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Shareholder and the company. Three centuries of evolution.
GÁBRIŠ, T., JANÁČ, V.: Shareholder and the company. Three centuries of evolution. Právny obzor, 105, 2022, special issue, pp. 14-28
https://doi.org/10.31577/pravnyobzor.specialissue.2022.02
The development of business organisations and commercial law as such in the Kingdom of Hungary was gradual. We may add that it was belated, as compared to other Western European countries, but also Austria. This is also documented by historical events, where the onset of the modern age in the Kingdom of Hungary dates back to 1526; the Industrial Revolution has also begun later, given the rural character of Hungary, that also preserved its nature during the Austro-Hungarian Monarchy. After the end of World War I and the formation of Czechoslovakia, intensive reform and unification efforts were underway in the law of business organisations. World War II frustrated these efforts. The period that followed after the end of the war was not a propitious time for the commercial law either. The monopoly held by the Czechoslovak Communist Party meant liquidation of private businesses and a centrally controlled economy. Changes were not brought before the events after 1989, or 1993 (associated with the formation of an independent Slovak Republic).
Key words: The Kingdom of Hungary, Austro-Hungarian Empire, corporate law, partnerships and corporations, shareholders, creditors protection, start-ups, simple jointstock company
Introduction
Back in the medieval Kingdom of Hungary, commercial law did not exist as a separate field of law,
1)
as follows from the relatively late theoretical structure of dividing the legal system into fields of law. However, some aspects of trading were regulated by royal decrees and statute articles of the Diet. Most of the fundamental questions related to the commercial legal relationships was subject to regulations of city rights and guild statutes. Merchant rights were, back then, subjective, regarded as status
2)
and were originally not objective rights understood in the context of a set of legal rules or standards in a fixed form and enforceable by a steady system of authorities. It was only gradually that the merchant law evolved as an objective right. But even then, the law of merchants did not take the form of written rules of law and not even occasionally explicit provisions in city books contain provisions of substantive law, much rather questions of jurisdiction - primarily in the form of exemption (privileged status) of merchants from common1. The Modern Period and Enlightenment Absolutism in the Kingdom of Hungary
In Austria that was ahead of the Kingdom of Hungary in the development of commerce and commercial law, state rules regulating commercial law were adopted several centuries before they were in the Kingdom of Hungary, as early as the late 17th century. Trading books were introduced as early as 1693; in 1717, the law on bills of exchange and a regulated structure of the commercial judiciary was introduced, insolvency law was regulated by Insolvency Code of 1734. In 1787, a court decree ordered that merchants must be registered in a commercial court.
3)
Due to abrupt boom of trade and the attraction of foreign models, even in spite of defiance of Austrian law that was also forcefully spread in the Kingdom of Hungary in the age of enlightened absolutism, Hungarian elites had come to understand the necessity of statutory regulation of this area of social life, although naturally with deviations that accounted for Hungarian circumstances and legal traditions. Curia regis, as the supreme court of the Kingdom of Hungary, was concerned with own provisions of commercial law and bills of exchange under the reign of Joseph II and drafted a bill of the respective code (Codex Cambio-Mercantilis) in 1781.
4)
In 1787, also the Tabula Regia (Royal Table) (a lower bench of the supreme court)
5)
drafted a new Codex Cambio-Mercantilis according to the German model. A special codification committee entitled
deputatio in juridicis
(for legal questions), established under Law No. 67/1790, thus had a basis to rely on, when working on projects of the merchant and bill of exchange law and the code of commercial justice as one of the tasks vested in it by a statute article.According to the regulation, bigger (
dittal
) and smaller (
minutary
, All-Ingrosso) merchants were obliged to be registered in a commercial court, whereby under the bill of exchange bill, the record had to comprise of the following: a) name and type of business activity; b) age supported by an authentic document; c) capital (under Section 10 of Article 1, bigger merchants had to document a capital of least 10 thousand Florens to be recorded, while the smaller ones had to prove they had 4 thousand); d) list of members, including the dormant ones; e) year and date of formation; and f) contents of the deed of foundation. Even minors could become businessmen, provided they had a tutor, and also noblemen if they fulfilled the capital requirement (not subject to
aviticity
). Any person who would not obtain the official consent, that is obtained a dissent to their registration, would have the right to appeal to the ruler through the court office of the Kingdom of Hungary. Soldiers, sensals (business intermediaries) and the clergy were explicitly exempt from the capacity to be recorded. At the end of every year, the commercial court had a duty to submit a list of all recorded and expunged businessmen to the king's governor under Section 16 of Article 1.Under Section 13 of Article 1, businessmen with the exception of dormant partners were generally bound to be liable for obligations with their entire assets, unless special forms of business organisations provided otherwise. Creditors whose claims were intabulated in a land book had a priority in settling claims receivable (under Section 15, claims could only be intabulated with respect to immovable property, while under the law, Article 107/1723, claims towards a businessman's personal property, i. e. privately- owned immovable property, were not capable of intabulation). Other creditors were to be satisfied according to the quality and weight of their proof of debt against the debtor and the rest of them were to be satisfied from what was left, on a "pro rata" basis.
The Commercial-Bill of Exchange Bill drafted by the
in juridicis
deputation also addressed specific types of business organisations - three major types were distinguished - 1.) open companies whose members were recorded by the court under the undertaking in their name and surname and were also publicly identified in the deed of foundation (according to Section 4, they would be liable for the company's obligations jointly and severally, with their entire property); 2) silent companies whereby one or more members was identified on the deed of foundation, i. e. publicly known (liable with their entire property), while others were only known to the court (and were only liable up to the amount of the recorded capital investment under Section 5) - those companies used the supplement "& Compagnie", 3.) so-called higher companies (
accomandita
) in which one or more private persons participated in the company with a specified amount of capital (stake). Neither those entrusted with the company governance, nor those participating with capital investment only, would be liable in excess of their investment (Section 6), as was supposed to be set out in the deed of foundation (
obligatoriis literis
). If, however, one of the members alone had committed in his name, or inflicted damage to the company purposefully or upon grave omission, such member would have been liable with his entire property.All companies would come into existence by recording the written deed of foundation (with no distinction made between formation and the beginning of existence) that would contain the names of the members, their obligations, capital, distribution of surplus, questions of damage and liability. The company would not be liable for the members' private debts incurred outside the business domain, but would be liable for debts incurred by one of the members when conducting business operations within the company's business purpose, or as stated in the bill: "it is fair to also jointly bear the loss if it is profits that they share" (Section 7).
The procedure of adopting the regulation of commercial law could not be successfully concluded, even not towards the end of the 18th century, or during the following two sessions of the Diet of Hungary (1830, 1832-36). In 1836, only Statute Article 18/1836 on Market Courts was passed. It was as late as the Diet assembly in 1840 that the statute articles regulating the substance of commercial law were passed, however in a more modern form, different from the initial bills of the
deputation in juridicis
- along the Statute Articles on Businessmen (16/1840) and Business Organisations (18/1840) that regulated the same substance (but in a mode different) from the first two parts of the original bill of the Code of Commerce and Bills of Exchange; because the statute articles on Legal Situations in Factories (17/1840), Chambers of Commerce and Brokers (19/1840) and Freight Carriers (20/1840) were passed as well which did not fall within the scope of the bills of 1795.Out of the mentioned commercial statute articles prepared by the Vienna lawyer Ignác Wildner, Statute Article 16/1840 on Businessmen is the main centre of our interest here. This statute article typically relied on the concept of a businessman undertaking under a trade name and keeping business accounting books, with the exception of the persons defined in Section 2.
6)
Statute Article 18/1840 recognised two types of business organisations - 1) own trade companies whose shareholders were either explicitly defined or included under "
et Comp
."; any potential silent members invested a certain amount of contribution, but had no control over business operations; and 2) joint-stock companies (bearer shares were not allowed). The commercial law lasted in this torso form during the following centuries, with additions of German commercial law models.2. First codification of commercial law in the Kingdom of Hungary
Historically, the first more comprehensive codification of commercial laws in our territory was the
Corpus Juris Hungarici
of 1875. This law, same as the law applicable in the Czech countries (Austrian Commercial Code of 1863), had its roots in the German Commercial Code of 1861, however, it did not take over the provisions on limited partnerships with participations, silent companies and marine law.
7)
The Commercial Code was comprised of general provisions (2 sections) and of two parts:1. businessmen and business organisations; and
2. commercial obligations.
A trader under the Code was anyone w
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