JointVentures and the new Civil Code
JointVenture agreement packages are the guarantors of successful cooperation. The pillars of these are the JointVenture contract, the Hungarian company’s partnership agreement and the so-called vertical agreements such as the transportation, know-how transfer and licence agreements. These legal ‘checks and balances’ were stirred up by the new Civil Code, which entered into force on 15 March 2014. Legal and business fine-tuning has become necessary. Why? For instance in the past it was common practice to establish purchase rights for the share of the other party in the company.
This was often used as an ultimate tool when the parties couldn’t agree on something in a debate. This is no longer possible because of the stipulations of the new Civil Code, and these stipulations refer to all similar guarantee agreements. Instead of these the new Civil Code favours the classic mortgage. Another new – and dangerous – regulation in the new Civil Code is that contract clauses are automatically deemed null and void if they ‘aren’t understandable’ or ‘contradictory’. According to some experts this makes it possible for a JointVenture partner to declare the full agreement invalid even if there is only a minor ambiguity or small contradiction in it, only to improve their negotiating position. It is stipulated by the new Civil Code that the parties can freely decide on the contents of the partnership agreement. Due to this the partnership agreement of the JointVenture can serve as a regulatory platform, generating actual legal value. There are three general limitations, though: 1. the regulation mustn’t limit the rightful interests of creditors or employees, 2. minority owners (members) rights mustn’t be harmed, 3. the company’s state supervision mustn’t be limited. We urge company owners to refrain from bringing already existing JointVenture agreements under the scope of the new Civil Code without making the necessary changes.Related news
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