In actions for the repeal of company decisions, it will be possible to repeal decisions with retroactive effect from 1 January 2026.
According to art. 3:35 of the Hungarian Civil Code (HCC), the members (including shareholders), executive officers and supervisory board members of a legal person may submit a claim with the court within the time limit specified in HCC for the repeal of a decision taken by the members, founders or organs of the legal person, if the decision is contrary to law or the articles of association.
If the resolution is in breach of law or in breach of the statute of the company, the court may repeal the resolution in accordance with art. 3:37 (1) of HCC and, if necessary, order the legal person to pass a new resolution.
Pursuant to art. 10/A (3) of the HCC in effect at the moment, a court judgment declaring a resolution to set aside becomes effective upon its entry into force, i.e. the decision that is contrary to the law or the statutory instrument remains in force and enforceable until the judgment of the court to set aside it becomes final.
Pursuant to art. 10/A (3) of HCC, decisions taken by the organs of a legal person may be set aside with retroactive (ex tunc) effect if the law allows the court to take a decision with such effect. However, there is currently no legal provision in force that would allow courts to make such a decision, i.e. a judgment which would have retroactive effect to the date of the resolution.
Unfortunately, in practice, this legal loophole has also given rise to a number of abuses which were clearly contrary to the intention of the legislator. The fact that an unlawful company resolution is capable of producing legal effects until it has been finally annulled - often following a lawsuit which has dragged on for years - allows, for example, an illegally elected managing director to act permanently on behalf of a company, to assume obligations on behalf of the company or to dispose of the company's assets.
In the current legal environment, the only possibility left for those entitled to bring proceedings to prevent this, is to ask the court to suspend the execution of the resolution sought to be revised in the court procedure. Submitting a statement of claim for the judicial review of an unlawful resolution does not have suspensory effect on the enforcement of the resolution. On the basis of a request for suspension, the court may apply the art 3:36 (4) of HCC, and according to its discretion, may suspend the enforcement of the decision until the judgment, if it deems it justified. However, even in the case of suspension of enforcement, the problem is that suspending the resolution does not affect the period between the date of the resolution and the decision of the court to suspend its execution. It also follows that any declaration or legal act made during that period on the basis of the contested decision is deemed to be valid and capable of producing legal effects, even if it suffers in a legal defect which subsequently leads to its invalidity.
The legislator presumably changed the above regulation in order to prevent the abuses experienced as a result of the above legal loophole, when it included the possibility of retroactive repeal in the HCC, based on the amendment of the HCC effective from 1 January 2026.
The HCC, in force from 1 January 2026, in its art. 3:37 (2) provides that a judgment ordering the repeal of a corporate decision shall, as a general rule, continue to be effective upon its entry into force. The court may, however, in exceptional cases, upon the request by a party, decide to repeal the decision with retroactive effect to the date of its adoption, without prejudice to the requirements of legal certainty.
The amendment specified above was enacted by Article 6 of Act XCV of 2021 (the "Amendment Act"), but unfortunately the explanatory memorandum of the Act does not provide any guidance as to the criteria to be applied by the courts in deciding what constitutes a breach of “legal certainty” in the context of relevant cases. Thus, it remained unclear, which could be the exceptional cases the legislator provides for making retroactive annulment of decisions possible.
In the absence of clear legislative guidance, it may be worthwhile to take authorities and the practice of the Constitutional Court (the “AB”) as a basis for examining the requirements of “legal certainty”, since the principle of “legal certainty”, which was originally developed on the basis of private law, has been given constitutional content in the law in force.
In his book called Hungarian Private Law, Károly Szladits mentions legal certainty as one of the basic principles of private law, emphasising that it primarily sets out requirements for the legislator, while the courts are expected to apply the law uniformly, i.e. to rule on similar decisions in a similar manner. Barnabás Lenkovics, in his writing on legal certainty [Adalékok a jogbiztonsághoz, Constitutional Court Review 2015/1] mentioned the protection of acquired rights and trust, among other things, as a substantive element of legal certainty. Zoltán Tóth J. in his work on the content of rule of law [A jogállamiság tartalma, Jogtudományi Közlöny 2019/5.] identifies the protection of vested rights with the requirement of keeping legal relationships that have come to an end or have been finally concluded, intact, furthermore he defines the protection of trust as meaning that rights that have been created in the past but are also - permanently - existing in the present can only be restricted in the future and with respect for the future.
According to the reasoning of the AB Decision 20/2020 (VIII.4.), the principle of legal certainty requires that "the law as a whole, in its individual parts and in its individual rules must be clear, unambiguous and also interpretable and comprehensible for the addressees of the norm". Moreover, the precise content of legal certainty has not been defined in the AB's practice in a taxative manner.
According to the AB Decision 3061/2017 (31.III.) "legitimate expectation is a well-founded expectation that a law will remain unchanged (in force), protected by law. The Constitutional Court considers on a case-by-case basis where the line is drawn between the freedom of the legislator and the interest of the addressees in the stability and predictability of the legal regulation, examining whether the disadvantage suffered by the legal entities as a result of the change in the legal regulation justifies the finding of an infringement of the fundamental law on the basis of breach of legal certainty" [Nr [13]].
In the practice of the Constitutional Court, the protection of vested rights means that closed legal relationships must be left intact, and permanent legal relationships may only be changed within limits. This protection, according to the Constitutional Court, extends only to rights acquired in good faith, in other words, it can only be interfered with in respect of rights acquired unlawfully. [11/1992 (III. 5.) and 12/2018 (VII. 18.) AB 6.]
In relation to company law, Tamás Török's article on legal certainty in company law states that "in the system of company law, legal certainty is primarily reflected in the requirement of security of turnover, which is manifested in the protection of creditors' interests". [Gazdaság és Jog 2000/6] Thus, legal certainty in company law is primarily based on the requirement of security of turnover, a view confirmed by AB 935/B/1997. In the case in point, the Constitutional Court justified the constitutionality of the time limit for challenging company decisions by stating that the fundamental requirement of company law, which can be derived from legal certainty, is security of turnover, which primarily serves the purpose of creditor protection. This principle has similarities with the protection of vested rights and the protection of legitimate expectations, since its primary objective is to enable economic operators "to have confidence in the unchanged nature of the relations once regulated by the company law and to adapt their economic activities to them without having to anticipate a radical change in those regulated relations beyond a time-limit which economic operators can still tolerate."
On the basis of the above, the followings may be relevant for the retroactive repeal of company decisions in an exceptional case and without prejudice to the requirement of legal certainty.
The relevant legal certainty requirements in the context of the amendment are the protection of acquired rights, the protection of legitimate expectations and the requirement of traffic safety. While the protection of acquired rights and the protection of legitimate expectations imply the preservation of closed legal relationships and the stability of long-lasting legal relationships, the security of turnover implies the closure of legal relationships governed by a company law.
On the basis of the above requirements, the courts may presumably set aside company decisions with ex tunc effect if setting aside the resolution does not involve any prejudice to the closed legal relations created and performed under the decision, provided that the beneficiaries were acting in good faith. Thus, if retroactive annulment would prejudice the rights of bona fide third parties, the courts will not be able to do so. In other words, the court will only be able to repeal ex tunc if it is justified by the circumstances of the case and does not prejudice the rights of the aforementioned group of subjects.
Of course, only actual case law will determine and clarify in which cases the courts will consider that the retroactive annulment of decisions does not violate the requirement of legal certainty. However, it is foreseeable that the inclusion of 'legal certainty requirements' in company law will raise questions of interpretation, primarily because, as is clear from the Constitutional Court’s case-law cited, the requirement of legal certainty is first and foremost an obligation imposed on the legislature. It is for the courts, in this system, to ensure uniform application and interpretation of the law in accordance with the requirements of legal certainty.
In my opinion, the explanatory memorandum of the Amendment Act should have clarified what exactly the legislator meant by the preservation of legal certainty requirements in relation to the annulment of company resolutions, as the Civil Code does not use this terminology anywhere else. On the contrary, the protection of the rights of bona fide third parties and the protection of ownership acquired in good faith and for consideration were concepts already present in the conceptual scheme of the Civil Code, which would have prevailed even without the inclusion of the 'legal certainty requirements' phrase. In view of the above, the legislator could have given the intended amendment a more precise and genuine content, if it had used different terminology.