1. Introduction – The Problem and the “Aborted” Reform
For a long time, actions for repeal of company decisions have suffered from a structural problem: even if a decision is unlawful – because it violates the law or the constitutive document – it remains in force and enforceable until the court’s final judgment ordering its repeal. In the meantime, the unlawful decision is fully capable of producing legal effects in corporate practice.
The planned amendment of the Hungarian Civil Code (HCC) intended to remedy this situation by introducing, as of 1 January 2026, the possibility of repealing company decisions with retroactive (ex tunc) effect. However, this amendment ultimately never entered into force, because Section 204 of Act LXVII of 2025 on the amendment of certain laws to improve Hungary’s competitiveness modified the earlier entry‑into‑force provision and prevented the new rule from taking effect.
Despite this, the text of the intended new Section 3:37 (2) HCC and the underlying legal policy and dogmatic considerations remain highly relevant. On the one hand, they highlight the existing loophole and the potential for abuse inherent in the current regime of company decisions. On the other hand, they raise the question whether the legislator’s chosen solution would actually have been suitable to address these problems, and whether it should be regarded as fortunate or unfortunate that the amendment eventually did not become part of the positive law.
2. The Current Regulatory Framework – Challenging Company Decisions and Their Legal Effects
2.1. General Rules on the Repeal of Company Decisions
Pursuant to Section 3:35 HCC, the members (including shareholders), executive officers and supervisory board members of a legal person may, within the time limit specified in the HCC, bring an action for repeal of a company decision taken by the members, founders or an organ of the legal person if that decision is contrary to the law or the constitutive document (articles of association, statutes).
If the decision indeed infringes the law or the constitutive document, the court shall repeal the decision under Section 3:37 (1) HCC and, if necessary, order the legal person to adopt a new decision in its place.
Under the currently applicable Section 10/A (3) of the Act on the Entry into Force and Implementation of the HCC (Ptké.), a judgment ordering the repeal of a decision becomes effective upon becoming final. This means that a decision which is contrary to law or to the constitutive document remains in force and enforceable until the judgment ordering its repeal has become final.
Section 10/A (3) Ptké. further provides that decisions adopted by the organs of a legal person may only be repealed with retroactive (ex tunc) effect to the date of their adoption if a specific statutory provision expressly authorises the court to render a judgment with such effect. At present, however, no statutory provision of general application is in force that would enable courts to render a judgment ordering the repeal of company decisions with retroactive effect to the date of their adoption. The planned amendment of Section 3:37 (2) HCC was intended to fill precisely this gap.
2.2. Practical Problems and Potential for Abuse in the Current System
In practice, this regulatory gap has given rise – and continues to give rise – to a number of abuses that are clearly contrary to the intention of the legislator. The fact that an unlawful company decision remains a valid and enforceable act, fully capable of producing legal effects, until it is finally repealed – often following court proceedings that may last for years – allows, for example, an unlawfully elected managing director to act on a lasting basis in the name and on behalf of the company, to assume obligations, or to dispose of the company’s assets.
Bringing an action for judicial review of a company decision does not in itself have suspensory effect on the enforcement of the decision. Under the current framework, the only available tool for those entitled to bring such proceedings to prevent the continuation of an unlawful situation is to request the court, as claimant in an action for repeal of a company decision, to suspend the enforcement of the challenged decision. On the basis of such a request, the court may, exercising its discretion under Section 3:36 (4) HCC, suspend the enforcement of the decision until the final judgment, if it considers this justified.
Even a suspension of enforcement does not provide full legal protection, however, because the suspension order does not affect the period between the adoption of the decision and the court’s ruling on suspension. As a result, all declarations and legal acts performed during that period on the basis of the contested decision are deemed to be valid and capable of producing legal effects, even if they suffer from a defect that subsequently leads to the repeal of the underlying decision.
3. The Legislative Attempt: The Planned Amendment of Section 3:37 (2) HCC
3.1. Content of the Intended Rule
The legislator intended to change the above regulatory framework – presumably in order to prevent abuses stemming from the identified loophole – by expressly providing in the HCC for the possibility of repealing company decisions with retroactive effect. According to the amendment as adopted in 2021, the new Section 3:37 (2) HCC would have provided that, as a general rule, a judgment ordering the repeal of a company decision becomes effective upon becoming final, but that the court may, in exceptional cases and upon a party’s request, order the repeal of the decision with retroactive effect to the date of its adoption, provided that this does not prejudice the requirements of legal certainty.
This amendment was enacted by Section 6 of Act XCV of 2021 (the “Amendment Act”). However, the explanatory memorandum of the Amendment Act unfortunately did not provide any guidance as to the criteria to be applied by the courts in determining what constitutes a breach of the “requirements of legal certainty” in actions for repeal of company decisions, nor did it specify in which exceptional cases the legislator intended to make retroactive repeal possible.
Subsequently, Section 204 of Act LXVII of 2025 on the amendment of certain laws to improve Hungary’s competitiveness provided that the above amendment would not enter into force after all, with the result that Section 3:37 HCC remained unchanged as regards the rules on the repeal of company decisions. The possibility of retroactive repeal thus continues to exist only where this is expressly allowed by a separate statutory provision, while the adoption and entry into force of such a general rule for company decisions remains outstanding.
4. Assessment of the Planned Rule – Would It Have Solved the Problem?
4.1. Addressing the Loophole: Merits of the Proposal
One of the main merits of the planned provision would have been that it formally recognised the need, in certain cases, for ex tunc repeal of company decisions. Under the current regime, this is only possible where a special law explicitly permits such retroactive effect in a specific context; no such general rule exists for company decisions. The amendment would have removed this blanket prohibition and would have equipped the courts with a tool to neutralise the legal effects of an unlawful decision not only for the future (ex nunc), but – within certain limits – also in respect of the past (ex tunc).
This would have been particularly important in those cases where the legal relationships created by the unlawful decision had not yet been fully performed or closed, or where the continued existence of the unlawful state of affairs was seriously detrimental to the company’s members, creditors or other participants in economic transactions. For example, it would have made it possible to correct ex tunc the legal effects of the actions taken by an unlawfully appointed managing director acting on behalf of the company, or the corporate relationships created by an unlawful capital transaction.
Another strength of the proposal was that it treated retroactive effect as an exceptional measure. The rule did not envisage that every unlawful decision would automatically be repealed ex tunc; rather, retroactive effect would have been available only where justified by the circumstances of the individual case and where this could be done “without prejudice to the requirements of legal certainty”. In this way, the legislator recognised that retroactive interference in corporate relationships may be justified in a narrow range of situations, but should not become the general rule.
4.2. The “Requirements of Legal Certainty” as a Vague Standard
At the same time, the proposal raised a serious dogmatic concern by linking the admissibility of retroactive repeal to the condition that it must not infringe the “requirements of legal certainty”, without clarifying this notion either in the HCC or in the explanatory memorandum of the Amendment Act.
The principle of legal certainty is a central element of the rule of law, whose content has been extensively developed in legal scholarship and in the case law of the Constitutional Court. In general terms, legal certainty requires that the legal system, its individual sectors and individual norms be clear, unambiguous and foreseeable for those to whom they are addressed. The individual’s trust in the stability of legal regulation is undermined when the legislator or the courts intervene in legal relationships in a way that is unpredictable, inconsistent or retroactive in effect.
In the Hungarian legal literature, legal certainty is listed among the fundamental principles of private law, and it is emphasised that it primarily imposes obligations on the legislator, while from the courts it mainly requires the uniform application of the law, i.e. similar treatment of similar cases. Other authors identify the protection of vested rights and the protection of trust as key elements of legal certainty, interpreting the protection of vested rights as the requirement that legal relationships which have been fully performed and brought to a close must be left intact, and the protection of trust as meaning that rights created in the past but persisting into the present may only be restricted prospectively and with due respect for the future.
According to the reasoning of the Constitutional Court, the principle of legal certainty requires that the law as a whole, its individual sub‑fields and individual rules must be clear, unambiguous and interpretable and comprehensible for the addressees of the norm. The precise content of legal certainty has not been defined exhaustively in the Court’s case law.
In the same case law, the protection of vested rights means that closed legal relationships must be left untouched, while long‑lasting legal relationships may only be modified within certain limits. This protection extends only to rights acquired in good faith; in other words, interference is permissible only in respect of rights acquired unlawfully.
4.3. Legal Certainty and Security of Transactions in Company Law
In the context of company law, legal certainty primarily manifests itself in the requirement of security of transactions, serving to protect the interests of creditors and other market participants. On this basis, legal certainty in company law is above all linked to the requirement of security of transactions, as also recognised by the Constitutional Court. The Court has held that the preclusive time limit for challenging company decisions is constitutionally acceptable because security of transactions – primarily serving creditor protection – is a fundamental requirement derived from legal certainty in the field of company law.
This principle shows clear affinities with the protection of vested rights and of legitimate expectations, in that its primary objective is to ensure that economic actors can rely on the stability of legal relationships once regulated by company decisions and can organise their economic activity accordingly, without having to anticipate a radical change in such relationships beyond a time limit that is acceptable in commercial life.
In the context of the planned amendment, the relevant aspects of legal certainty may therefore be broken down into three closely related requirements: (i) the protection of vested rights, (ii) the protection of legitimate expectations and (iii) security of transactions. While the protection of vested rights and of legitimate expectations implies that closed legal relationships must be left intact and long‑standing relationships must be kept stable, security of transactions points to the need for closure and finality of legal relationships governed by company decisions.
5. The (Never‑Enacted) Section 3:37 (2) HCC – Likely Interpretation
On the basis of the above considerations, if the amendment had entered into force, the courts would presumably have been able to order the repeal of company decisions with ex tunc effect only where this did not prejudice closed legal relationships created and fully performed on the basis of the decision, provided that the beneficiaries acted in good faith. Conversely, where retroactive repeal would have infringed the rights of bona fide third parties or disturbed closed legal relationships, the courts would not have been permitted to exercise this power. Put differently, ex tunc effect would have been available only where the circumstances of the case justified such intervention and where it did not impair the rights of the above‑mentioned group of persons.
Naturally, only actual case law could have determined, and gradually clarified, in which specific types of situations the courts would have considered retroactive repeal to be compatible with the requirements of legal certainty. It is already foreseeable, however, that the introduction of the phrase “requirements of legal certainty” into company law would have raised interpretative questions, chiefly because – as the Constitutional Court’s case law demonstrates – legal certainty primarily imposes obligations on the legislator. Within this framework, the role of the courts is to ensure the uniform application and interpretation of legal rules that themselves satisfy the requirements of legal certainty.
In this author’s view, the explanatory memorandum of the Amendment Act should have clarified what the legislator understood by “preservation of the requirements of legal certainty” in the specific context of the repeal of company decisions, particularly since the HCC does not otherwise use this terminology. By contrast, the protection of the rights of bona fide third parties and the protection of rights acquired in good faith and for consideration are established concepts within the conceptual system of the HCC and would have applied even without the insertion of the phrase “requirements of legal certainty”. Against this background, the legislator could probably have given the intended amendment a more precise and substantively richer formulation by relying on these existing concepts instead of introducing a new, undefined general clause.
6. Evaluating the Failure of the Amendment to Enter into Force
The fact that the amendment of Section 3:37 (2) HCC ultimately did not enter into force is ambivalent and can be evaluated from two opposing perspectives.
On the one hand, it may be regarded as a positive development that the Civil Code did not come to contain a provision whose key term – the “requirements of legal certainty” – is foreign to the HCC’s own conceptual framework and whose content would have had to be reconstructed only indirectly, relying on Constitutional Court case law and academic writings. A norm of this kind, granting a very broad scope for judicial discretion on the basis of an undefined general clause, could easily have led to fragmented judicial practice and inconsistent outcomes in comparable cases.
On the other hand, it is undoubtedly negative that the legislator left untouched a regulatory gap which it had itself clearly identified and which causes significant practical difficulties: the persistence in force of unlawful company decisions and the limited possibilities for correcting the legal relationships based on such decisions. The courts still lack any generally applicable tool, expressly enshrined in the HCC, to order the repeal of a company decision with retroactive effect to the date of its adoption, even though a carefully drafted, narrowly framed ex tunc rule would be compatible with the constitutional requirements of legal certainty and security of transactions.
7. Concluding Remarks – The Case for a Second, Clearer Legislative Attempt
In summary, the planned amendment of Section 3:37 (2) HCC sought to respond to an important and genuine problem, but, by relying on the open‑ended formula of the “requirements of legal certainty”, it failed to provide a sufficiently precise solution that would integrate organically into the conceptual system of the HCC. The fact that the amendment ultimately did not enter into force has, therefore, a dual significance: on the one hand, it avoided the introduction of a norm that would have been difficult to apply in a predictable and consistent manner; on the other hand, it left in place a regulatory situation in which the tools available to challenge unlawful company decisions remain narrower than would be desirable.
The task of future codification should be to draw the lessons from this “aborted” reform and to develop a regulatory framework that:
- expressly and unambiguously allows for the retroactive (ex tunc) repeal of company decisions in appropriate cases;
- instead of relying on the vague notion of “requirements of legal certainty”, builds on well‑established concepts already present in the HCC (such as the protection of bona fide third parties, the protection of vested rights, the protection of legitimate expectations and security of transactions);
- clearly sets out the criteria and limits for judicial discretion when deciding whether to grant ex tunc effect in an action for repeal of a company decision.
Only a framework of this kind offers a realistic prospect that judicial control over company decisions will be both effective in practice and consistent with the requirements of the rule of law, legal certainty and security of transactions.