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19 The New Company Laws of

Eastern Europe

In Chapter 3 various possible models of companies were discussed. As

Eastern European States emerge from economies where property was
state-owned and no vehicles existed for private enterprise, they are having
to invent their own versions of company law. It is interesting to examine
some of the strucures which are emerging. This chapter examines the
company law in Kazakhstan, Hungary, Poland, and the Czech Republic.
The models in the various jurisdictions are not clear cut, however, and
distinct differences exist between the various types of enterprise in each
country and across the jurisdictions. The way in which the law treats the
property of the enterprise affords significant clues to the way in which the
company is viewed.

19.1 The Property of the Enterprise

In Kazakhstan the property of an enterprise is defined as:
'the basic funds and the circulating assets derived from the capital put in
by the founders as well as revenues received from bank loans and from
economic activity as well as from "any other source not prohibited by
law".'
In Hungary and Poland the law protects the right of a company to
acquire property in its own right but does not provide an insight into the
relationship between the entity and its property, whereas the original
Czech definition of an enterprise in relation to its property revealed much
about the model of company envisaged as it included 'all its tangible and
intangible assets and the skills applied by its staff to its business activity'
(this has now been changed; see below). The attitude to company property
thus revealed would seem to indicate that, in 1991, only the Czech law
envisaged an enterprise or associative model, the others complied much
more closely to ownership or contractual models. The subsequent
amendment of the Czech Commercial Code gives further credence to this
analysis. It appears to bring Czech law into line with the others by
introducing a more limited definition of a commercial concern. New s. 5
of the Czech Commerical Code reads:
'for the purposes of this Code, an enterprise is understood to be the
aggregate of the tangible, personal, and intangible components of
business activity. Things, rights and other property values belonging to
the entrepreneur which are used, or because of their nature are intended
for use, in the operation of the enterprise, belong to the enterprise.'
J. Dine, Company Law
© Janet Dine 1998
 The New Company Laws of Eastern Europe 351

It is arguable that this wide definition of a company still includes staff

and their skills, but the deliberate excising of them from the previous
definition points to a contrary view.

19.2 Structures of Boards and Shareholders

Close examination of other factors such as the structure of boards and the
rights and duties of shareholders reveals a more diverse picture.

Poland
The Polish models both for private and public companies give much
power to the shareholders, providing for the appointment and removal of
the management and supervisory boards by them. However, the wide
powers of control given to the shareholders meeting in private companies
is not reflected in the rules for public companies, which are much more
closely controlled by additional financial and accounting control. This
would indicate that the closely held corporations are seen as correspond-
ing to the contractual model, to be controlled by their private owners,
whereas public companies are to be much more to be the province of
external state control, closer to the idea that state property is being
administered, remote from idea of private contractual shareholder
ownership.

Hungary
The Hungarian limited liability company gives similar powers to the
shareholders to elect and dismiss the members of the boards but some
interesting provisions point away from the conclusion that a simple
ownership or contractual model has been adopted. Thus, members may
not vote on any resolutions in which they have an interest (Art. 187 of the
Hungarian Commercial Code). Article 188 of the Hungarian Commercial
Code imposes a duty of care on members exercising their vote:
'Members who adopt a resolution which they knew, or could have
reasonably been expected to have known, would obviously impair the
major interests of the company, bear unlimited and joint liability for
any damage so arising'.
Such duties placed on shareholders significantly depart from the idea
that the company belongs to the shareholders and thus from the notion
that they can manipulate it according to their own wishes. In this version
the interests of the company are paramount when important issues are at
stake. The denial of the shareholders' right to act selfishly on all occasions
indicates a rejection of the simple contractual ownership model in favour
of making the company's own rights paramount. In determining the
company's rights and interests more factors are important than simply the
shareholders' wishes. This accords with the idea that shareholders have
two rights as a result of their ownership of shares. This idea is at the root