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FROM PEN TO PENDRIVE - PART IV: E-WRITING IN COMPANY LAW IN HUNGARY?
20 April 2023
In company law, we often encounter the requirement of written documents. From the first moment, i.e. the establishment of the company, through the operation of the company, until its termination, as we presented in our last article. In this article, we will examine the provisions related to the companies established online, and we will explore how we can make electronic legal declarations on behalf of the company.
The previous part of the article is available here: FROM PEN TO PENDRIVE - PART III: PROVING THE CLAIM WITH EMAILS DURING DEBT COLLECTION IN HUNGARY? - Blog - Smartlegal
1. Company established online
EU citizens and companies can form a limited liability company or a branch office in Hungary fully online, in a fast-track registration procedure.
The requirement for online company formation is that the electronic documents (including various company documents, e.g. articles of association, register of members, etc.) containing the declarations of the person making the declaration(s) during the incorporation:
- shall be provided with the qualified electronic signature or seal, or advanced electronic signature or seal based on a qualified certificate of the declarant, or
- authenticated by the declarant by the document authentication service that is traceable to identification.
We can see that although company law has taken steps towards modernization, in order to ensure the authenticity of the company registry and the security of business transactions, it requires advanced electronic signature or authentication in connection with electronic writing.
2. Operation of the company
a. legal declarations relating to the company
According to the Hungarian Civil Code[1], legal statements relating to the company may be made or delivered by means of electronic communications if so permitted by the company’s articles of association.
In this case, the articles of association shall provide for the relevant conditions and the means thereof.
However, this does not automatically mean that any electronic communication would be accepted. Based on the relevant case law, the courts may require at least an advanced electronic signature for written electronic documents related to company affairs.[2]
b. company register - documents on which registration is based
Since public credibility is an essential criterion for the company register, the documents supporting the data to be entered to the register should be drawn up at least in the form of private documents of full probative value.[3]
According to the Hungarian Code of Civil Procedure[4], a private electronic document may only have full probative value if it meets the requirements detailed in point 1.
During company procedures, we come across e-signed documents more and more often, and according to our experience, the company courts accept properly signed electronic documents.
c. signing on behalf of the company
It is becoming more and more common for companies to buy electronic signatures for their representatives in order to manage the company’s affairs electronically with the same legal effect as if they did so on paper.
According to the Hungarian Companies Act[5], at the request of the company, the commercial register contains the certificate of the electronic signature of the person authorised to sign on behalf of the company. An electronic signature with a certificate registered in the commercial register is considered to be the formal signature of the signatory.
It is important that the above procedure is not mandatory, only an option for the company to reinforce the legality of the electronic signature in the public registry, which can be checked by business partners or authorities.
In the field of company law, great emphasis is placed on modernization. With the above-mentioned new solutions, the decision-makers try to make Hungary more tempting for foreigners to start their business here. Although these solutions are indeed forward-looking, document security is still a key factor to maintain the authenticity of the public registries and the safety of business.
For this reason, electronic documents related to companies shall be in most cases provided with qualified electronic signature or at least advanced electronic signature.
In our next article we will examine the area of labour law.
[1] Section 3:91(2) of act V of 2013 on the Civil Code
[2] Court of Appeal of Debrecen Pf. 200027/2021/5.
[3] BDT2010. 2341.
[4] Section 325(1) f),g) of the act CXXX of 2016 on the Code of Civil Procedure
[5] Section 9(4) of the act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings
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