Business Associations Flashcards
What is meant by freedom of establishment?
The founders of the company can free decide with whom, under what circumstances, for what goals to set up a company.
What are the fixed legal forms in the CCHU?
associations(civil associations), business associations (companies), cooperative societies, groupings, foundations
What are the valid company forms?
general partnership (kkt), the limited partnership (bt), the private limited-liability company (kft), the limited company (rt) - [non-listed limited company, listed company/public limited company]
What is meant by the imperative nature of company forms?
It refers to the mandatory rules regarding to the company forms. Moreover, definitions are very important, several restrictions provoke strick interpretation of the qualification of the company form and so the validation of the memorandum of association. (in case of divergence –> null and void)
What are the elements of the instrument of constitution?
The relevant legal instruments are contracts, charter documents or articles of associations.
What are the two types of norms?
Imperative and the non-mandatory norms
What are the main features of the imperative norms?
Imperative norms are the ones which are binding in the sense that no deviation whatsoever is accepted. The sanction pertaining to an imperative norm is that it automatically substitutes the challenged unlawful provision or, if so stipulated, renders the agreement of the parties null and void.
What are the main features of the non-mandatory rules? (dispositive rules)
The laws on the legal persons are generally non-mandatory. (dispositive) The founders of the company may set up a customised company. For example: set up a supervisory board
What is the reason behind the permissive nature of private law?
The contractual relationship is relative, the parties express their wills to themselves only, in a limited circle. Third parties are not affected. All acting and interested parties are identified. [except listed company]
What are the main features of the management?
The management is completely separated from the members after the company has been registered. This is certainly different in the various company forms. (management in the partnership = members themselves, but institutionally they are separate)
What is meant by the duty of the management to provide information?
The management’s operative decision-making is less transparent to the members. Therefore the management has special duty to inform or keep the member’s meeting updated.
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What is the management’s confidentiality notice?
It means that the management could refuse to provide information, if it hurt the business opportunity of the company or it were likely that the member requesting the information exercises his rights abuvisely.
What are the 3 kinds of representations of the management?
The organisatory, the employed and the specifically appointed representative.
What does the organisatory representative role of the management?
organisatory representative = CEO. The one who can always lawfully represent the legal entity regarding all issues. This is the manager or the managing director who is not an employee of the company, even if he can be. The management owe fiduciary duty to act in the interest of the company. The members of the company cannot lawfully instruct the management, his competence cannot be truncated.
What is the employed representative’s role in the management?
The employed repr. is by definition an employee of the company and consequently, this term is deployed only for the business associations.(cégvezető). Although the supreme body appoints these managers as well, they are subordinated to the executive officers. Managers are the assistants of the executive officers, with general and independent competence. (characteristic of companies with more subsidiaries)
What is the specifically appointed representative’s role in the management?
They have limited competence, they can be selected by the supreme body itself. The managers could delegate some of their powers to their own selectees. (assistant-representative expenses)
What kind of contracts managers usually have?
agency contract or an employment contract.
List the key managerial tasks!
The operative business task, the accounting task, the mandatory administrative tasks
What did we mean under operative business tasks of the management?
The operative tasks entail the every day management, such as governing the company, instruction the employees, drafting contracts, managing contracts.
What did we mean under the accounting tasks of the management?
Accounting tasks refer to the accountability requirements towards the members of the company, like the annual reporting to the members’ meeting, guaranteeing of the members’ access to the information.
What did we mean under the mandatory administrative tasks of the management?
These administrative tasks include the statutory requirements towards the authorities, like, the filing of the necessary documents with the court of registry. Provides for necessary information towards the authorities.
How can the managers prove that their liability in case of the failure of the company is ill-grounded?
If there is damage, the liability of the company must be discussed. To be exempt from the liability, the manager has to be able to prove that the damage occcurred is a consequence of unforeseeable circumstances beyond his control, he could have not prevented or mitigate the damage that occurred.
What is the management’s liability in tort cases? (non-contractual damages)
If the management causes damage to third parties, then they have to prove that their behaviour in question was not only generally reasonable, but that it was reasonable from a manager. This standard of behaviour is higher than the average standard of behaviour, because it is expected from the
professionals in the field. This liability pertains only to the CEO and no to the employees.
In case of bankruptcy whose interest the CEO have to prioritize?
The CEO has fiduciary duty towards the creditors. The management’s liability towards to be a priority, and the interest of the other creditors and stakeholders come fore.
What we meant by special immunity clause?
It renders the management (CEO) exempted from past liabilities. The supreme body may issue an immunity certification attached to the annual financial reports in which the members certify that the report has been approved and the activities of the management accepted. (can be challenged by the members: falsified report- fraud)
What is joint and several liability=accountability of the members?
This means that if the asset of the company is less than its debts, the company’s decisions are going to have direct effect on the members’ assets. This term is not at all a liability. This is rather accountability, cause it does not refer to anything blameworthy. It doesn’t not depend on the act of the members, it is rather a fact. There is no exemption from this accountability and no further investigation whether the member was involved in the decision or not.
What is the only excuse the member could use against accountability?
The fact that shows he was not the member of the general partnership at the time of liquidation, because he quit earlier, or inherited the partnership or was excluded.
