Hungary: A managing director without representation rights
Hungarian corporate law has traditionally allowed shareholders to restrict a managing director’s authority, including the option to appoint one without representation rights. However, these limitations were not registrable in the Companies Register and therefore held no validity against third parties.
A significant legal reform took effect on July 1, 2018, introducing a new Companies Register section for documenting managing directors without representation rights. The register now accommodates three categories: individual representation rights, joint representation rights, and absence of representation rights.
This modification addresses a practical gap in corporate governance, particularly benefiting larger enterprises such as private companies limited by shares and public limited companies. Board members have frequently been appointed without signing authority, functioning solely for internal management and decision-making purposes rather than external representation.
To implement such an arrangement, shareholders must formally approve amendments to the company’s articles of association or deed of foundation. Following approval, the designated company court must file and register these modifications in the official registry.