Setup a company in HUNGARY

(2) If the application for registration of the business association is refused, the business association may not acquire further rights or assume new obligations, and shall be obliged to terminate its operation. The members (shareholders) shall accept liability for debts arising from the undertakings of the executive officers according to the rules applicable to the termination of business associations. This provision shall also apply to settlement of the members (shareholders) inter se.

(3) If, as a consequence of the form of the business association to be established, the liability of the members for the obligations of the business association is limited, and outstanding claims remain despite the members (shareholders) accepting liability, the executive officers of the business association to be established shall bear unlimited, joint and several liability towards third parties.

Title 4

Court Registration of the Foundation of Business Associations

Section 16.
(1) Unless otherwise provided by the Act on Company Registration, Public Company Information and Court Registration Proceedings, the foundation of a business association shall be reported to the county courts (Municipal Court of Budapest) maintaining the register of companies (hereinafter referred to as "court of registration"), for registration and publication, within a maximum of thirty days after conclusion of the articles of association (deed of foundation, statutes). If a license for foundation is required for the establishment of the business association, such report to the court of registration shall be effected within thirty days after receipt of the license.

(2) Business associations shall be established upon entry into the register of companies as of the date of such entry. Rules governing the registration of business associations are set forth in the Act on Company Registration, Public Company Information and Court Registration Proceedings.

(3) Following registration, the Act on Company Registration, Public Company Information and Court Registration Proceedings shall apply to the avoidance of the articles of association (deed of foundation, statutes) and the alteration thereof.

Section 17.
The rights, facts and data constituting a part of the company registration records which relate to business associations, and the members, executive officers and supervisory board members thereof are public information, and shall be published in the official publication entitled Company Gazette, pursuant to the provisions of the Act on Company Registration, Public Company Information and Court Registration Proceedings.

Chapter III.
Joint Regulations on the Bodies and Executive Officers of Business Associations

Title 1.

Supreme Body of Business Associations

Section 18.
(1) For unlimited partnerships and limited partnerships the business association"s supreme body is the meeting of members; for joint enterprises the council of directors; for limited liability companies the members" meeting; and for companies limited by shares the general meeting. Issues falling within the exclusive competence of the supreme body of business associations are regulated by the provisions on the individual forms of business associations.

(2) All members (shareholders) of a business association are entitled to take part in the activity of the business association"s supreme body.

(3) Unless otherwise provided by this Act, the supreme body of a business association may discuss any issue not contained in the invitation to (announcement of) the meeting only if all members (shareholders) are present at the meeting, and unanimously agree to discuss such issue on the agenda.

(4) If, by law or pursuant to the provisions of the articles of association (deed of foundation, statutes), a member (shareholder) may not vote on a particular subject, the member concerned shall be disregarded when stating whether there is a quorum for passing a resolution on such subject.

(5) When passing a resolution, a member (shareholder) who is relieved from an obligation or responsibility through the resolution, or is granted some other benefit to the detriment of the business association, as well as a member (shareholder) with whom an agreement is to be concluded, or against whom legal proceedings are to be initiated as per the resolution, may not cast a vote.

Section 19.
(1) Unless otherwise provided by law or the articles of association (deed of foundation, statutes), the supreme body of business associations shall pass resolutions by a simple majority of votes.

(2) Members (shareholders) who have passed a resolution, in respect of which they knew, or should have known given reasonable care that such resolution was obviously contrary to the significant interests of the business association, shall bear unlimited, joint and several liability for resulting damages.

(3) Upon the foundation of the business association, the executive officers and the supervisory board members, as well as the auditor shall be appointed by the founders (members, shareholders) in the articles of association (deed of foundation, statutes). Thereafter, the executive officers, supervisory board members and the auditor of the business association shall be elected by the business association"s supreme body, with the exception of the case contained in Section 33.

(4) No members" meeting (general meeting) shall function in the case of single-member business associations. The sole member or shareholder shall decide on the issues falling within the competence of the business association"s supreme body.

Section 20.
(1) Unless otherwise provided by this Act, the business association"s supreme body shall decide on the alteration of the articles of association (deed of foundation, statutes), whereby signature of the members is not required. The articles of association (deed of foundation, statutes) altered on the basis of a resolution of the supreme body may also be countersigned by the legal advisor of the business association.

(2) When altering the registered office (business premises) and branch office, or the scope of activities of the business association, the provisions of Subsection (1) shall apply whereby such alteration shall be entered in the minutes drawn up at the meeting of the business association"s supreme body, and the decision shall be passed by the business association"s supreme body by a simple majority of votes.

(3) Unless otherwise provided by the Act on Company Registration, Public Company Information and Court Registration Proceedings, alteration of the articles of association (deed of foundation, statutes) shall be reported to the court of registration within thirty days after the change taking place.

Title 2

Management of Business Associations

Section 21.
(1) The executive officers shall conduct the management of the business association pursuant to the provisions governing the individual forms of business associations.

(2) Executive officers shall be understood as the member(s) entitled to management at unlimited partnerships and limited partnerships, the director at joint enterprises, and the managing director (managing directors) at limited liability companies.

(3) Unless otherwise provided by the deed of foundation of a close company limited by shares, management of a company limited by shares shall be carried out by the board of directors, and the members of the board of directors shall qualify as executive officers.

Section 22.
(1) The same person may be elected as an executive officer in three business associations at the most. The person elected shall inform in writing the business associations, at which he is already an executive office, within fifteen days after his acceptance of the new position.

(2) In his capacity as such, an executive officer may not be instructed by the members (shareholders) or the employer of the business association.

(3) Unless otherwise provided by this Act, an executive officer may only be a natural person. The duties of an executive officer may only be carried out in person, no representation is admissible.

(4) The supreme body of a business association may deprive an executive officer (the board of directors) of his competence falling within the scope of management only in the cases and to the extent rendered possible in the articles of association (deed of foundation, statutes).

(5) The provisions of Subsection (2) and (4) may not be applied in the case of single-member business associations. In respect of single-member business associations, the member (shareholder) may deprive an executive officer of his competence and may instruct him in writing. In such cases, the executive officer shall be exempted from the obligation set forth in Section 29 by the decision of the member (shareholder).
(6) The provisions of Subsection (4) may not be applied to the executive officers of business associations, in which a member (shareholder) holds a majority of three-quarters or more of the votes.

Section 23.
(1) A person who has been sentenced to imprisonment by a final judgment due to the commission of a crime may not be an executive officer of a business association until such person is relieved from the detrimental legal consequences related to his criminal record.

(2) A person who has been barred from a certain profession by a final judgment may not be an executive officer in a business association pursuing the activity indicated in such judgment during the force of such sentence.

(3) For a period of three years after the establishment of the insolvency (order of liquidation) of a business association by final judgment, a person who acted as an executive officer at the business association to be liquidated for one year or more during the period of two years prior to the date of the final judgment ordering such liquidation may not be an executive officer of another business association, unless he was specifically appointed as executive officer for the purpose of avoiding the liquidation.

(4) For a period of two years after cancellation of a business association from the register of companies based on cancellation proceedings ex officio, a person who, during the year preceding such cancellation, acted as an executive officer of the terminated business association by the cancellation may not be an executive officer of another business association.

Section 24.
(1) Executive officers shall be elected, or appointed by the articles of association (deed of foundation, statutes), for a definite period of time, but for a period of no more than five years. If no provisions are made in the articles of association (deed of foundation, statutes) on the duration of the mandate of the executive officers by the members (shareholders), the executive officers shall be considered to have been elected for a period of five years, unless the business association is established for a shorter period of time.

(2) The mandate of an executive officer shall take effect by its acceptance by the person concerned. Executive officers may be re-elected, and may be removed by the business association"s supreme body.

(3) Unless forbidden by law, performance of the duties of an executive officer may be subject to remuneration. No remuneration may be granted to executive officers during the period of the liquidation proceedings following the establishment of the insolvency of the business association by a final judgment.

Section 25.
(1) With the exception of acquiring shares in a public company limited by shares, an executive officer may not acquire interest in another business association pursuing an activity identical to that of the business association, furthermore, may not be an executive officer in another economic organization pursuing an activity identical to that of the business association, unless rendered possible in the business association"s articles of association (deed of foundation, statutes), or the business association"s supreme body grants its consent.

(2) An executive officer and his close relatives [Paragraph b) of Section 685 of the Civil Code] may not conclude transactions falling within the scope of activities of the business association in his own name or to his own benefit, unless specifically permitted in the articles of association (deed of foundation, statutes).

(3) An executive officer and his close relatives [Paragraph b) of Section 685 of the Civil Code] may not be elected as a member of the supervisory board at the same business association.

(4) Indemnification claims for damages caused to the business association by violation of the rules set forth in Subsections (1)-(3) may be enforced for a period of one year from the occurrence of such damage.

Section 26.
(1) The executive officers shall be responsible for reporting to the court of registration the foundation of the business association, alteration of the articles of association (deed of foundation, statutes), the rights, facts and data entered in the register of companies and changes therein, as well as any other data required by law.

(2) Executive officers shall bear joint and several liability for any damage resulting from the incorrectness of the data, rights or facts reported, or from the delay in filing or failure to file the report.

Section 27.
(1) Executive officers shall safeguard as business secrets any information obtained regarding the affairs of the business association.

(2) Upon request by the members (shareholders), executive officers shall provide information on the affairs of the business association, and allow inspection of its books and documents. In the event that executive officers do not comply with such request, upon request of the member concerned, the court of registration shall oblige the business association to provide information or to provide for inspection.

(3) Exercise of the right pursuant to Subsection (2) by the members (shareholders) may not infringe upon the business interests or business secrets of the business association.

Section 28.
(1) Unless otherwise provided by the articles of association (deed of foundation, statutes), executive officers shall exercise employer"s rights over the employees of the business association. For companies limited by shares, employer"s rights shall be exercised by the board of directors within the framework set forth in the deed of foundation (statutes).

(2) The articles of association (deed of foundation) or a resolution by the business association"s supreme body may, if there are several executive officers, transfer exercise of the employer"s rights to a single executive officer, or to another person employed by the business association.

Section 29.
(1) Executive officers shall conduct the management of the business association with the increased care generally expected from persons occupying such positions, and give priority to the interests of the business association. Executive officers shall be liable to the business association in accordance with the general rules of civil law for damages caused to such by violation of the law, or breach of the articles of association (deed of foundation, statutes), the resolutions of the business association"s supreme body, or their management obligations.

(2) In respect of executive officers with joint authorization to sign for the company, and the board of directors of companies limited by shares, the liability for damages caused according to Subsection (1) shall be joint and several. If such damage is caused by a resolution of the board of directors of a company limited by shares, no liability shall lie with a member of the board of directors who did not take part in the decision or voted against the resolution, and informed the supervisory board thereof in writing within fifteen days after passage of such resolution.

(3) The business association shall be liable for damages caused to third parties by its executive officer acting within his sphere of competence as such.

(4) Following termination of the business association without legal successor, indemnification claims may be brought against the executive officers by the members (shareholders) with membership at the time of the cancellation of the business association by the court of registration, for a period of one year following such cancellation by a final judgment. If, during the existence of the business association, the liability of the member (shareholder) for the obligations of the business association was limited, the member (shareholder) may exercise such indemnification claim up to the proportion due to him from the assets distributed upon termination of the business association.

Section 30.
(1) The mandate of the executive officer shall terminate
a) upon expiration of the mandate,
b) upon removal of the executive officer,
c) upon occurrence of statutory grounds for disqualification,
d) upon resignation,
e) upon death of the executive officer.

(2) Executive officers may resign their mandate at any time. However, if so required by the operation of the business association, such resignation shall only take effect on the sixtieth day after the announcement thereof, unless the business association"s supreme body has already provided for the election of a new executive officer beforehand. Until the resignation takes effect, the executive officer shall participate in making any urgent decisions and taking any urgent measures.

(3) If the executive office is carried out within the framework of a labor relationship, the rules of the Civil Code on contracts of agency (Sections 474-483 of the Civil Code) shall apply correspondingly in respect of the legal relationship of the executive officer.

Title 3.

Supervision of the Operation of Business Associations

Section 31.
(1) If so justified by the number of the members of a business association, or the importance or nature of its activity, or the founders, members (shareholders) deem it otherwise necessary, a supervisory board consisting of no less than three, but no more than fifteen members may be established in the articles of association (deed of foundation).

(2) Establishment of a supervisory board shall be obligatory:
a) for companies limited by shares;
b) for limited liability companies, if the initial capital of the company exceeds fifty million HUF;
c) for any business association, if the annual average of the number of full-time employees employed by the business association exceeds two-hundred.

(3) For a single-man limited liability company, establishment of a supervisory board shall be obligatory only on the basis of Paragraph c) of Subsection (2).

Section 32.
(1) A person elected as a member of the supervisory board shall inform in writing the business associations, at which he is already a supervisory board member, within fifteen days after his acceptance of the new position.

(2) The supervisory board supervises the management of the business association for the business association"s supreme body. The supervisory board may request information from the executive officers or the managerial employees of the business association, and may inspect the books and documents of the business association.

(3) The supervisory board shall examine all substantial business policy reports on the agenda of the meeting of the business association"s supreme body, as well as any proposals relating to issues falling within the exclusive competence of the business association"s supreme body. The business association"s supreme body may pass resolution on the report prepared according to Act XVIII of 1991 on Accounting (hereinafter referred to as the "Accounting Act"), and on the appropriation of after-tax profits only in possession of the written report of the supervisory board.

(4) If, in the judgment of the supervisory board, the activity of the management is contrary to the law, the articles of association (deed of foundation, statutes) or the resolutions of the business association"s supreme body, or otherwise infringes on the interests of the business association or its members (shareholders), the supervisory board shall call an extraordinary meeting of the business association"s supreme body and shall propose its agenda.

(5) Members of the supervisory board shall take part in the meeting of the business association"s supreme body with a right of consultation.

Section 33.
(1) The deed of foundation (statutes) of a company limited by shares, or the articles of association of a limited liability company may transfer to the competence of the supervisory board the election and removal of the members of the board of directors (managing director), the establishment of their remuneration, as well as the approval of the legal transactions set forth in the deed of foundation (statutes, articles of association).

(2) The supervisory board shall report at the next meeting of the business association"s supreme body on the measures it has taken within the competence transferred to it.

(3) If, within its competence pursuant to Subsection (1), the supervisory board has refused to approve a legal transaction, the executive officers of the business association or the board of directors are entitled to convene the business association"s supreme body. In such cases, the members" meeting (general meeting) of the business association may approve the legal transaction by a majority of three-quarters or more of the votes.

Section 34.
(1) The supervisory board shall act as an independent body. The supervisory board shall elect a chairman (if necessary, deputy chairman or deputy chairmen) from among its members. The supervisory board shall have quorum if two-thirds of its members, but at least three members are present. The supervisory board shall pass resolutions by simple majority.

(2) The members of the supervisory board shall act in person, representation is not admissible. A member of the supervisory board may not be instructed in his capacity as such by the members (shareholders) or the employer of the business association.

(3) Meetings of the supervisory board shall be convened and chaired by the chairman. Any member of the supervisory board may request the chairman in writing to convene such meeting, indicating the reason and the purpose thereof. The chairman shall, within a period of eight days after receipt of such request, call a meeting of the supervisory board at a date within a period of thirty days. If the chairman fails to comply with such request, the member shall have the right to convene the meeting himself.

(4) In other respects, the supervisory board shall establish its rules of procedure itself, which shall be approved by the business association"s supreme body.

(5) If the number of supervisory board members falls below the number set forth in the articles of association (deed of foundation, statutes), or there is no person to convene the meeting of the supervisory board, the management of the business association shall convene the business association"s supreme body in the interest of restoring proper operation of the supervisory board.

Section 35.
The supervisory board may entrust any of its members to fulfill certain supervisory tasks, or may divide supervisory duties among its members on a permanent basis. Such division of supervisory duties shall not concern the responsibility of the supervisory board member, nor his right to extend his supervision to other activities falling within the supervisory duties of the supervisory board.

Section 36.
(1) In the case set forth in Paragraph c) of Subsection (2) of Section 31, the employees of the business association shall take part in the supervision of the operation of the business association by way of the supervisory board. In such cases, one-third of the members of the supervisory board shall be comprised of employees" representatives. In the event of an uneven number, such one-third shall be calculated in such a manner which is more favorable for the employees.

(2) If the business association is established through transformation from an organization, at which employees were not represented in the supervisory board, but the conditions set forth in Paragraph c) of Subsection (2) of Section 31 were fulfilled, it shall be ensured in the articles of association (deed of foundation, statutes) that employees take part in the operation of the supervisory board immediately following transformation.

(3) Employees" representatives taking part in the supervisory board shall, with the exception of business secrets, inform the company"s employees by way of the works council.

Section 37.
(1) Following a statement of opinion of the trade unions operating at the business association, the employees" representatives in the supervisory board shall be nominated by the works council from among the employees.

(2) Persons nominated by the works council shall be elected as members of the supervisory board by the business association"s supreme body at its first meeting following such nomination, unless statutory grounds for disqualification exist in respect of the nominees. In this case, a new nomination shall be requested.

(3) In the supervisory board, employees" representatives shall have the same rights and same obligations as all other members. If the opinion of the employees" representatives unanimously differs from the majority standpoint of the supervisory board, the minority standpoint of the employees shall be stated at the meeting of the business association"s supreme body.

(4) Membership of an employees" representative in the supervisory board shall terminate together with the termination of his labor relationship. Employee representatives may only be dismissed by the business association"s supreme body upon the proposal of the works council, unless the works council fails to meet its obligation to make such proposal despite statutory grounds for disqualification.

Section 38.
(1) The period of the mandate of supervisory board members may differ from the period with regard to which the business association"s supreme body has elected the executive officers.

(2) With the exception of employee representation, employees of a business association may not become supervisory board members.

(3) In other respects, Subsections (1)-(2) of Section 23, Section 24 and Section 30 shall apply correspondingly with regard to the formation and termination of supervisory board membership, and Section 25 and Subsection (1) of Section 27 with regard to the contents of the legal relationship.

(4) Supervisory board members shall bear unlimited, joint and several liability for damages caused to the business association through the violation of their supervisory obligation.

Chapter IV
Legal Representation of Business Associations;
Authorization to Sign for the Company

Section 39.
(1) Business associations are represented by their executive officers vis- -vis third parties and before the court and other authorities. The right of representation of executive officers may be restricted in the articles of association (deed of foundation, statutes), or may be distributed among several executive officers. Any restriction of the right of representation shall be void vis-....-vis third parties.

(2) The business association"s supreme body may confer the right of general representation upon an employee appointed by it (hereinafter referred to as "company secretary"). Employees who otherwise satisfy the requirements of executive officers may be appointed as company secretary. If the business association pursues activities at business premises or branch offices other than its registered office, more than one company secretary may be appointed.

(3) The company secretary shall carry out his duties independently, on the basis of the instructions of the executive officers. If the company secretary questions the legality or expediency of an instruction given to him by an executive officer, he may refer to the supervisory board.

(4) In respect of particular groups of issues, executive officers may invest employees of the business association with the right of representation.

(5) The company secretary and employees entitled to representation may not transfer the right of representation to any other party.

Section 40.
(1) Unless otherwise provided by the articles of association (deed of foundation, statutes), the right of the executive officers of the business association and the company secretary to sign for the company, including disposal over the bank account, shall be exclusive, whereas the joint signature of two persons having the right of representation shall be required for the validity of other representatives signing for the company.

(2) The articles of association (deed of foundation, statutes) may stipulate that an executive officer with joint authorization to sign for the company may jointly sign for the company together with an employee entitled to representation.

(3) Signature for the business association shall be effected on the documents of the business association by the persons entitled to represent the business association signing such documents under the company name of the business association, in accordance with their certified specimen signature.

Chapter V.
Guarantees for the Lawful Operation of Business Associations

Title 1.
The Auditor

Section 41.
(1) Election of an auditor shall be obligatory
a) for companies limited by shares,
b) for limited liability companies, the initial capital of which exceeds fifty million HUF, furthermore, in the case of single-man limited liability companies, and
c) if so prescribed by law.

(2) The business association"s supreme body may decide on the election of an auditor even if this is not obligatory.

(3) Persons included in the register of auditors in accordance with the relevant legal regulations may be elected as an auditor.

(4) The auditor shall be elected, or appointed in the articles of association (deed of foundation, statutes) for a definite period, such period not to exceed five years. Following election (appointment) of the auditor, the management of the business association shall conclude a contract in accordance with the general rules of civil law.

(5) If the auditor is an economic organization, it shall indicate the member, executive officer or employee thereof who is personally responsible for auditing. Such person may be appointed only with the consent of the business association"s supreme body.

Section 42.
(1) In the case set forth in Section 41, the business association shall have the authenticity and legal compliance of the report prepared pursuant to the Accounting Act examined by the auditor. Without a statement of opinion by the auditor, the business association"s supreme body may not decide on the report prepared pursuant to the Accounting Act. Furthermore, the auditor shall examine all substantial business reports proposed to the business association"s supreme body from the point of view of whether such contain true data and comply with all legal regulations.

(2) The auditor may inspect the books of the business association, may request information from the executive officers, supervisory board members and employees, and may examine the bank account, the petty cash, the stocks of securities and goods, and the contracts of the business association.

(3) The auditor shall safeguard the information obtained about the affairs of the business association as business secrets.

Section 43.
(1) A founder or member (shareholder) of the business association may not be an auditor. Neither executive officers, supervisory board members, close relatives of such [Paragraph b) of Section 685 of the Civil Code] nor employees of the business association for a period of three years after termination of such capacity, may be elected as auditors.

(2) If the auditor is an economic organization, in addition to the person pursuing the activity of the auditor, the regulations related to personal conflict of interest shall also be applied to all members (shareholders), executive officers and managerial employees of the economic organization.

(3) The person responsible for the audit may not be commissioned to carry out any other work for the business association. Similarly, an auditor economic organization may carry out other duties only if the subject of such commission does not concern the duties of the auditor set forth in the contract indicated under Subsection (4) of Section 41.

(4) Other laws may establish other regulations pertaining to conflicts of interest in respect of auditors.

Section 44.
(1) The auditor shall take part in meetings of the business association"s supreme body. If so required, the auditor may be invited to attend the meeting of the management body or the supervisory board with a right of consultation, or the auditor himself may initiate his attendance at such meetings. In this latter case, the request of the auditor may be refused only in exceptionally justified cases.

(2) If the auditor ascertains or otherwise learns that a considerable decrease in assets of the business association is probable, or perceives any other issue which entails the liability of the executive officers or the supervisory board members as set forth in this Act, he shall request that the business association"s supreme body be convened.

(3) If the business association"s supreme body is not convened, or the supreme body fails to take the decisions required by legal regulations, the auditor shall inform the court of registration exercising legal supervision.

Section 45.
(1) The mandate of the auditor shall terminate upon the removal of the auditor based on the decision by the business association"s supreme body, upon expiration of the period of the contract concluded with the auditor, upon the occurrence of statutory grounds for disqualification, or upon termination of the contract by the auditor. The auditor may be re-elected.

(2) In respect of the liability of the auditor, the rules on liability set forth in legal regulations pertaining to auditors, and in the Civil Code shall be authoritative.

Title 2.
Legal Supervision by the Court of Registration

Section 46.
Pursuant to the provisions of the Act on Company Registration, Public Company Information and Court Registration Proceedings, legal supervision of business associations shall be carried out by the court of registration competent for the registered office of the business association.

Title 3.
Court Review of Resolutions of Business Associations

Section 47.
(1) Any member (shareholder) of a business association may request a court review of resolutions passed by the organs of the business association with reference to the point that such resolution conflicts with this Act, other legal regulations, or the articles of association (deed of foundation, statutes).

(2) With reference to the violation set forth in Subsection (1), any executive officer or supervisory board member may also initiate court review of a resolution passed by the business association"s supreme body.

(3) The claim for court review of a resolution of the business association violating the law shall be lodged against the business association within thirty days after learning of such resolution. Following expiration of a ninety day non-appealable deadline from the date of passing the resolution, the resolution may not be contested even if it has not been communicated to the person entitled to lodge a claim or he has not learned thereof.

(4) The right to lodge claims may not be validly excluded, but shall not be granted to persons who contributed with their votes to the passage of the resolution, except for cases of mistake, misrepresentation or duress.

(5) Lodging a claim shall have no delaying force on the implementation of the resolution, but the implementation of the resolution may be suspended by the court, against which there shall be no appeal.

Section 48.
(1) If a review is initiated by an executive officer of the business association, and the business association remains without an executive officer who can represent the business association, a supervisory board member appointed by the supervisory board shall represent the business association in the proceedings. If the business association does not have a supervisory board, or all the supervisory board members are involved in the proceedings as plaintiffs, the court shall order a curator ad litem to represent the business association.

(2) Resolutions in violation of the law shall be repealed by the court.

(3) The court judgment passed in the course of the review of a resolution of the business association in violation of the law shall also extend to those members (shareholders) who were not involved in the proceedings.

Title 4.
Exclusion of Members by Court Judgment

Section 49.
(1) A member of a business association shall be excluded from the business association by the court based on a claim initiated by the business association against such member, if the continued membership of the person in question would seriously endanger achievement of the business association"s purpose.

(2) No claims may be lodged for the exclusion of shareholders. A member may not be excluded from a business association, if the business association has only two members. A member holding three-quarters or more of the votes may not be excluded.

(3) The supreme body of a business association shall pass a resolution to lodge a claim, for which a majority of three-quarters of the votes shall be required. Such resolution shall be made in writing. The person concerned may not vote on the issue of lodging the claim. The claim may be submitted to the county courts (Municipal Court of Budapest) competent for the registered office of the business association within a fifteen day non-appealable deadline from the date of passing the resolution.

(4) A separate claim may not be lodged for court review of the business association"s resolution on lodging a claim, however, the defendant may refer to the illegality thereof in the exclusion proceedings.

Section 50.
(1) Both in the first and second instances, the court shall act in extraordinary proceedings for the exclusion of a member. If no other arrangements are required, the hearing shall be set for no later than the fifteenth day after receipt of the statement of claim by the court, or for arbitration proceedings, after formation of the council.

(2) Claims for the exclusion of a member may not be joined with any other claim, and no amendment of the claim or counterclaim is admissible. As compared to the originally submitted statement of facts, the plaintiff may not turn to other factual arguments in exclusion proceedings.

(3) During exclusion proceedings, stay or suspension is not admissible, and court injunctions may not be issued. The plaintiff may withdraw his claim at any stage of the proceedings without the consent of the defendant.

(4) Upon request, the court may suspend the defendant from exercising his membership rights until the end of the proceedings by a final judgment. Such suspension shall not affect the right of the member to the share of after-tax profits due to him. There shall be no appeal against a judgment ordering suspension, however, the court itself may amend such judgment upon request.

(5) With the exception of the cases set forth as obligatory in the Act, during the period of suspension of membership rights, the business association may not alter the articles of association, may not initiate the exclusion of another member, may not resolve the transformation of the business association, and may not resolve termination without legal successor.

(6) The deadline for submitting an appeal against the judgment passed in the exclusion proceedings shall be eight days. Re-opening of the proceedings may not be initiated against a final judgment.

Title 5.
Minority Rights in the Interest of Lawful Operation

Section 51.
(1) Members (shareholders) representing one-tenth or more of the votes may at any point in time request that the business association"s supreme body be convened, indicating the reason and the purpose thereof. The articles of association (deed of foundation, statutes) may also grant this right to members (shareholders) representing a smaller proportion of the votes. If the management does not comply with this request within a period of thirty days, upon the request of the members making the proposal, the court of registration shall convene the meeting of the business association"s supreme body within a period of thirty days after the submission of a request to this effect. There shall be no appeal against a judgment of the court of registration admitting such a request.

(2) The court of registration shall be obliged to convene the business association"s supreme body pursuant to Subsection (1) only if the members (shareholders) making the proposal advance the necessary costs, and provide for all other conditions for the meeting to be held. The business association"s supreme body shall decide whether the costs incurred by convening the business association"s supreme body be borne by the business association or the persons convening such meeting.

(3) If the business association"s supreme body has refused a proposal that the last report prepared pursuant to the Accounting Act, or any event which has occurred in the management during the last two years be examined by an auditor, or, if the decision on a regularly announced proposal to this effect has been ignored by the supreme body, such examination shall be ordered by the court of registration upon a request by members (shareholders) representing one-tenth or more of the eligible votes.

(4) Under penalty of forfeiture of rights, the request set forth in Subsection (3) shall be submitted within a period of thirty days after the date of the meeting of the business association"s supreme body. In the event of a judgment admitting such request, an auditor shall be appointed by the court of registration, and the costs thereof shall be advanced by the business association. The business association"s supreme body shall decide whether the costs incurred through the activity of the auditor be borne by the business association or the persons proposing the examination.

(5) If the supreme body of a business association has refused the proposal to enforce a claim against the members, executive officers, supervisory board members or against the auditor of the business association, or, if no decision on a regularly announced proposal to this effect has been reached by the business association"s supreme body, members (shareholders) representing one-tenth or more of the eligible votes may, under penalty of forfeiture of rights, enforce such claim on behalf of the business association in court proceedings within a period of thirty days after the meeting of the business association"s supreme body. The costs of lodging the claim shall be advanced by the business association. However, in the event that the action fails, the costs thereof shall be jointly and severally reimbursed to the business association by the members (shareholders) lodging such claim.

Title 6.
Arbitration Proceedings

Section 52.
(1) In accordance with the provisions of Act LXXI of 1994 on Arbitration, permanent or contingent arbitration may be stipulated in the articles of association (deed of foundation, statutes) with regard to corporate legal disputes.

(2) Legal disputes arising in relation to the articles of association or the operation of the business association in the legal relationship between the business association and its members (shareholders), including former members excluded from, or otherwise withdrawing from the business association, or among the members (shareholders) inter se shall qualify as corporate legal disputes.

Chapter VI.
Termination of Business Associations

Section 53.
(1) The business association shall terminate,
a) if the period of time set forth in the articles of association (deed of foundation, statutes) expires or any other condition of termination is realized;
b) if it resolves its termination without legal successor;
c) if it resolves its termination with legal succession (transformation);
d) if the number of its members declines to one person, unless otherwise provided by the provisions on the individual forms of business associations;
e) upon being declared terminated by the court of registration;
f) upon the order of the court of registration on its cancellation ex officio;
g) if terminated by the court in liquidation proceedings;
h) if so prescribed by the provisions of this Act on the individual forms of business associations.

(2) Business associations shall be terminated upon cancellation from the register of companies.

Section 54.
(1) In the event of termination of a business association, claims to be enforced on the basis of obligations of the business association being terminated shall lapse after a period of five years, unless legal regulations establish a shorter limitation period for certain claims.

(2) If the liability of a member for obligations of the business association was unlimited during the existence of the business association, and his membership was terminated prior to the termination of the business association, the limitation period shall be reckoned from the termination of the membership.

Section 55.
(1) In the event of termination of a business association with legal succession, the legal successor business association shall be responsible for the obligations of the legal predecessor business association. The liability of the members (shareholders) of the legal predecessor business association may be established only if the legal successor business association failed to fulfill its obligation to accept liability.

(2) Members (shareholders) of business associations shall be liable for the obligations of business associations terminated without legal successor.

Section 56.
(1) If the liability of a member for the obligations of the business association was unlimited, joint and several during the existence of the business association, his obligation to accept liability shall also be unlimited and joint and several for the obligations of the terminated business association. A debt incurred with regard to the obligation to accept liability among members shall be divided proportionately to their share in the assets of the business association.

(2) If the liability of a member for the obligations of the business association was limited during the existence of the business association, the liability of the member (shareholder) for the obligations of the terminated business association shall be limited to that share of the assets distributed upon the termination of the business association which is due to such member (shareholder).

(3) A member who has abused his limited liability may not make reference to such limited liability. Therefore, a member of a limited liability company or a company limited by shares, who has abused the separate legal personality and limited liability of the business association to the detriment of creditors, shall bear unlimited, joint and several liability for the unsatisfied obligations of such business association.

(4) The liability of the members according to Subsection (3) shall be valid in particular, if such members disposed over the assets of the business association as if they had been their own, or, if they reduced the assets of the business association for the benefit of others or their own in a way, in which they knew or should have known with due care that the business association would not be able to satisfy its obligations towards third parties as a result thereof.

Section 57.
(1) With the exception of liquidation proceedings and cancellation by the court of registration ex officio, upon the termination of a business association without legal successor, voluntary dissolution is admissible.

(2) In its resolution on the commencement of voluntary dissolution, the business association"s supreme body shall appoint the person in charge of voluntary dissolution. In addition to the executive officers of the business association, other persons may also be appointed as the person in charge of voluntary dissolution.

(3) Any of the creditors of the business association, or the members (shareholders) representing one-tenth or more of the subscribed capital may, indicating the reason thereof, request the court of registration in writing to appoint a different person to be in charge of voluntary dissolution. The articles of association (deed of foundation, statutes) may also grant this right to members (shareholders) representing a smaller proportion of the subscribed capital.

(4) The court of registration shall render a decision on requests pursuant to Subsection (3) within eight days. There shall be no appeal against a judgment of the court of registration admitting such request.

(5) The detailed regulations for voluntary dissolution are contained in Act IL of 1991 on Bankruptcy Proceedings, Liquidation Proceedings and Voluntary Dissolution.

Section 58.
Chapter VII provides for the termination of business associations with legal succession.