IX.

Act CXLIV of 1997

on Business Associations

 

PART 3:

Chapter XI.

Limited Liability Companies

Section 121.
(1) Limited liability companies (hereinafter referred to in this Chapter as "company") are business associations founded with an initial capital (subscribed capital) consisting of capital contributions of a pre-determined amount, in the case of which the obligation of members to the company extends only to the provision of their capital contributions, and to other possible contributions as set forth in the articles of association. With the exceptions set forth in this Act, members shall not be liable for the obligations of the company.
(2) The designation "limited liability company" (korlátolt felelosségu társaság), or its abbreviation "kft.", shall be indicated in the company"s name.

Title 1.
Foundation of Companies

Section 122.
Members may not be recruited by public invitation.
Section 123.
(1) In addition to the items listed under Subsection (1) of Section 11, the following shall also be defined in the articles of association:
a) the amount of the initial capital and the capital contributions of the individual members;
b) the method and due date of the payment of the contributions in cash not paid up in full;
c) the extent of voting rights;
d) the first managing director, and in the case of several managing directors, the method of representation;
e) the method of signing for the company;
f) if establishment of a supervisory board is obligatory, the members of the first supervisory board;
g) if election of an auditor is obligatory, the person of the first auditor;
h) the order of calling repeated members" meetings.
(2) If so required, the articles of association shall provide for the following:
a) the contributions in kind and the value thereof;
b) other services representing pecuniary value (ancillary services) owed by members, the conditions thereof, as well as the amount of penalty payable in the event of the non-performance or insufficient performance of ancillary services;
c) the authorization of the members" meeting to order additional payments and to define the conditions thereof;
d) the business shares securing distinct membership rights;
e) the exclusion or restriction of the transferability of business shares, and making the transfer of such shares subject to the consent of the company;
f) in the case of legal succession, the exclusion of the devolution or division of business shares;
g) the permission to withdraw business shares;
h) employees" business shares, and preferential rights attached thereunto;
i) the rules on quorum and the method of passing resolutions;
j) the rules of calling the members" meeting at a place other than the registered office, as well as the deadline for passing resolutions outside a meeting;
k) the indication of a value limit, above which transactions shall fall within the exclusive competence of the members" meeting;
l) the distribution of after-tax profits, and the proportion of assets due to members upon the termination of the company, if the method of calculating such is different from the proportion of capital contributions;
m) the entitlement of all members to management and representation;
n) the restriction of the representation rights of managing directors;
o) if a supervisory board is established, the appointment of the members of the first supervisory board;
p) if an auditor is elected, the appointment of the first auditor;
r) in the case of an initial capital increase, the method of exercising preferential rights.
Section 124.
(1) The initial capital of the company consists of the amount of capital contributions of the individual members.
(2) Capital contributions are the contributions of the members, which consists of contributions in cash and contributions in kind.
(3) Contributions in kind constituting a part of the subscribed capital may be any marketable object or intellectual work of pecuniary value, or any right representing pecuniary value. Only such objects, intellectual works or rights which are subject to execution may be taken into account as a contribution in kind and which may be subsequently transferred by the business association without the consent (permission) of a third party. A permission granted upon the provision of the contribution in kind shall qualify as such a case.
(4) The amount of initial capital may not be less than three million HUF.
(5) Upon foundation, the amount of contributions in cash may not be less than thirty per cent of the initial capital or one million HUF.
Section 125.
(1) The capital contributions of members may be of varying value, but the value of each capital contribution may not be less than one-hundred thousand HUF. Capital contributions shall be expressed in HUF and shall be exactly divisible by ten thousand.
(2) Each member shall have one capital contribution. However, according to the regulations of joint property, one capital contribution may have several owners.
Section 126.
(1) A company may be registered only if, prior to the submission of the application for registration,
a) contributions in kind have been made available to the company in full, and
b) at least half of each contribution in cash, and an amount of one million HUF in total have been deposited into the company"s bank account.
(2) Simultaneously upon submission for registration to the court of registration, the managing directors shall certify fulfillment of the conditions contained in Subsection (1).
Section 127.
If the full amount of contributions in cash was not paid up at the time of the foundation of the company, the method and due date of the payment of the remaining amounts shall be set forth in the articles of association. All contributions in cash shall be paid up within a period of one year following registration of the company, which shall be reported by the managing director to the court of registration.
Section 128.
Members of a company, who have knowingly had the contribution of any member approved by the company at a value exceeding its value at the time of the provision thereof, or who otherwise acted fraudulently in the course of the foundation, shall bear unlimited, joint and several liability for all resulting damages.
Title 2.
Legal Relations between Companies and Their Members
Section 129.
Members of companies are obliged to pay the contributions in cash and to make available the contributions in kind. Members of companies may not be exempted from such payment, and any offsetting of payments with the company is not admissible.
Section 130.
(1) The business share of members (Section 133), whose membership has been terminated pursuant to Section 13, shall be sold on the basis of the agreement with the member concerned. If such agreement does not exist, a public auction shall be held within sixty days after termination of membership.
(2) The regulations on public auctions are contained in Section 146-149.
Section 131.
(1) In addition to providing their capital contributions, members of companies may undertake to perform other services representing pecuniary value (ancillary services). The personal assistance of members, excluding those of elected officers, may also qualify as ancillary services if such is not based on a labor relationship. The conditions for performing ancillary services shall be provided for in the articles of association.
(2) Members may be entitled to separate remuneration for ancillary services.
(3) The transfer of a business share shall terminate the obligation to perform ancillary services, unless the party acquiring the business share assumes such obligation with the consent of the company.
Section 132.
(1) In order to cover losses, the articles of association may authorize the members" meeting to order an obligation of additional payments by members. The maximum amount payable by members on this basis, as well as the method, frequency and timing of performing additional payments shall be set forth in the articles of association. The amount of additional payments shall not increase the capital contributions of members.
(2) Unless otherwise provided by the articles of association, the obligation of additional payments shall be established and performed according to the proportion of capital contributions. Additional payments may also be ordered prior to the full payment of all capital contributions.
(3) The provisions of Section 13 and Section 130 shall be applied to the delayed performance or non-performance of additional payments, whereby the amount of additional payments yet to be performed and due to the company shall be deducted from the purchase price of business shares.
(4) Additional payments which are not required to cover losses shall be repaid to members. Such repayment, however, may only take place after full payment of all capital contributions.
Section 133.
(1) Following registration of the company, the rights of members and the share due to them from the assets of the company are embodied by the business shares. Identical membership rights shall be attached to equivalent business shares. The articles of association may, however, invest certain business shares with membership rights which are different from those of other business shares.
(2) Each member shall have only one business share. If a member acquire another independent business share, his business share shall increase by the business share acquired.
(3) One business share may have several owners. Such owners shall qualify as one member vis- -vis the company; their rights, including the conclusion of the articles of association, may be exercised only by their joint representative, and they shall bear joint and several liability for the duties owed by such member.
(4) Joint representatives shall report to the company all changes in the person or ownership ratio of co-owners. A change in the person of the joint representative shall be reported to the company by the new joint representative.
Section 134.
(1) With the exception of own business shares of companies (Section 143), business shares may be freely transferred to the members of the company. Members may grant each other pre-emption rights in the articles of association.
(2) With the exceptions contained in Section 130 and Subsection (3) of Section 132, business shares may be transferred to non-member parties only if the member concerned has paid his capital contribution in full. The member concerned, the company or a person appointed by the members" meeting shall, in this order, have pre-emption rights for business shares to be transferred by means of a contract of sale.
(3) If the member concerned fails to make a statement within fifteen days after the announcement of the intention of transfer, he shall be considered not to have exercised his pre-emption right. For the company or a person appointed by such, the deadline shall be thirty days from such announcement. The latter deadline shall also apply to the consent specified in Section 137.
Section 135.
When selling the business share of a member in the course of court execution proceedings, the company or a person appointed by the members" meeting shall, in this order, have pre-emption rights for such business share. In the course thereof, the provisions of Section 134 shall apply to the exercise of the pre-emption rights.
Section 136.
(1) Any transfer of pre-emption rights shall be null and void. Pre-emption rights may not be validly waived.
(2) A claim for the establishment of the invalidity of a contract concluded in violation of pre-emption rights may only be lodged within a one year non-appealable deadline.
Section 137.
(1) Members may transfer business shares to non-member parties subject to the consent of the company. The conditions for granting or refusing such consent shall be provided for in the articles of association.
(2) Transfer of business shares based on legal grounds other than a contract of sale may be excluded or restricted in the articles of association.
Section 138.
(1) In the event of the transfer of business shares, the rights and obligations of the transferor attached to his membership shall pass to the party acquiring the business shares.
(2) The articles of association need not be altered as a result of a transfer of business shares.
(3) In order for the change of ownership and date thereof to be entered in the register of companies (Section 157), the party acquiring the business share shall report such information to the company. Such report shall be drawn up in a notarial document or a private document representing conclusive evidence, and, in addition to the fact of acquiring the business share, shall contain a statement that the party acquiring the business share acknowledges the provisions of the articles of association as binding.
Section 139.
Upon the death or termination of a member, his business share shall devolve to his legal successor. The articles of association may prohibit such devolution, in which case the articles of association shall provide for redemption of the business share by the members or the company. If a member is terminated without legal successor, the company shall take possession of the business share, whereby the value of such shall be compensated by the company.
Section 140.
(1) Business shares may only be divided in the event of transfer, legal succession of the member terminated or inheritance. Such division shall be subject to the consent of the members" meeting.
(2) The provisions related to the minimum value of capital contributions shall apply also to the division of business shares.
(3) The articles of association may prohibit the division of business shares.
Section 141.
(1) During the company"s existence, members may not reclaim from the company contributions which they have provided. Members may lay claim only to that portion of the company"s after-tax profit calculated according to the legal regulations on accounting, which has been ordered to be distributed by the members" meeting (dividend). Members are only entitled to dividends in proportion to the contributions which they have already provided.
(2) Unless otherwise provided by the articles of association, after-tax profits shall be distributed to members in proportion to their capital contributions.
(3) Upon the proposal of the managing director, approved by the supervisory board in the event that a supervisory board operates at the company, the members" meeting may pass a resolution on the payment of dividends simultaneously upon the approval of the report prepared pursuant to the Accounting Act. No dividends may be paid to members if, as a result of such, the equity of the company does not reach the initial capital of the company as set forth in the legal regulations on accounting.
(4) Prior to the approval of the report prepared pursuant to the Accounting Act, interim dividends may be paid if, on the basis of the interim balance sheet prepared pursuant to the provisions of the Accounting Act, and approved by the members" meeting, it is highly likely that following this there will be no obstacle to paying dividends at year end pursuant to the provisions of Subsection (1)-(3).
(5) Members may not be obliged to repay dividends received in good faith. This provision shall not apply to interim dividends paid to members during the course of the year.
Section 142.
(1) With the exception of the reduction of initial capital and remuneration for ancillary services, no payments to the debit of initial capital may be made to members on the basis of their membership.
(2) Payments that have been made contrary to the provisions of Subsection (1) shall be repaid to the company. This provision shall not apply to dividends received by members in good faith.
Section 143.
(1) Based on a resolution of the members" meeting passed by a majority of three-quarters or more of the votes, a company may acquire one-third of the business shares at the most, from its assets in excess of initial capital. Only those business shares may be acquired, with regard to which the capital contributions have been paid up in full.
(2) A company may not exercise voting rights for business shares acquired by the company (own business shares).
(3) Within a period of one year following the purchase thereof, the company shall alienate the business shares purchased pursuant to Subsection (1), shall convey the same to members, in proportion to their capital contributions, without compensation, or shall withdraw such business shares pursuant to the rules of initial capital reduction following expiration of the aforementioned deadline.
Section 144.
(1) The company shall take possession of business shares
a) upon termination of membership pursuant to Section 13, or the exclusion of the member concerned by the court, in the interest of completing the auction, or
b) upon termination of the member concerned without legal successor.
(2) If auction pursuant to Paragraph a) of Subsection (1) fails, the company shall decide within a period of thirty days after the last auction, whether the business share in question (capital contribution, Section 149)
a) shall be purchased by the company from its assets in excess of initial capital, or
b) shall be purchased by the company"s members in proportion to their capital contributions, or
c) shall be withdrawn by the company.
(3) In the case of Paragraph b) of Subsection (1), the business share may be withdrawn even if such withdrawal is not rendered possible in the articles of association. The company may also resolve that the business share be conveyed to the members, in proportion to their capital contributions, without compensation.
(4) With the exception contained in Subsection (3), business shares may be withdrawn only if the articles of association expressly allows such withdrawal. Withdrawal of a business share need not be subject to the consent of the member concerned, if the conditions for withdrawal were set forth in the articles of association when such member acquired the business share.
(5) Upon the order of withdrawal, the capital contribution (business share) shall cease to exist, and the initial capital shall be reduced by the value thereof pursuant to the rules of capital reduction.
Section 145.
(1) The articles of association may provide that employees of the company may acquire employees" business shares free of charge or at a reduced price.
(2) Employees" business shares may only be formed from the company"s assets in excess of initial capital, with a simultaneous increase in initial capital. Employees" business shares may not exceed fifteen per cent of initial capital.
(3) The owners of employees" business shares are entitled to the same rights as all other members of the company. The articles of association may, however, grant preferential rights to the owners of employees" business shares.
(4) Unless otherwise provided by the articles of association, the provisions contained in Section 146 shall be applied to the transfer, devolution and termination of employees" business shares.
Section 146.
(1) Employees" business shares may be transferred only to the employees of the company, or to persons whose employment relationship is terminated due to retirement.
(2) In the event of the death of an employee or the termination of his employment relationship, excluding retirement, his heir or former employer shall have the right to transfer the employees" business share in question to other employees of the company within a period of six months. In the event that this deadline expires without success, the company shall, at the first meeting of members" meeting thereafter, withdraw the employees" business share in question together with a corresponding reduction in initial capital, or shall decide to sell the same, changing the type thereof (transformation of business shares).
(3) In the event of inheritance, the deadline of six months set forth in Subsection (2) shall be calculated
a) from the death of the testator, if no probate is held,
b) from the date when the order of distribution providing for transfer of the inheritance with full effect becomes final, if a probate is held,
c) from the date when the judgment of the court becomes final, in the event of inheritance proceedings.
(4) In the event of the withdrawal of an employees" business share or the transfer of the same following transformation, the amount of the capital contribution shall be due to the former employee or his heir, which shall be disbursed, for heirs, within a period of thirty days, and for former employees, within a period of one year, respectively, following the withdrawal or transfer of the business share.
Section 147.
(1) The company shall be obliged to sell the business share of a member excluded by the court. Such business share shall be sold at a public auction, to be held within a period of forty-five days after the date when the judgment ordering exclusion of the member becomes final. The business share may be sold by other means only with the consent of the member excluded.
(2) Before putting the business share up for auction, an advertisement of auction shall be published in the Company Gazette at least eight days in advance of the date of the auction. The following shall be defined in such advertisement:
a) the name and registered office of the company;
b) the place and time of the auction;
c) the method and deadline of payment;
d) the key data of the business share to be auctioned, including its upset price.
(3) With the exception of the member whose business share is put up for auction, anyone may take part in the auction in person or by way of a representative. Authorization of representatives shall be drawn up in a notarial document or private document representing conclusive evidence.
Section 148.
(1) Auctions shall be held in the presence of a notary public. At the auction, the buyer offering the highest bid may purchase the business share in question, and is obliged to pay up the full purchase price, unless a different method of payment has been defined by the company in the advertisement. The members of the company and the company, in this order, shall have pre-emption rights at the price reached and under the method of payment determined at the auction, which may be exercised by said parties within a period of thirty days after the auction at the request of the managing director. The result of the auction shall be communicated to entitled parties by the managing director.
(2) In the course of the first auction, the business share in question may not be sold for a price amounting to less than two-thirds of the value of the capital contribution as set forth in the articles of association. If the first auction fails, the auction may be repeated several times. In the course of repeated auctions, the business share may be sold at a lower price, but not below the company"s claim.
(3) The provisions contained in Subsection (1) of Section 120 of the Civil Code shall be applied to the acquisition of property by a buyer at auctions.
(4) Following deduction of the auction costs, first the claim of the company on the unpaid part of the capital contribution shall be satisfied from the purchase price paid, whereas the rest shall be due to the former member concerned. If the member was excluded from the company by the court, then, following deduction of the costs, the full purchase price reached at the auction shall be due to the member excluded.
Section 149.
In the event of termination of membership pursuant to Section 13, or exclusion of a member, if auction has failed, the former member may lay claim to that portion of his capital contribution which was provided by him, or to the amount of his capital contribution.
Title 3.
Organizations of Companies
Members" Meeting
Section 150.
(1) The supreme body of a company is the members" meeting. Members" meetings shall be convened at least once every year.
(2) The following shall fall within the exclusive competence of the members" meeting"
a) approval of the report prepared pursuant to the Accounting Act, including decision on the appropriation of after-tax profits;
b) order and repayment of additional payments;
c) decision to pay interim dividends;
d) consent for the division of business shares, and order on the withdrawal of business shares;
e) resolution on initiating the exclusion of a member;
f) decision on business shares taken into possession, and the purchase of such by members;
g) with the exception contained in Section 47, election and removal of the managing director, and the establishment of his remuneration, as well as the exercise of employer"s rights if the managing director is also employed by the company;
h) election and removal of supervisory board members, and the establishment of their remuneration;
i) election and removal of the auditor;
j) approval to conclude contracts which take place between the company and one of its members, its managing director or their close relatives [Paragraph b) of Section 685 of the Civil Code];
k) enforcement of indemnification claims against members responsible for foundation, managing directors or supervisory board members;
l) decision on termination without legal successor or transformation of the company;
m) alteration of the articles of association;
n) all issues which are assigned to the competence of the members" meeting by the law or the articles of association.
Section 151.
(1) Members may be represented in the members" meeting by persons so authorized. Managing directors, company secretaries, supervisory board members and the auditor may not be representatives. Authorization shall be drawn up in a notarial document or private document representing conclusive evidence.
(2) The members" meeting has quorum if at least half of the initial capital or the majority of the eligible votes are represented. The articles of association may stipulate a higher rate of participation.
(3) Unless otherwise provided by the articles of association, if the members" meeting did not have quorum, members" meetings repeated as a result of this shall have a quorum for the issues of the original agenda irrespective of the degree of initial capital or voting rights represented by those present.
Section 152.
(1) Unless otherwise provided by law or the articles of association, the members" meeting shall be convened by the managing director.
(2) In addition to the cases defined in this Act or the articles of association, a members" meeting shall be convened if it is otherwise so required in the interest of the company. A members" meeting shall be convened without delay in order to provide for the necessary measures if it is evident from the balance sheet and the books of the company that, due to losses, the equity has decreased to half of the initial capital or below the value set forth in Subsection (4) of Section 124, and also in the event that the company has stopped payments and its assets do not cover its debts.
(3) In the cases defined in Subsection (2), the members shall decide on the order of additional payments, or, if the articles of association do not provide for this possibility, the provision of the initial capital in some other way or the reduction of the initial capital, transformation of the company into an unlimited or limited partnership, or, failing the above, termination of the company.
Section 153.
(1) Unless otherwise provided by the articles of association, members" meetings shall be convened at the registered office of the company. Any deviation from this shall be subject to the prior consent of all members.
(2) Members shall be invited to the members" meeting, announcing the agenda of the meeting at the same time. A period of at least fifteen days shall pass between dispatch of the invitations and the date of the members" meeting.
(3) Any of member shall have the right to request for the discussion of an issue proposed by him, if his proposal is communicated to the members at least three days in advance of the members" meeting.
(4) If the members" meeting has been convened in contravention of the rules, it may pass resolutions only if all members are present and none of the members protests against holding such meeting.
(5) Members" meetings repeated due to lack of quorum may also be convened subject to the same conditions as indicated in the invitation to the original members" meeting.
Section 154.
(1) With the exception of resolutions on the approval of the report prepared pursuant to the Accounting Act and on appropriation of after-tax profits, members may pass resolutions without holding a members" meeting.
(2) Unless the articles of association specifies a shorter deadline, the draft of the resolution proposed outside a meeting shall be communicated to the members in writing, setting a deadline of eight days, who shall cast their votes in writing. Resolutions shall be considered to have been passed on the day following the receipt of the last vote. The managing director shall inform the members of the result of the vote in writing within eight days after receipt of the last vote.
(3) Upon the request of any member, the members" meeting shall be convened to discuss the draft resolution.
Section 155.
(1) Managing directors shall cause minutes of members" meetings to be made. The minutes shall contain the place and time of the members" meeting, the persons present and the extent of voting rights represented by such persons, significant events, statements and resolutions taking place during the members" meeting, the number of votes cast for and against resolutions, and the persons abstaining from or not taking part in the vote.
(2) The minutes shall be signed by the managing director and a member present at the meeting, and elected as the person in charge of confirming the minutes.
(3) Managing directors shall keep continuous records of resolutions passed by the members" meeting (register of resolutions). Once passed, resolutions shall be entered in the register of resolutions without delay.
(4) Any member may inspect the minutes and the register of resolutions, and may request a copy confirmed by the managing director of the contents thereof.
Managing Directors
Section 156.
Administration of the company"s affairs and representation of the company shall be carried out by one or more managing directors elected from among members or non-members. The articles of association may provide that all members be entitled to management and representation, in which case they shall be considered managing directors.
Section 157.
(1) Managing directors shall keep records of the members of the company (hereinafter referred to as "register of members").
(2) The following shall be indicated in the register of members:
a) the name (company), domicile (registered office) and capital contribution of each member;
b) the amount of initial capital;
c) the provisions of the articles of association on possible additional payments and ancillary services, as well as on the restriction or exclusion of the transfer of business shares.
(3) Any change in the person or business shares of members, in particular, the transfer (devolution) or division of business shares, or the acquisition or withdrawal thereof by the company shall be entered in the register of members by the managing director.
(4) Managing directors shall submit the register of members or, if the data contained therein have changed, the valid register of members to the court of registration.
(5) The register of members may be inspected by anyone at the registered office of the company, if his interest is rendered probable.
Section 158.
(1) A resolution of the members" meeting passed by three-quarters or more of the votes shall be required for the removal of managing directors.
(2) If the number of the managing directors of the company falls below the number set forth in the articles of association, the managing director shall convene the members" meeting within a period of thirty days.
(3) If the company is left without a managing director, upon the request of any member or creditor, the court of registration shall convene the members" meeting within the framework of its legal supervision procedures.
Title 4.
Alteration of the Articles of Association, Increase and Reduction of Initial Capital
Section 159.
(1) A resolution of the members" meeting passed by three-quarters or more of the votes shall be required for the alteration of the articles of association.
(2) The members" meeting need not be held and formal alteration of the articles of association is not required for a change in the person of the members.
Section 160.
A resolution of the members" meeting passed unanimously shall be required to increase the obligations of members contained in the articles of association, to establish new obligations or to restrict special rights of certain members.
Section 161.
(1) If the members" meeting resolves an increase of initial capital, with the exceptions contained in Subsection (2) of Section 145 and Section 165, such increased initial capital shall be covered through the payment (provision) of new capital contributions.
(2) With the exception contained in Section 165, initial capital may be increased only if all previous capital contributions have been paid up in full.
Section 162.
(1) Members of companies registered prior to an increase of initial capital shall have pre-emption rights to acquire new capital contributions within a period of thirty days after passage of the resolution on the initial capital increase. Unless otherwise provided by the articles of association, members may exercise this right in proportion to their capital contributions.
(2) If members have not exercised their pre-emption rights within the above deadline, persons appointed by them, or failing this, any person shall have the right to acquire the new capital contributions.
(3) The provisions of Subsections (1)-(2) may not be applied if the initial capital is increased in the interest of establishing employees" business shares.
Section 163.
A declaration drawn up in a notarial document or private document representing conclusive evidence shall be required to acquire new capital contributions being established through initial capital increase. The ancillary services undertaken shall be indicated in such declaration, and a statement shall be made therein that the person making the declaration acknowledges the provisions of the articles of association as binding.
Section 164.
The provisions on the minimum amount of initial capital, the method and due date of payment, the legal consequences of default, the valuation and provision of contributions, as well as on the liability of members providing the contribution shall also be applied to capital contributions being established through an increase of initial capital.
Section 165.
The members" meeting may order an increase of initial capital from the assets of the company in excess of initial capital. Such increase of initial capital shall, without any payment, increase the capital contributions of members in proportion to their previous capital contributions.
Section 166.
(1) The members" meeting may reduce initial capital, and in cases defined in this Act, the members" meeting is obliged to reduce initial capital. Initial capital may not be reduced to an amount below three million HUF. If the initial capital reduction takes place through the repayment of a part of the capital contributions, the minimum amount of the capital contributions remaining may not be lower than one-hundred thousand HUF.
(2) If the reduction of initial capital is required by law, the provisions of Subsections (2)-(4) of Section 167 shall not be applied.
(3) If the reduction of initial capital prescribed by this Act is not rendered possible because the initial capital of the company would fall below the minimum amount set forth in this Act, the members" meeting shall pass a resolution on transformation of the company into some other form of business association, or on termination of the company without legal successor.
Section 167.
(1) In the event of an initial capital reduction, it shall be established in the resolution of the members" meeting deciding thereon whether the initial capital is reduced in the interest of capital withdrawal or the settlement of debts, or for the purpose of increasing some other element of equity.
(2) Following the submission thereof to the court of registration, managing directors shall publish an announcement on the resolution providing for the reduction of initial capital in the Company Gazette on two consecutive occasions, with an interval of thirty days. The following shall be included in such announcement: the date of passing the resolution on initial capital reduction, the amount of original and reduced initial capital, and the method of initial capital reduction. Simultaneously, the company"s creditors shall be notified that claims of creditors disapproving the initial capital reduction should be reported within a period of thirty days after the last publication of such announcement. Known creditors shall also be called upon separately to make such a report.
(3) Claims of creditors, who have reported within said deadline and have disapproved the initial capital reduction, shall be satisfied, or such creditors shall be granted security for any outstanding claims.
(4) Following the deadline set forth in Subsection (2), the managing director shall report to the court of registration that the creditors disapproving the initial capital reduction have been satisfied, or have been granted security. The issues of the Company Gazette containing the announcements shall be attached to such report.
(5) The reduction of initial capital may be entered into the register of companies only after the report pursuant to Subsection (4).
(6) On the basis of an initial capital reduction, repayments to members may be performed only after entry of the initial capital reduction in the register of companies.
Title 5.
Termination of Companies
Section 168.
A resolution of the members" meeting passed by three-quarters or more of the votes shall be required to resolve termination of the company.
Section 169.
(1) In the event of termination of a company by voluntary dissolution, following the publication of the judgment of the court of registration on the voluntary dissolution proceedings, the person in charge of voluntary dissolution himself shall publish an announcement on voluntary dissolution in the Company Gazette, which shall contain the name and domicile of the person in charge of voluntary dissolution, as well as a notification to the creditors that their claims should be reported to the person in charge of voluntary dissolution within a period of forty days after publication of such announcement.
(2) Simultaneously with the submission of the application for the cancellation of the company to the court of registration, the person in charge of voluntary dissolution shall certify that publication pursuant to Subsection (1) has taken place.
(3) The assets of the company may not be distributed until the cancellation of the company.
(4) In the event of termination of a company without legal successor, from the assets remaining after the satisfaction of creditors, first additional payments shall be repaid, then, unless otherwise provided by the articles of association, the remaining assets shall be distributed among the members of the company in proportion to their capital contributions.
(5) If, upon commencement of voluntary dissolution or upon an order of liquidation, the initial capital of the company has not yet been paid up in full, the person in charge of voluntary dissolution or the liquidator shall have the right to make outstanding payments due with immediate effect, and to order the performance thereof by the members, if this is necessary in order to satisfy the debts of the company.
Section 170.
If the number of members in the company declines to one, the company shall not terminate, but shall continue to operate as a single-man company according to the relevant rules. In this case, a separate deed of foundation need not be prepared.
Title 6.
Single-Man Companies
Section 171.
(1) A company may be founded by a single member, or a single-man company may be established in a way in which the ownership of all business shares of an already operating company is acquired by one member (hereinafter referred to as "single-man company").
(2) The approval of a deed of foundation shall be required for the foundation of a single-man company. The provisions on the articles of association shall be applied correspondingly to the contents and formal requirements of the deed of foundation.
(3) In the event of the foundation of a single-man company, all contributions in cash shall be paid up in full, and all contributions in kind shall be made available to the company before the application to the court of registration.
Section 172.
(1) In respect of single-man companies, the member set forth in Subsection (1) of Section 171 shall resolve the issues falling within the competence of the members" meeting, and shall inform in writing the executive officers thereof.
(2) If the member set forth in Subsection (1) of Section 171 is a natural person, the deed of foundation of the single-man company may provide that such member be entitled to management and representation.
(3) If the member set forth in Subsection (1) of Section 171 is an economic organization, the same person may not be an executive officer or a supervisory board member of the single-man company in question, and of such organization at the same point in time.
(4) In order for a contract concluded between a single-man company and its member to be valid, such contract shall be drawn up in writing.
Section 173.
(1) A single-man company may not acquire its own business shares.
(2) If, due to the division of business shares or increase of initial capital, a single-man company is supplemented with new members and in this way becomes a company with multiple members, the members shall change the deed of foundation into articles of association.
(3) The rules of liability related to a controlling interest as set forth in Subsection (3) of Section 292 and Subsections (1) and (3) of Section 296 shall be applied correspondingly to the liability of the member of a single-man company. The provision on the prohibition of the enforcement of a permanently detrimental business policy may not be applied against the member of a single-man company, if the member of the single-man company has undertaken unlimited, full liability for the debts of the single-man company in the deed of foundation or in the alteration thereof.
Section 174.
In other respects, the regulations on multiple member companies shall be applied correspondingly to single-man companies.