration between the
dominant shareholder and the controlled company, and the companies
demonstrate the kind of conduct that evidences predictable
170 Getting the Deal Through – Mergers & Acquisitions 2013