The Civil Code provides that a meeting of the decision-making body must be convened by sending out or publishing an invitation.
The agenda must be set out in the invitation with sufficient detail to enable those entitled to vote to form their position on the matters to be discussed.
In practice a number of issues have been raised in this regard. Is a generally worded agenda item sufficient? Is it necessary to provide a detailed proposal and reasons? Shall all the relevant information be included in the agenda item, or can the required level of detail also be supplied through accompanying documents? Is it necessary to attach a draft resolution?
1. The invitation and its annexes may jointly satisfy the requirement of sufficient detail of the agenda
The agenda identifies the matters and issues to be discussed at the meeting of the decision-making body and in respect of which the decision-making body may adopt resolutions.
According to the judicial practice, the convening of a meeting is not lawful if the agenda is formulated in such general terms in the invitation that, with an average degree of attention and interpretation, it cannot be established what matter the decision-making body is to discuss.
However, the invitation and the documents attached thereto may jointly satisfy the requirement of sufficient detail.
A concise agenda item in the invitation (e.g. amendment of the articles of association) clearly identifies the subject matter to be discussed. A written draft resolution attached to the invitation further clarifies the substance of the proposal, e.g. which provision of the articles of incorporation needs to be amended and what the amendment should entail.
In practice, this means that agenda items should be formulated in a concise and focused manner, while the precise substance of the proposed decision may be set out in the draft resolutions and other background materials attached to the invitation. This ensures that the invitation remains succinct, while the shareholders have access to the information they need, in order to prepare adequately.
2. The invitation does not have to state the reasons for the agenda items
In our practice, it has occurred on several occasions that minority shareholders challenged a corporate resolution on the grounds that the invitation was not sufficiently detailed because it did not explain why it was necessary to make a decision on the particular matter at the meeting.
The Budapest-Capital Regional Court of Appeal (Fővárosi Ítélőtábla) confirmed that the invitation does not need to include the reasons justifying the inclusion of the proposed resolution on the agenda, nor is it necessary to set out the position of the board of directors.
The Civil Code does not impose such an additional requirement, and the wording of the act cannot be interpreted broadly. The bottom line is that shareholders should be able to form their position on the basis of adequate information, and this is not affected by the reason why the particular agenda item was included on the agenda.
3. The goal is to ensure that decision-makers are adequately prepared
The legislative rationale underlying the requirement for sufficient detail of the agenda is to ensure that those entitled to vote should be able to obtain adequate information in advance regarding the matters to be decided at the meeting, process that information and prepare themselves for the decision-making process.
At the same time, this requirement does not mean that, when the meeting commences, shareholders should already have a final and unequivocal position on every agenda item.
An agenda item merely defines the scope of the meeting, i.e. it sets out the scope of the matters that shareholders may discuss and decide upon at the meeting. Accordingly, the objective is for decision-makers to attend the meeting with an adequate basic level of preparation and information, and to be capable of formulating any additional relevant questions that may arise.
Therefore, an agenda item does not have to predetermine every detail or cover every possible angle of the discussion at the decision-making body.
4. The role of the right to information
If a shareholder considers the information made available in the invitation to be insufficient, they may exercise their right to request information and their right of inspection under the Civil Code.
The right to information is derived from the general provisions of the Civil Code and, in the case of a company limited by shares, the Civil Code also contains specific provisions expressly governing this right.
The requirement for an agenda item to be sufficiently detailed and the right to information are interrelated but distinct legal concepts. The invitation must ensure that the matter on the agenda can be identified and that the shareholders have an opportunity to prepare adequately; however, the shareholders have a right to obtain additional information under the Civil Code.
Therefore, a shareholder may not necessarily be able to successfully invoke the lack of sufficient detail in the agenda merely because the invitation did not contain all information that the shareholder considered necessary, particularly when the shareholder could have requested further information but failed to exercise that right.
5. Examples of lawful and potentially risky solutions
- Agenda item is very general, e.g. “amendment of the articles of association”, and no draft resolution is attached: NOT LAWFUL
- Agenda item is concise, but a specific draft resolution is attached: LAWFUL, and indeed BEST PRACTICE
- Agenda item is sufficiently specific to enable shareholders to prepare for the matter to be discussed: LAWFUL
- Specific background information and reasons are attached to the agenda item: ALWAYS LAWFUL, but in a critical or contentious situation, it may be “OVERDONE” from a tactical standpoint.
- A shareholder considers the agenda incomplete but asks no questions, either in advance or at the meeting: RISKY, because if the resolution is challenged, the court is unlikely to view favourably the fact that the shareholder failed to exercise their right to ask questions.
Our corporate dispute resolution team with significant expertise in such and similar matters is at your disposal in case of questions.
