Business Law Mid-Term 3

1. Civil Law – Law of Business Associations

1. Transformation, merger, demerger of legal persons:

 Transformation:
In the case of transformation of a legal person to another type of legal person, the legal
person undergoing transformation will be dissolved, and its rights and responsibilities shall
be transferred to the legal person established by way of the transformation, as the general
legal successor.
o A legal person may not be transformed if:
 Undergoing dissolution without succession or bankruptcy proceedings
 Indicted in criminal proceedings carrying possible criminal sanctions
 the members or founders fail to provide the capital contribution
o The decision on going transformation lies with the members of founders of the legal
person – prepare draft terms of transformation
o Members or founders shall take a decision on transformation by adopting the draft
terms of transformation; the decision-making body shall pass this resolution by at
least a three-quarters majority
o At the time of registration of the legal person established by transformation, the
legal person terminated by transformation shall be removed from the registry
 Merger:
A legal person may combine with other legal persons as one legal entity by way of merger or
acquisition
o In the case of merger, the merging legal persons are terminated and a new legal
person is established by way of universal succession
o In the case of merger by acquisition, the acquired legal person is terminated and all
its assets and liabilities are transferred to the acquiring legal person by way of
universal succession
 Their management shall prepare the draft terms of merger in accordance
with the draft terms of transformation
 The merging legal persons shall individually decide on adopting the draft
terms of merger
 Demerger:
Demerger means when a legal person is split into two or more legal persons by way of
division or separation
o Division means the operation whereby, after being terminated, a legal person
transfers all its assets to more than one legal person
o In the case of separation the legal person shall continue to operate in its previous
form and part of its assets are transferred to the successor legal person established
by the separation
 Separation by acquisition / Division of acquisition
 The successors of the legal person being divided – shall be held liable in
accordance with the draft terms of division
  Cases of transformation:
A business association may be converted into a business association, grouping or cooperative
society of another corporate form
o The members who have decided to withdraw from the company upon
transformation, if dissolved without succession, shall be liable for any debt of the
predecessor which is not covered by the legal person established by transformation
o Merger of business associations:
 With another business association
 With cooperative society
 With grouping

2. Dissolution of legal persons (special part):

 General Partnership to Limited Partnerships (KKT & BT):

o The conversion of any general partnership into a limited partnership or any limited
partnership into a general partnership is subject to the amendment of the
memorandum of association, irrespective of the provisions on the transformation of
business associations
o If, in connection with the conversion of a general partnership into a limited
partnership, the liability of a member who becomes the limited partner shall remain
to have unlimited liability for the partnership’s debts arising before the conversion
within a preclusive period of five years.
 Private Limited-liability Companies (KFT):
o In the event of dissolution of company without succession, from the assets remaining
after the satisfaction of creditors, the supplementary capital contributions shall be
repaid first, and then the remaining assets shall be distributed among.
o If the company that will cease to exist held its own business shares, the
commensurate part of assets shall be distributed among the other members in the
percentage of their core deposits.
 Limited companies (RT):
o Transformation: if a limited company is converted, the shares shall become invalid
upon the registration of the legal person established by transformation
o Merger: In respect of convertible or equity bonds the limited company being
established through the merger shall provide such entitlements to bond holders,
which are at least equivalent to the entitlements they possessed in the predecessor
business association, unless each of the bond holders gives his consent to the change
of entitlement.
o If there are several types or classes of shares, the provisions on the approval of the
general meeting resolution shall be applied in the process of adopting a resolution on
the merger.
o Public limited companies may not be divided

3. Dissolution of legal persons without succession:

 A legal person shall terminate without succession if:

o It was established for a fixed duration, and such period of time expires
o It was subject to termination upon a certain condition, when this condition is met
 o Declared terminated by its members or founders; or
o Terminated by a body so authorized;
 Provided in all cases that the legal person is cancelled from the registry following completion
of the appropriate procedure for the settlement of the legal person’s financial affairs.
 Following dissolution of the legal person without succession, its assets remaining after
settlement of all debts shall be allocated to the legal person’s members, or to the person
exercising founders’ rights in the case of non-membership legal persons in the same
percentage as the capital contribution they or their predecessors provided to the legal
person.
 The members and founders of a legal person dissolved without succession shall be held
liable up to their respective shares for the debts of the dissolved legal person outstanding.

4. Insolvency proceedings:

 Winding up proceedings:
o In case of dissolution of companies without succession- if the company is not
insolvent and there are no special legal provisions applicable – the company shall be
winding up.
 Bankruptcy proceedings:
o Shall mean the proceedings where the debtor is granted a stay of payment with a
view to seeking an arrangement with creditors, or attempts to enter into a
composition arrangement with creditors
 Liquidation proceedings:
o Shall mean the proceedings aimed to provide satisfaction, as laid down in this Act, to
the creditors of an insolvent debtor upon its winding-up without succession.

5. Bankruptcy proceedings (opening):

 The directors of debtor economic operators may submit an application for the opening of
bankruptcy proceedings at the court of law. Legal representation for the debtor shall be
mandatory with regard to submission of the application. The petition may be submitted in
possession of the prior consent of the supreme body of the debtor economic operator
exercising founder’s (shareholder’s) rights.
 At the debtor’s request, provided that it is not rejected outright, the court shall – within one
working day – provide for the publication of the request itself, and of the temporary stay of
payment with immediate effect in the Cégközlöny (Company Gazette) by way of the means
described in specific other legislation. The time of the opening of a bankruptcy proceeding is
the day when the court ruling is published.
 Upon taking the measure hereof the court shall examine within five working days of receipt
of the request. if the request is incomplete, the court shall return it for having the
deficiencies remedied within 8 working days.
 The court shall reject the debtor’s request for the opening of bankruptcy proceedings:
o a) if the deficiencies are not remedied by the applicant within the prescribed time
limit of eight working days, or if re-submitted with deficiencies still remaining;
o b) if prior consent of the supreme body specified in Subsection (1) of Section 8 is not
available;
o c) if satisfaction of the claim referred to in Paragraph a) of Subsection (3) of Section 7
has not yet been provided;
 o d) inside a period of two years following the time of publication of the final
conclusion of the previous bankruptcy proceedings;
o e) if the debtor is adjudicated in bankruptcy in another court in Hungary;
o f) if the debtor is undergoing liquidation proceedings, and a ruling ordering the
debtor’s liquidation has already been adopted; or
o g) if before the request for the opening of bankruptcy proceedings the debtor has
submitted another such request within one year
 If the court did not refuse the request for the opening of bankruptcy proceedings, it shall
adopt a ruling within fifteen days for the opening of bankruptcy proceedings and the
appointment of a temporary administrator and shall then provide without delay for having
the ruling published in the Cégközlöny (Company Gazette) and for having the indication “cs.
a.” (under bankruptcy) entered in the register of companies next to the debtor’s name.
 The objective of temporary stay of payment and stay of payment is to preserve the assets
under bankruptcy protection with a view to reaching a composition with creditors, during
which the debtor, the administrator, the financial institutions carrying their accounts and
creditors are liable to refrain from taking any measure contradictory to the objective of the
stay of payment.

6. Administrator, Composition Conference

 Administrator:
o review the debtor’s financial standing, which may entail inspection of the debtor’s
books, assets and liabilities, contracts and current accounts,, and shall inform the
creditors regarding his findings
o carry out the tasks relating to the registration and categorization of claims
o approve and endorse any financial commitment of the debtor after the time of the
opening of bankruptcy proceedings;
o advise the debtor to enforce its claims and shall oversee the way it is executed,
 The administrator - assisted by the debtor - shall categorize the claims registered in
preparation for the consultation with creditors with a view to reaching a composition. The
administrator shall forthwith inform the creditors concerning the registration and
categorization of their claims.
 The administrator’s mandate shall terminate:
o a) upon the termination (discharge) of the bankruptcy proceedings by final decision,
o b) * upon the appointment of a liquidator
 Composition Conference with Creditors:
o The debtor shall call a meeting of creditors within a ninety-day period following the
time of the opening of bankruptcy proceedings for composition conference, and shall
invite the administrator and all known creditors directly, any other unknown
creditors shall be invited by way of a public notice, The debtor shall prepare a
restructuring plan or composition proposed to restore or preserve its solvency.
o Composition means the debtor’s agreement with the creditors laying down the
conditions for debt settlement, such as in particular any allowances and payment
facilities relating to the debt, on the remission or assumption of certain claims, on
receiving shares in the debtor economic operator in exchange for a debt.
o A composition agreement may be concluded if the debtor was able to secure the
majority of the votes for the agreement from the creditors holding voting rights, in
respect of secured and unsecured claims alike.
 o Composition agreement shall be made in writing.

Bankruptrcy proceedings (termination):

 The head of the debtor economic operator shall notify the court concerning the outcome of
the composition conference within five working days, and shall enclose a copy of the
composition agreement where applicable, as well as the reports, agreements and
statements.
 The court shall deliver its decision on the approval of the composition arrangements within
fifteen working days of receipt of the notice referred
 If the composition arrangement is in conformity with the relevant legislation, the court shall
grant approval by way of a ruling and shall declare the bankruptcy proceedings dismissed.
 If no composition is arranged, or if the arrangement fails to comply with the relevant
regulations, the court shall dismiss the bankruptcy proceedings and shall consequently
declare the debtor insolvent ex officio in the liquidation proceedings governed and shall
order the liquidation of the debtor.
 The court shall deliver the rulings referred to by way of public notice published in the
Cégközlöny (Company Gazette), if the number of registered creditors exceeds one hundred.

7. Liquidation proceedings (opening):

 Liquidation proceedings shall be conducted in the event of insolvency of the debtor:

o a) * ex officio in the case mentioned in Section 21/B;
o b) upon request by the debtor, the creditor or the receiver; or
o c) * upon receipt of notice from the court of registry,
o d) * upon receipt of notice from a criminal court
 The court shall investigate the insolvency of the debtor. If requested by the debtor, the
court may allow a maximum period of 45 days for the debtor to settle his debt, except if the
liquidation proceedings had been opened directly after bankruptcy proceedings.
 The court shall order the liquidation of the debtor by way of a ruling if it finds that the
debtor is insolvent. The court shall adopt the ruling ordering liquidation within 60 days of
receipt of the application for the opening of liquidation proceedings.
 The court shall appoint a liquidator company (hereinafter: “liquidator”) without delay, using
the Authority’s information system featuring the random electronic selection process.
 The liquidator shall designate a receiver to carry out the liquidation of a debtor.

8. Conduct of liquidation proceedings:

 Upon the ruling ordering liquidation of a debtor becoming final, the court shall without delay
appoint the liquidator and shall order to have the abstract of the ruling ordering liquidation
and the ruling on the appointment of the liquidator published in the Company Gazette.
 The head of an economic operator (debtor) under liquidation shall be required to:
o Prepare a closing inventory, annual accounts, closing balance sheet
o Prepare a list of the documents that may not be discarded
o Inform the employees & the beneficaries of the claims about the liquidation
o Provide an inventory about property and other assets of the debtor
 As of the time of the opening of liquidation only the liquidator shall be authorized to make
any legal statements in connection with the assets of the economic operator. As of the time
of the opening of liquidation the name of the debtor company shall be appended by the
words “felszámolás alatt” (under liquidation) or in the abbreviated form “f. a.”.
  All debts of the economic operator shall be deemed payable (due) at the time of the
opening of liquidation proceedings
 The liquidator shall register the claims against the debtor which are notified after forty days,
but within one hundred and eighty days of the publication of the opening of liquidation
proceedings.
 Composition Agreement: Following a period of forty days subsequent to the publication of
the ruling ordering liquidation, the creditors and the debtor may, at any time, conclude a
composition agreement before the final liquidation balance sheet is submitted. The debtor
shall prepare, for the composition agreement negotiations, a program for restoring solvency
and a composition proposal.
 In the course of composition negotiations, the economic operator (debtor) under liquidation
and the creditors may agree on:
o a) the order for the settlement of debts,
o b) rescheduling payments,
o c) the ratio and manner of the satisfaction of debts
 A composition agreement shall be deemed valid if supported by the votes of at least half of
the creditors with proper entitlement to conclude a composition agreement in all groups.
 If solvency of the economic operator is restored through the composition, the claims are
satisfied, and the composition is in conformity with the relevant legislation, it shall be
confirmed by the court
 The court shall terminate the liquidation proceedings if all registered debts, recognized or
uncontested, of the debtor had been satisfied

9. Proceedings of the liquidator:

 The liquidator shall analyze the financial standing of the economic operator and the claims
against it.
 The liquidator shall prepare an opening liquidation account, estimate the costs of liquidation
and set up a timetable for its implementation.
 The liquidator shall register and review of the creditors’ claims notified in deadline & shall
inform creditors in written within 45 days.
 The liquidator shall have powers to terminate, with immediate effect, the contracts
concluded by the debtor, or to rescind from the contract.
 The liquidator shall collect the claims of the debtor when due, enforce his claims and sell his
assets.
 The liquidator shall dispose of the debtor’s assets through public sales at the highest price
that can be obtained on the market.
 The liquidator shall effect the sale by way of tender or auction.
 If the amount of money received during the liquidation procedure is sufficient to cover the
claims of creditors, the liquidator may prepare an interim liquidation account following
deadline for notification. It is mandatory to prepare the interim financial statement each year
after the time of the opening of liquidation proceedings.
 The court shall deliver its ruling for the approval or refusal of the interim financial statement
and the proposal for partial distribution of assets within thirty days.
 Upon conclusion of the liquidation proceedings the liquidator shall prepare the final
liquidation balance sheet, the statement of revenues and expenditures, the final tax
returns, the closing report and a proposal for distribution of assets, and shall send all these
 to the court and, on the day that follows the date of the final balance sheet, to the tax
authorities and shall arrange for the placement of the economic operator’s documents.
 Following the end of the second year a final liquidation balance sheet must be prepared.
 The liquidator shall act with due care and diligence, as is expected from persons in such
positions, at all times during the liquidation procedure.

10. Conclusion of liquidation proceedings:

 The court shall send the liquidation balance sheet, the closing report and the proposal for
the distribution of assets to the creditors within 30 days of receipt. Any creditor may raise an
objection in writing concerning the liquidation balance sheet, the closing report or the
proposal for the distribution of assets within thirty days of the date of receipt. The court shall
decide whether to sustain or reject the objection after the hearing.
 The court shall distribute the outstanding receivables and the unsold assets among the
creditors, according to their respective claims, in view of the order of satisfaction
 Based on the final liquidation balance sheet and the proposal for the distribution of assets
the court shall rule on the bearing of costs, on the liquidator’s fee, on satisfaction of the
claims of creditors,. Simultaneously, the court shall decide concerning the conclusion of
liquidation and the dissolution of the debtor without succession,
 The company’s debts shall be satisfied from its assets that are subject to liquidation in the
following order:
o a) liquidation costs (wages, cost of sales, liquidator’s fee, court costs)
o b) * the part of a claim secured by a pledge that were not satisfied
o c) * alimony and life-annuity payments, compensation benefits,
o d) * other claims of private individuals
o e) * debts owed to social security funds, taxes
o f) other claims;
o g) * default interests and late charges,
 The liquidator’s fee shall be 5 per cent of the total amount of the proceeds from the assets
sold in the course of liquidation and the proceeds from claims
 The State shall not be liable for the fulfillment of creditors’ claims that were not satisfied
from the assets of the debtor; it shall, however, assume responsibility for contribution and
similar claims as alimony.

11. Special provisions (liquidation proceedings)

 Establishing Liability for any Transfer of Partnership Shares Done in Bad Faith
o a former member (shareholder) with majority control, who transferred his share
within three years before the opening date of the liquidation procedure, is subject to
unlimited liability for the debtor’s outstanding liabilities,
 Simplified Liquidation Procedures
o If the debtor’s available assets are insufficient even to cover the foreseeable costs of
liquidation, or the liquidation proceedings are technically nonexecutable
 Special Provisions Pertaining to Major Companies of Exclusive Status for Strategic
Considerations
o The Government may classify as major companies of preferential status for strategic
considerations those companies, which:
 settlement of the debts of such operators, composition with creditors or
reorganization is in the interests of the national economy
  the winding up of such operators without succession in a simplified,
transparent and standardized procedure is given priority due to economic
considerations.
2. Competition Law
1. Introduction:

 Effect and goal of competition:

o The basis of a market economy is that the supply side provided by the enterprises
producing certain products and services meets the demand side consuming the
goods. The transactions are concluded at the price resulting from the market bargain
of the two sides.
 Functions of competition:
o Welfare function: consumers can choose when to spend their income
o Allocation function: they invest in the products and services they need, thus
adapting production to the needs of consumers
o Efficiency function: competition forces production costs to a minimum
o Income distribution function: for the best performance, the most profit
 Competition Law and Competition Politics:
o C. Politics: The state forces companies to compete to ensure that the useful
functions of competition are realized.
o C.Law: Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices
+ EU Contract 101-102. Art. + direct regulations
 Restrictions on freedom of competition:
o Natural restrictions of competition: natural monopolies, restricted access to
resources, economies of scale
o Restrictions by the state: legal monoploies, restrictions of number of market players
(pharmacies), authorizations, price regulations
o Restrictions by the market players: companies are interested in increasing their profit
with either multi-party anti-competitive agreements or misuse of monopolistic or
powerful position
 Competition restrictive agreements
 Monopolization and exclusionary abuses through economic dominance
 Shaping the market structure - merger control (antitrust)
o General prohibition of unfair behaviour in competioin law (boycott, Decieving
consumers. Distortion of market, exploition
o Personal scope: natural persons, legal persons, other legal bodies
o Territorial scope: territory of Hungary and extraterritorial effect?

2. Basic Principles

 1.) Prohibition of unfair competition

 2.) Prohibition of unfair manipulation of business decisions
 3.) Prohibition of agreements restricting economic competition (cartell)
 4.) Prohibition of abuse of a dominant position
 5.) Control of contentration of undertakings

3. Prohibition of unfair competition:

  It shall be prohibited to engage in unfair economic activities, particularly in a manner that
infringes or jeopardises the legitimate interests of customers, buyers, recipients or users
(hereinafter collectively: trading parties) or competitors, or that are contrary to the
requirements of business fairness.
 It shall be prohibited to injure or jeopardise the reputation or credibility of competitors by
making or spreading false allegations, by falsifying facts or by other practices.
 It shall be prohibited to make unfair appeals to other persons with the intention to disrupt
existing economic relationships with third parties or to prevent the creation of such
relationships.
 It shall be prohibited to manufacture, distribute or advertise marketable movable property
(hereinafter: products) or services without the consent of a competitor if these goods have a
characteristic presentation, packaging, sign, or furthermore it is prohibited to use a name,
indication or other sign by which a competitor or its products or services are usually
recognised.
 It shall be prohibited to make any statement or communication with the purpose of
promoting the sale, or the use in any other manner than sale, of products, services, forces of
nature that can be exploited as property, real estate, securities, financial instruments or
intangible assets (hereinafter collectively: goods), or in connection with this purpose,
promoting the name, sign or activities of the undertaking, or raising awareness of the goods
or brand name which, explicitly or by implication, identifies a competitor of the undertaking
or goods produced, distributed or introduced by a competitor with intended use identical or
similar to that of the goods presented (hereinafter: comparative advertising), if
o (a) this may result in any unfair advantage derived from the reputation of the
competitor or the name, goods, indication and other sign of such competitor;
o (b) this may harm the reputation of the competitor or the name, goods, indication or
other sign of such competitor;
o (c) it presents goods as imitations or replicas of other goods bearing a trade mark or
other protected sign; or
o (d) it may result in market participants mistaking the undertaking for its competitor
or the name, goods, indication or other sign of the undertaking with those of a
competitor.
 It shall be prohibited to infringe in any manner the fairness of any bidding process — in
particular in respect of competitive tenders —, auctions or stock exchange transactions.

4. Prohibition of unfair manipulation of business decisions:

 It shall be prohibited to deceive trading parties in economic competition

 Deceiving business practice, which:
o (a) in respect of material information, contains incorrect facts or presents facts in a
manner which in light of all the circumstances of their presentation is deceptive or is
likely to deceive the trading parties to whom it is addressed or to whom it reaches;
or
o (b) hides or conceals information which is necessary for the business decision of the
trading party in the given situation and which, for this reason, shall be regarded as
material, or provides such information in an unclear, unintelligible, ambiguous or
untimely manner,
 and thereby affects or is likely to affect the economic behaviour of trading parties or
potential trading parties.
  Material information:
o A) the essential characteristics of the goods
o B) the price or the fee of the goods or the manner in which the price or the fee is
calculated
o C) any other contractual condition relating to the purchase or use of the goods
o D) the undertaking or the person acting as its agent, the attributes and rights of the
undertaking,
 It shall be prohibited to employ a business practice that unduly restricts the trading party’s
freedom of choice, in particular the creation of circumstances which make the realistic
appraisal of the good or offer, or its objective comparison with another good or offer
difficult, if this affects or is likely affect the economic behaviour of trading parties or potential
trading parties.
 Comparative advertising shall be permitted only if:
o (a) it exclusively compares goods intended for the same purpose or meeting the
same needs;
o (b) it compares relevant, determinant, representative and verifiable features of the
goods, and it must be objective, including in respect of price where that is also an
element of the comparison;
o (c) for products with designation of origin, it relates exclusively to products with the
same designation.

5. Prohibition of agreements restricting competition (cartel):

 Agreements or concerted practices between undertakings and decisions (hereinafter

collectively: agreements) by organisations of undertakings established pursuant to the
freedom of association, public corporations, associations or other similar organisations of
undertakings (hereinafter collectively: association of undertakings), which have as their
object or potential or actual effect the prevention, restriction or distortion of competition,
shall be prohibited.
 This prohibition shall apply, in particular, to:
o (a) the direct or indirect fixing of purchase or selling prices or other business terms
and conditions;
o (b) the limitation or control of production, distribution, technical developments or
investments;
o (c) the allocation of sources of supply, or the restriction of the possibility to choose
from them as well as the exclusion of a specified group of trading parties from
purchasing certain goods;
o (d) the allocation of markets, exclusion from sales, or restriction of the choice of
market outlets;
o (e) the hindering of market entry;
o (f) cases, where, in respect of transactions of identical value or character, there is
discrimination between trading parties,;
o (g) making the conclusion of contracts subject to the acceptance of obligations
which, by their nature or according to commercial usage, are unrelated to the
subject matter of such contracts
 Agreements of minor importance shall not be prohibited.
 An agreement shall be deemed to be of minor importance if,
 o (a) for agreements between competitors, the joint share of the participating
undertakings and of undertakings which are not independent of them does not
exceed ten per cent on any of the relevant markets,
o (b) for agreements between entities other than competitors, the joint share of the
participating undertakings and of undertakings which are not independent of them
does not exceed fifteen per cent on any of the relevant markets.
 The relevant market shall be defined by taking into account the goods that are subject to the
agreement and the geographical area. In addition to the goods subject to the agreement,
demand-side substitutability and the aspects of supply-side substitutability shall be taken
into account.
 Undertakings shall be deemed not to be independent of each other where they belong to
the same group of undertakings or where they are controlled by the same undertakings.
 Certain categories of agreements may be exempted from the prohibition of cartel by the
Government in a government decree.

6. Prohibition of Abuse of a dominant position:

 It shall be prohibited to abuse a dominant position, in particular:

o (a) to set unfair purchase or selling prices or to stipulate in any other manner
unjustified advantages or to force another party to accept disadvantageous
conditions in business relations;
o (b) to limit production, distribution or technical developments to the prejudice of
final trading parties;
o (c) to refuse, without justification, to create or maintain business relations
appropriate for the type of transaction in question;
o (d) to influence the economic decisions of another party in order to gain unjustified
advantages;
o (e) to withdraw, without justification, goods from circulation or withhold them from
trade prior to a price increase or with the purpose of causing a price increase or in
any other manner which is likely to produce unjustified advantages or to cause
competitive disadvantages;
o (f) to make the supply or acceptance of goods subject to the supply or acceptance of
other goods, furthermore to make the conclusion of contracts subject to the
acceptance of obligations which, by their nature or according to commercial usage,
are unrelated to the subject matter of such contracts;
o (g), to discriminate, without justification, against trading parties including in relation
to the application of prices, periods of payment, discriminatory selling or purchase
terms or methods, thereby placing certain trading parties at a competitive
disadvantage;
o (h) to set extremely low prices which are not based on greater efficiency in
comparison with that of competitors and which are likely to drive out competitors
from the relevant market or to hinder their market entry;
o (i) to hinder, without justification, market entry in any other manner; or
o (j) to create, without justification, disadvantageous market conditions for
competitors or to influence their economic decisions in order to obtain unjustified
advantages.
 A dominant position shall be deemed to be held on the relevant market by persons who are
able to pursue their economic activities to a large extent independently of other market
 participants without the need to substantively take into account the market reactions of
their suppliers, competitors, customers and other trading parties when deciding their market
conduct.
 In assessing whether a dominant position exists, the following factors shall be considered in
particular:
o (a) the costs and risks of entry to and exit from the relevant market, and the
technical, economic and legal conditions that have to be met;
o (b) the assets, financial strength and profitability of the undertaking or the group of
undertakings, and the trends in their development;
o (c) the structure of the relevant market, the comparative market shares, the conduct
of market participants and the economic influence of the undertaking or the group of
undertakings on the development of the market.

7. Control of concentration of companies:

 A concentration of undertakings (companies) shall be deemed to arise where

o (a) two or more previously independent companies merge or a company is absorbed
by another company or a part of a company becomes part of another company
which is independent of the first one; or
o (b) a sole company acquires, or more than one comapny jointly acquire, direct or
indirect control over an company which is independent of it or them, or over more
than one other undertaking which are independent of it or them but not of each
other; or
o (c) more than one independent company jointly create a company controlled by
them which is able to perform on a lasting basis all the functions of an independent
undertaking.
 Direct control and Indirect control (23. §.)
 A concentration of companies shall be notified to the GVH in cases where the aggregate net
turnover of all the groups of undertakings concerned and by other undertakings exceeded
fifteen billion forints in the preceding business year, and the net turnover of each of at least
two of the groups of undertakings concerned in the preceding business year combined with
the net turnover of the undertakings jointly controlled by undertakings that are members of
the respective group of undertakings and other undertakings in the preceding year was more
than one billion forints.
 Companies concerned are companies participating directly or indirectly in the concentration.
 Direct participants are:
o (a) in the case provided for in Article 23(1)(a), the merging undertakings, the
undertaking being absorbed and the absorbing undertaking, as well as the
undertaking which absorbs the part of an undertaking;
o (b) the undertaking acquiring direct control the undertaking controlling such
undertaking jointly with one or more members of another group of undertakings by
acquiring indirect joint control as well as the undertaking over which control is
acquired; and
o (c) the undertakings setting up a joint venture.
 Indirect participants are the other members of the group of undertakings to which a direct
participant belongs.
 In cases of mergers, absorptions and the establishment of joint ventures, it is the obligation
of the direct participant to notify the concentration; in all other cases such obligation rests
 with the acquirer of the part of an undertaking, or the acquirer of direct control or the
undertaking controlling the former.
 The Hungarian Competition Authority shall prohibit a concentration where, the
concentration would significantly reduce competition on the relevant market, in particular
as a result of the creation or strengthening of a dominant position.
 When assessing a concentration, both concomitant advantages and disadvantages shall be
considered. In the course of such consideration, the following factors shall be examined in
particular:
o (a) the structure of the relevant markets, existing or potential competition on the
relevant markets, procurement and marketing possibilities, the costs, risks and
technical, economic and legal conditions of market entry and exit, the prospective
effects of the concentration on competition on the relevant markets;
o (b) the market position and strategy, economic and financial capacity, business
conduct, internal and external competitiveness of the undertakings concerned and
likely changes to them;
o (c) the effect of the concentration on suppliers and trading parties.

8. Hungarian Competition Authority (GVH):

 The GVH is an autonomous state administrative body which is responsible for competition
supervision and for further functions as set forth in this Act and in separate acts.
Furthermore, the GVH carries out all the duties delegated by European Union law to the
competence of the competition authority of a Member State.
 The Hungarian Competition Authority is headed by the President.
 The President is nominated by the Prime Minister and appointed by the President of
Hungary.
 The President proposes the two Vice-Presidents to the Prime Minister who, if in agreement,
submits the nomination to the President of Hungary. Vice Presidents are appointed by
President
 The President and VPs are appointed for six years (once renewal)
 GVH President direct the activities of the GVH; represent the GVH; establish the
organisational and operational rules of the GVH, approve the organisational and operational
rules of the Competition Council, set the number of allocated posts and the procedure for
the issuance of official copies in the GVH, exercise employer’s rights.
 Secretary General (President appoints and direct the GVH organization)

9. GVH (The Competition Council):

 The Competition Council consists of a Chair and members. The Competition Council shall
perform the duties set forth in this Act. The Chair and members of the Competition Council
shall make 15 their decisions independently, in accordance with the law and in conformity
with their own convictions, and they may not be influenced or instructed in making their
decisions.
 The Chair of the Competition Council
o (a) shall organise the activities of the Competition Council;
o (b) shall supervise compliance with procedural time limits;
o (c) shall prepare and submit for approval the organisational and operational rules of
the Competition Council;
o (d) shall provide for the publication of the resolutions of the Competition Council and
 o (e) may act as a member of the proceeding competition council
 Following nomination by the President of the Hungarian Competition Authority, the
members of the Competition Council are appointed and dismissed by the President of
Hungary. The appointment is made for a term of six years. The appointed members may be
re-appointed once following the end of their term of office

10. Proceedings of Hungarian Competition Authority:

 1.) Market analysis and sectoral inquires

o With a view to discharging its statutory responsibilities more effectively and
efficiently, the GVH may conduct market analyses, in the framework of which it
surveys and analyses the operation of particular markets, the market processes and
the development of market trends as well as particular market practices employed in
multiple industries
o Where price movements or other market circumstances suggest that competition is
possibly being distorted or restricted in a market within a specific sector, the GCH
shall, by an injunction, launch a sectoral inquiry with a view to exploring and
assessing the market processes. GVH ends the inquiry process with a formal report.
 2.) Formal and informal complaints
o A formal (completed form) or informal (without form) complaint may be submitted
to the GVH by any person concerning any infringement which falls within the
competence of the GVH. Handler shall start an investigation or terminate the
proceedings.
 3.) Notification concentrations (by completed form)

11. Competition Supervision proceedings:

 Competition supervision proceedings shall mean the official proceedings aimed at

establishing an infringement of the provisions of the Act.
 Competition supervision proceedings shall be conducted by the GVH. The Hungarian
Competition Authority has the power to proceed in the whole territory of Hungary.
 Phases of the proceedings:
o the investigation and
o the proceeding of the Competition Council
 The investigation phase ends when the case handler’s report is submitted to the Competition
Council. The investigation phase shall continue if the proceeding competition council adopts
a decision
 Resolutions are made and other necessary measures are taken by the case handler in the
investigation phase and by the competition council proceeding in the case in the proceeding
of the Competition Council.
 The Competition Council shall adopt its resolutions in a panel of three or five members
appointed by the chair of the Competition Council, with the proviso that the member of the
competition council proceeding in the case designated as the rapporteur may adopt
injunctions on his/her own against which no legal remedy may be sought, or may take other
measures as necessary.
 Time limits:
o 3 months – in case of prohibition of unfair competition
o 6 months – in case of cartel, misuse of dominance, fusion controll
  Any evidence that is suitable for the clarification of the facts of the case may be used in
competition supervision proceedings.
 Hearing: The case handler or the competition council proceeding in the case shall hold a
hearing if it is necessary to simultaneously interview the persons participating in the
proceeding for the clarification of the facts of the case.
 The case handler shall issue an injunction initiating an investigation upon the observation of a
conduct falling within the competence of the GVHthat is likely to constitute an infringement,
if the protection of the public interest necessitates the conducting of a competition
supervision proceeding.
 No competition supervision proceeding shall be initiated, if:
o Prohibition of unfair competition – 3 years has elapsed
o Cartel, misuse of dominance, fusion controll – 5 years has elapsed
 After completing the investigation, the case handler shall prepare a report, which he or she
shall submit to the competition council together with the documents. Upon receipt of the
report of the case handler, the competition council proceeding in the case may return the
documents to the case handler.
 Competition Council:
o Interim measures / prohibition of continuation of infringing conduct
o Shall send to the party its preliminary position about the case, which shall contain
the facts of the case as established, the evidence in support thereof, the assessment
of the facts
 Settlement procedure: If the party and the competition council proceeding in the case reach
a common understanding on the aforesaid factors within a time period which does not
jeopardise the swift and effective conclusion of the proceeding
 Hearing of the Council: Before adopting a decision the competition council proceeding in the
case shall conduct a hearing if this is requested by the party or considered necessary by the
competition council proceeding in the case.
 Commitment: Where, regarding a conduct investigated in a competition supervision
proceeding initiated, the party offers commitments to bring its conduct in a specified way in
line with the applicable legal provisions, the competition council proceeding in the case may,
in its decision, oblige the party to abide by such commitments without establishing the
existence or the absence of an infringement in such decision.
 In its decision, the competition council proceeding in the case:
o shall establish the fact of infringement;
o shall order the termination of the infringing state;
o shall prohibit the continuation of the infringing conduct;
o shall impose obligations,
o shall impose a fine
o shall oblige the undertaking to fulfil the commitments
 GVH shall, after rendering restricted access data unrecognisable, publish on its website its
decision and orders

12. Special provisions:

 Application of the Competition Rules of the European Union

o The case handler or the competition council proceeding in the case shall terminate
the competition supervision proceeding if the European Commission has initiated its
own proceeding in the case
  Procedure for the Application of Regulation (EC) No 2006/2004
o GVH shall be responsible for the enforcement of Regulation (EC) No 2006/2004 of
the European Parliament and of the Council
 Legal Remedy in the Competition Supervision Proceeding of GVH
o If a competition authority of another Member State requests an investigation from
the Hungarian Competition Authority, the rules of the competition supervision
procedure shall apply accordingly. In such a case, the proceedings shall end with an
order of the examiner on the transfer of the evidence obtained and on the
determination of the costs incurred in advance by the Office in the course of the
proceedings
 Follow-up investigations:
o The GVH shall conduct follow-up investigations ex officio to monitor compliance with
the enforceable decision of the competition council proceeding in the case

3. Labour Law
Introduction 1.:
1. Work can be carried out in several different legal relationships…

 In almost uncountably many kind…

 Only for example: in Act No. CXXII. of 2019 on the on Entitlements to Social Security Benefits
and on Funding These Services (hereinafter: Tbj. tv.)
o In its 6. § section (1) subsection a), only those that under the scope of Tbj. Tv. should
be referred as employment relationship (though they are actually not) are listed till
25 (!) kind.
o The enlisting follows further from a) till k),
o Section (2) in itself is a listing in about 10 lines,
o And still there is a section (3)…
o Moreover, besides all these, still there are several, since these are only the relevant
ones from social security aspects.

2. Level of legal regulations – laws:

 In the centre of labour law is Labour Code (Act No. I. of 2012. on Labour Code – its official
Hungarian abbreviation is: Mt.)
 Labour Code is the „alpha” of labour law. – During the course, we shall only talk about
certain parts of this.
 The other major legislations about work somehow relate to it.
 Behind Labour Code stands another, even bigger act: Act No. V. of 2013. on the Civil Code –
(„Ptk.”) – several rules of Labour Code refer back to the Civil Code as ones that must be
applied in employment relationships as well.

3. Level of legal regulations: decrees:

 In certain specific topics, laws give authorization for making decrees on implementing certain
parts of the law in details:
o Government decrees
o Ministerial decrees
 The authorization of making a decree may arise from:
 o The Labour Code itself
 e.g. cost reimbursement of cost for travel to work, mandatory minimum
wage etc.
o Laws regulating other types of legal relationships
 It’s pretty frequent in the public sector
o Or from the thematic laws
 E.g. law on occupational health and safety also has implementing decree

4. Is there anything else beyond legal regulations?

 In labour law there are rules, which are not legal regulations, though still behave as if they
were.
 These are the followings:
o collective agreements –
 These are concluded by the trade union(s) – if such exists at an employer or
at a sector, this represent a regulatory level above the individual
employment contracts
o work agreements
 concluded between the worker’s council and the employer on cooperation
rules
o the binding decisions of the conciliation committee adopted according to Section
293.

5. Thus, we introduced an important definition:

 Employement regulations:
o Legal regulations
 Laws and decrees
+
o The previously discussed „quasi-laws” of collective labour law
 Collective agreement
 Work agreement
 The binding decisions of the conciliation committee adopted according to
Section 293.

6. Is Labour Code cogent or dispositive?

 43. § ”(1) Unless otherwise prescribed by law, the employment contract may derogate from
the provisions of Part Two and from employment regulations to the benefit of the employee.
 (2) Such derogations shall be adjudged by comparative assessment of related regulations.”
o Labour Code is basically unilaterally (for the benefit of the employee) dispositive →
RELATIVE DISPOSITIVITY
o By collective agreement derogation is allowed also for the disadvantage of the
employee (with exceptions).
o But: Labour Code also contains a set of rules from which derogation is forbidden,
even if the parties could agree in it or would serve the employee’s benefit.
7. Parties to employment relationship

 Those, who conclude employment agreement with each other:

o The employer and
o The employee
 It’s a bipolar legal relationship
o (exception: temporary agency work)

8. The parties of employment relationship (Mt. 32-34 . §)

 Employer
o a person having the capacity to perform legal acts, who employs employees under
employment contract
o May be an organization – if mandated by law with the capacity to perform legal acts
(as a legal persons) or
o a natural person – a human - (e.g. self-employed entrepreneurs may also be
employers of employees.)
 Employee
o a natural person who works under an employment contract
o Always a human.
 Basically over 16 years old (with exceptions), but
 for several jobs many further conditions apply (e.g. scholar level,
professional qualifications, non criminal record etc.)
 Do not confuse definitions!:
o In case of an organization as employer, the employer and the person exercising
employer’s rights surely differ!
o Mt. 20. § (1) The person exercising employer’s rights shall be entitled to make legal
statements on the employer’s behalf.
o (2) The rules for exercising employer’s rights shall be laid down - within the
framework of law - by the employer.

9. Commencement of an Employment Relationship (Mt. 42. §)

 42. § (1) An employment relationship is deemed established by entering into an employment

contract.
 (2) Under an employment contract:
o a) the employee is required
 to work
 as instructed by the employer;
o b) the employer is required
 to provide work for the employee and
 to pay wages.

10. Basic typologies of employment relationships

 By working time:
 o Full time
 8 hours daily - general principle for full-time daily employment (exceptionally
may differ)
o Part time
 which is less than above
 By duration/term:
o Indefinite duration
o Fixed-term duration

11. Rules of employment relationships for fixed-term duration (Mt. 192. §) -1.

 „The period of fixed-term employment shall be determined

o according to the calendar or
o by other appropriate means.
 The date of termination of the employment relationship may not depend solely on the
party’s will, if the duration of the employment relationship is not determined by the
calendar. In the latter case the employer is required to inform the employee of the
expected duration of employment.”

12. Rules of employment relationships for fixed-term duration (Mt. 192. §) – 2.

 „(2) The duration of a fixed-term employment relationship may not exceed five years,
including the duration of an extended relationship and that of another fixed-term
employment relationship concluded within six months of the termination of the previous
fixed-term employment relationship.”
o Exception: employments where official authorization is required
 „(4) A fixed-term employment relationship may be extended, or another fixed-term
employment relationship may be concluded within six months from the time of termination
of the previous one upon the employer’s legitimate interests. The agreement may not
infringe upon the employee’s legitimate interest.”

13. The compulsory minimum content of employment agreement (Mt. 45. §)

 The parties must specify in the employment contract the employee’s

o personal base wage and
o job function.
 Any of these is missing, the consequence is nullity.
 Written format is a must for concluding a valid employment contract.
 The duration of the employment relationship
o „The term of the employment relationship shall be defined in the employment
contract. Failing this the employment relationship is concluded for an indefinite
duration.”
 Workplace
o „The workplace of the employee shall be defined in the employment contract.
Failing this, the place where work is normally carried out shall be considered the
workplace.”
 Working time
o „In the absence of an agreement to the contrary, employment relationship is
concluded on general principle for full-time daily employment.”
14. Probation /trial period (Mt. 45. §)

 „(5) In the employment contract the parties may stipulate a probationary period of not more
than three months from the date of commencement of the employment relationship. In the
event that a shorter probationary period has been stipulated the parties may extend the
probationary period once. In either case, the duration of the probationary period may not
exceed three months.”
o (Note: 1) collective agreement may stipulate a maximum 6 months probationary
period;
o 2) (probation time rules in the public sector differ from the ones at employment
contracts in the private sector.)
 During probation period, employment contract may be terminated by either party in writing
(!)
o Without notice (i.e.: with immediate effect),
o Without giving reason

15. Job Function

 Job function is a very basic minimal content of employment agreement.

 It’s an overall cathegory – a wide circle of duties
o E.g. sous chef, racehorse bender, chorus dancer, clown, footballer etc.
o This gets in the employment contract – specifying the function of our employment –
but not the exact duties
o Sometimes specific conditions must be applied
 E.g. scholar level of education, specific professional qualification, non
criminal record etc.

16. Job description

 Job description is not a question of agreement – it’s given in written form by the employer
but it’s only an information about the duties of the employee within the frame of the job
function.
o Thus employer may change it unilaterally, whithout the employer’s consent, but
within the range of the job function – it’s still general
 The exact, concrete duties are arising from the instructions of the employer individually or
the employer’s internal regulations – within the frames of the job description.

Introduction 2.:
1. General rules of conduct (Mt. 6-8. §)

 „The precepts of the law are these:

o to live honestly,
o to injure no one, and
o and to give every man his due.” /Justinian’s Institutes/

2. The „rubber rules” of labour law

 „Soft law” - „Hard” consequences…

 Employment relationship is a very personal one. Person-toperson connections are
determinative.
 These are – so called – subsidiary rules
 o The purpose of these rules is that we must regulate somehow the unregulatable:
 So that we can refer to a paragrapf in a legal dispute, if necessary
 Thus one may only refer to them when a breach of a specific legal provision
cannot be referred.

3. To act as generally expected in the given circumstances (Mt. 6. § (1) sec.) -1.

 Unless law provides different requirement, while executing the employment contract one
must act as generally expected in the given circumstances.

4. To act as generally expected in the given circumstances (Mt. 6. § (1) sec.) – 2.

 „Social meter cord” – not personal

o – The question is not what I personally expect of others (or think about my own
conduct) in accordance with my own personal standards, but what people in general
expect in such a situation.
 The „given circumstances” means the „here and now” situation – whatever may it be.
 The given circumstances may be the same, but what is generally expected may vary
depending on the job/responsibility, etc.

5. Principle of good faith and fairness, cooperation obligation (Mt. 6. § (2) sec.)

 In exercising rights and fulfilling obligations, one shall act in the manner consistent with the
principle of good faith and fairness, and they shall be obliged to cooperate with one
another, further they shall not engage in any conduct to violate the rights or legitimate
interests of the other party.”

6. The principle of equitable assessment (Mt. 6. § (3) sec.)

 „The employer shall take into account the interests of the employee under the principle of
equitable assessment; the mode of performance defined by unilateral act may not cause
disproportionate detriment to the employee.”

7. Prohibition of abuse of rights (Mt. 7. §) -1.

 Not everything is fair that is allowed…

 Rights also should be used what they are provided for.
 Rights are granted for a purpose – and not for something else…

8. Prohibition of abuse of rights – 2. (Mt. 7. §) -2.

 A typical appearance of this is when someone misuses an existing, real right, but against the
original goal, purpose of this right.
o E.g personal conflict, revenge, to intimidate etc.
o Practicing the right formally looks OK, while as of its essence is not.
o Do not confuse with the principle of equitable assessment! – They are different.
 „Abuse of rights is prohibited. For the purposes of this Act ‘abuse of rights’ means, in
particular, any act that is intended for or leads to
o the injury of the legitimate interests of others,
o restrictions on the enforcement of their interests,
o harassment, or
 o the suppression of their opinion.”

9. Obligation to inform (Mt. 6. § (4) sec.)

 „(4) The parties falling within the scope of this Act shall inform each other concerning all
facts, information and circumstances, and any changes therein, which are considered
essential from the point of view of employment relationships and exercising rights and
discharging obligations as defined in this Act.”

10. Protection of employer’s reputation and legitimate economic interest (Mt. 8. §)

 „While under employment relationship, employees shall not engage in any conduct by which
to jeopardize the legitimate economic interests of the employer, unless so authorized by
the relevant legislation.”
 „Employees may not engage in any conduct even out of their working hours that - stemming
in particular from the employee’s job or position in the employer’s organization - directly
and factually has the potential to jeopardize
o the employer’s reputation,
o legitimate economic interest or
o the purpose of the employment relationship.”

11. The employee’s right to express opinion (Mt. 8. § (3) sec.)

 „The employee may not exercise the right to express his opinion in a way where it may lead
to causing serious harm or jeopardy to the employer’s reputation or legitimate economic
and organizational interests.”
 According to judicial practice, freedom to express opinion does not bear – even if the opinion
is based on true facts - when the way of expression is disproportionally exaggerated,
unreasonably hurting, degrading.

12. Protection of business secret and confidential information (Mt. 8. § (4) sec.)

 „The employee shall maintain confidentiality of business secrets obtained during the course
of work.”
o – Attention! The secret remains secret even after the termination of the
employment contract!
 „Moreover, the employee shall not disclose to unauthorized persons any data obtained
during carrying out his job, that if revealed, could result in disadvantageous consequences
for the employer or other persons.”

Introduction 3.:
1. Fundamental obligations of the employer (Mt. 51. §)

 To employ
 To provide the necessary working conditions
 To implement occupational safety and occupational health requirements
 To reimburse costs

2. Obligation to employ
  Employers shall employ their employees in accordance with the rules and regulations
pertaining to contracts of employment and employment regulations.
o Take care! – Employment – providing work – under a labour contract is not a right,
it’s an obligation!
o If breached, it may have consequences.

3. Obligation to provide the necessary conditions

 Employers shall … - unless otherwise agreed by the parties - provide the necessary working
conditions.
o To be interpreted broadly
o E.g. material, personal, informational conditions, instructions, control etc.
o At teleworking special rules may apply to material conditions.

4. Obligations of occupational health and safety

 The responsibility for the implementation of occupational safety and occupational health
requirements lies with the employers
o Also to be interpreted broadly
o E.g. prior, regular and extraordinary occupational health check, work safety
appliances, equipments, education, safety procedures, organizing work processes,
even office furnishing etc.

5. Obligations of cost reimpursement

 Employers shall be liable to compensate their employees for

o justified expenses
o incurred in connection with fulfillment of the employment relationship.
o Salary /wage is paid for carrying out work. Cost reimbursement is different.
o The costs covered by this rule are those normally arising from the employer’s
obligations, but for some reasons they are advanced by the employee.
o It also raises questions on taxation.

6. Fundamental obligations of the employee (Mt. 52. §)

 To appear
 To be at the employer’s disposal
 To perform work
 To perform proper conduct
 To cooperate

7. Obligation to appear

 Employees shall … appear

o at the place and time specified by the employer,
o in a condition fit for work…
 Condition fit for work is a differentiated term and may differ in different job
functions:
 Mental and physical fitness
 E.g. health issues, certain medicines, alcohol, drugs, dressing etc.

8. Obligation to be at the employer’s disposal

 Employees shall … be at the employer’s disposal in a condition fit for work during their
working time for the purpose of performing work.
o To be prepared for carrying out work – in order to enable the employer to fulfill its
obligation to employ

9. Obligation to perform work

 Employees shall perform work …

 in person,
o My job should be carried out by me, may not delegate it to some other person –
 with the generally expectable level of professional expertise and diligence,
o Is mistake tolerable?
 in accordance with the rules, regulations, instructions and customs concerning his job
o (professional and organizational customs)

10. Obligation of proper conduct

 Employees shall … conduct in a way that’s in accordance with the trust necessary for
carrying out his job.
o Differentiated, it’s basically determined by the expectations related to the job
function
o Not a question of personal sympathy – workplace is not necessarily a friendly circle
at once
o It’s not an abstract concept – and is not a miraculous word but a sufficiently concrete
and justifiable cause is needed if referred to its loss

11. Obligation to cooperate

 Employees shall … cooperate with their co-workers.

o The employment contract is bipolar – employer and employee are the parties.
o Co-workers are not parties in our employment contract, so we must be linked legally
– this rule is about this