Category: company law

When establishing a limited liability company, the members pay their capital contributions, i.e. their financial contributions to the company's share capital. The sum of the capital contributions is the share capital.

A share is the totality of the membership rights and obligations associated with the capital contribution. The business share is created upon registration of the company. The size of the business share is based on the members' capital contributions. The business share is therefore more than the paid-in capital contribution (capital contribution), because it embodies the property rights, organisational rights (dividends, voting rights, etc.) and also represents the members' obligation to fulfil their financial contributions and to act in the interests of the company. The value of the business share is determined by the market, which means how much money the member can sell their share in the company for. The business share may therefore be worth less, but also significantly more than the capital contribution paid in by the member, depending on how successful the company is.
As a general rule, the value of the business share is proportional to the capital contribution paid in by the members, but the members may deviate from this by mutual agreement in the articles of association.

Unlike in the case of limited partnerships and limited liability companies, the managing director may also be a person who is not a member of the company.

The managing director may be elected for an indefinite term. More than one managing director may be elected, but it must be specified whether the company is represented independently – i.e. by each managing director separately – or jointly – i.e. by two or more managing directors together.

The managing director may only be a natural person who may be elected by the company's general meeting for a fixed term of up to five years, but the articles of association may provide otherwise, meaning that the managing director may also be elected for an indefinite term if the articles of association so permit. More than one managing director may be elected, but it must be specified whether the company is represented independently (i.e. by each managing director separately) or jointly (i.e. by two or more managing directors together).

The law governing companies stipulates that the main activity of the company must be defined, as well as its additional areas of activity, using the TEÁOR nomenclature in force at the time.

Our recommendation is not to include too many areas of activity, as this will only make the articles of association unclear. In any case, modifying areas of activity has become much simpler; today, they can be modified by simply notifying the tax authority, without the need to amend all the documents filed with the commercial court.

Many companies established by non-family members become unworkable within a few years due to personal conflicts between members, and what started out as a promising venture often ends up in lengthy litigation.

Therefore, it is wise to consider carefully before founding a company who we will partner with and how we can part ways in the event of a dispute. The most appropriate solution is to settle our mutual relations in a separate agreement at the time of founding. This agreement is commonly referred to as a syndicate agreement.

The company's place of business is the location where the company conducts its activities outside of its registered office. The difference between a place of business and a branch office is that a branch office is located in a different municipality from the registered office.

The registered office is the place of central administration, and we must report the corresponding location to the Company Registry Court.

The registered office may be our own property, but it may also be a leased or other legally used premises (e.g. usufructuary right), or even our home, if administration takes place there. The solicitor countersigning the articles of association is not obliged to verify our right to use the registered office. It is sufficient for the managing director to make a statement that the company is entitled to use the property designated as its registered office.
The registered office must be marked with a mandatory company sign.

So many companies have already been registered in Hungary that it is very difficult to find a name that not only differs from previous names, but also cannot be confused with them.

It does not help much to add a suffix corresponding to the year to an already registered name (e.g. Príma 2006 Kft), as the Commercial Registry Court will probably not find this sufficient for differentiation.
So when thinking about the name of the company, write down at least 4-5 different names and ask the solicitor drafting the articles of association to check them before the company is established.

The company name consists of a keyword (e.g. Príma), a description of the company's activity (e.g. Könyvkötő) and the company's legal form (e.g. Korlátolt Felelősségű Társaság).

The description of the company's activity (e.g. Könyvkötő) is not mandatory. The key word serves to identify the company and distinguish it from other companies. Apart from the key word, only Hungarian words may be used in the name, except, of course, for the foreign language name of the company as specified below.
The abbreviated name of the company consists of the key word and the abbreviated designation of the company form (e.g. Príma Kft).
In addition, it is also possible to name the company in a foreign language or languages (e.g. in English: Príma Bookbinder Limited, in German: Príma Buchbinder Gesellschaft mit beschränkter Haftung). Of course, the leading word cannot be changed in foreign language names.

When choosing a company form, founders usually consider the costs of setting up the company to be the decisive factor. So, those who start a business with a modest budget set up a limited partnership or a limited liability company, those who think bigger set up a limited company, and those who have really big plans set up a public limited company. However, this is not always the right approach.

It is true that a limited partnership is cheaper to set up than a limited company, and a public limited company is more expensive than both, but there are a few other factors that should not be overlooked.

One such factor is the question of liability. It is relatively well known that all members of a kkt. and the internal members of a bt. are liable for the company's debts with their entire assets. In the case of a kft. and an rt., the member is only liable for making the financial contribution they have undertaken available to the company.

Different companies have different prestige values. Therefore, where it is particularly important to gain the trust of customers, it is more advisable to establish a limited liability company or public limited company.

It is not worth setting up a company thinking that it will be fine for now and we can always transform it later (e.g. from a limited partnership to a limited company). Transformation is much more costly and time-consuming than setting up a new company, so it is definitely worth setting up a company that will serve the needs of its members for a long time.