On 23 June 2003 the Hungarian Parliament passed Act XLIX of 2003 on European Economic Interest Groupings and Modifications to Act CXLIV of 1997 on Economic Associations and CXLV of 1997 on the Register of Companies, Public Company Information and Court Registration Proceedings (the "Act").
The Act has (among others) introduced a new corporate entity named the "European Economic Interest Grouping" ("EEIG"). This is a new type of corporate entity which will be governed by Council Regulation (EEC) No. 2137/85 of 25 July 1985 on the European Economic Interest Grouping. In line with existing EU countries, the aim of an EEIG is to enable individuals or companies located in different Member States to set up a special cross-border business association. Under the new regulations it will be possible to incorporate an EEIG with its registered address in Hungary which will be a legal entity. The corporate governance requirements for an EEIG are set out partly in the Council Regulation and partly in the Act.
These include the following:
- An EEIG must have, as its members, at least two legal entities or two individuals or one of each which have their central administrations in different EU Member States. Accordingly, for example, two Hungarian companies cannot establish an EEIG;
- An EEIG must have the purpose of facilitating the economic activities of its members and cannot be aimed at making a profit;
- An EEIG cannot employ more than 500 persons;
- the management organs of an EEIG are the Members' Meeting and the Manager;
- Each member of an EEIG has one vote unless its Articles of Association give more than one vote to certain members but it is not possible to give one member the majority of the votes;
- Certain decisions of the EEIG are subject to a unanimous decision by all the members. These include changing the objects of the EEIG and changing the number of votes allotted to each member, among others;
- An EEIG cannot invite investment by the public;
- The members of an EEIG have unlimited joint and several liability for its debts;
- New members can only be admitted to an EEIG subject to a unanimous decision of the existing members;
- An EEIG is incorporated by its parties signing the Articles of Association, countersigned by a lawyer;
- Certain mandatory information is to be set out in the Articles of Association, as for all existing Hungarian legal entities;
- The Members' Meeting decides in a list of issues including, for example, approving the Annual Accounts and appointing Managers of the EEIG;
- The Members' Meeting has quorum if at least 3/4 of the votes are represented.
The provisions of the Act on the EEIG will only take effect upon Hungary's EU accession, foreseeably on 1 May 2004.
For further information please contact Eszter Török at ezter.torok@cms-cmck.com or on +36 1 483 4800.
