Adequacy of signatures in Hungarian public procurement procedures

In accordance with the stipulations of Section 3:116 of the Civil Code of Hungary (hereinafter referred to as the "Ptk.") the company shall be represented by its executive officers and its employees authorised to represent it in writing, by their signatory right. If a specimen signature or sample handwritten signature of the representative has been attached to the company documents in the company (change) registration procedure, the company can only be represented in accordance with the submitted specimen signature (sample handwritten signature).

The specimen signature serves to identify the signatures of the officers representing the companies. Its purpose is to ensure that no one else can act on behalf of the company other than the person who is personally entitled to do so. The specimen signature thus attests to the authenticity of the name or signature of the person authorised to sign on behalf of the company, but it shall be emphasised that it does not attest to the existence of the right of representation itself. Only a public notary shall be authorised to draw up a specimen signature.

Both the notarial specimen signature, which has been certified by a notary public, and the sample handwritten signature countersigned by a lawyer attest to how and in what form the company is registered by the person authorised to sign. The content of both types of document shall include the name of the company, the name of the person signing on behalf of the company, the place of residence of the person signing on behalf of the company, the title of representation (e.g. officer or employee), the manner of signing on behalf of the company and the specimen signature of the person signing on behalf of the company. At the request of the authorised employee, both the specimen signature and the sample handwritten signature can indicate the functions or position held within the company. The signature specimen certified by a notary public and the sample handwritten signature countersigned by an attorney-at-law (prepared in accordance with the stipulations of Section 9 (3) of Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings, hereinafter referred to as the "Ctv.") shall be deemed to be identical in terms of their probative value, but there are differences between the two documents:

• The specimen signature authenticated by a notary public shall be deemed to be an authentic instrument. A public document is any document drawn up by a notary, court, public authority or administrative body within its own jurisdiction and in the form specified.
• However, a specimen signature prepared and duly countersigned by an attorney-at-law shall be deemed to be a private document with full probative value and as such proves that the person who made the signature signed it in front of the attorney-at-law.

A significant difference between the two documents is that a notary public can prepare a specimen signature at any time upon the request of the client, but an attorney-at-law cannot prepare or issue a specimen signature at any time upon the client's specific request, since the provisions for its issue are laid down in the above-mentioned Ctv. On this basis, the attorney-at-law may only countersign the specimen signature during the act of registration or annotation of the company. A further restriction in this respect is that the attorney-at-law shall not countersign the specimen signature during the act of registration or annotation of the company unless he prepares or drafts and countersigns the company's memorandum and articles of association and any amendment thereto, and that the specimen signature constitutes an annex to the application for registration or annotation of the company.

As already referred to above, Section 3:116 of the Ptk., the company shall be represented in writing by its management and its employees authorised to represent it by means of a company registration, the form of which is prescribed by Section 9 (1) of Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings, hereinafter referred to as the "Ctv."). Accordingly, if enclosed with the application for registration (amendment notification), authorised signatories shall sign on behalf of the company in the same fashion as executed on the authentic statement of signature (signature registration certificate witnessed and executed by a notary public) or in the signature specimen countersigned by an attorney-at-law or bar association legal counsel.

We consider it very important to emphasise that the above-mentioned provision of the Companies Act on the method of incorporation does not, however, make the breach of the provision invalid. The Act does not provide for such a sanction, nor can it be inferred from its interpretation that the legislator did not intend to allow the validity of a declaration made in the name of the company but not duly signed.

The provisions of the Ptk. and the Ctv. concerning the form of legal and organisational representation of the company and the way of registration are intended to ensure the requirement of commercial and legal safety. Commercial and legal safety naturally requires that the representative of the company signs in accordance with the formal requirements, i.e. in the form of an authorised signature, but a breach of this requirement only has the consequence that the declaration cannot be considered as a private document representing conclusive evidence in accordance with the stipulations of Section 325 (1) (d) of Act CXXX of 2016 on the Code of Civil Procedure (hereinafter referred to as the "Pp.").

„(1) a document shall be deemed to be a private document representing conclusive evidence if

...

d) the document is duly signed by the person authorised to represent the legal person in accordance with the rules applicable to that person”

This provides guidance as to the burden of proof, namely that it is for the person claiming to be entitled to represent the person who is acting or for whom it is in the interest to prove such entitlement. From the point of view of the signature, the requirement of a simple instrument form and, consequently, of written form is satisfied if it is clear from the instrument containing the legal act of the company that the organisational representative - even if his signature cannot be regarded as an authorised signature - signed such legal act or instrument on behalf of the company, that is to say, not in his own name.

Therefore, if the signature of the managing director representing the company on a legal act made on behalf of a company is not an authorised signature, but meets the criteria of written form, then such a legal act cannot be considered null and void due to a legal flaw.

In summary, it can therefore be stated that the requirement of a simple documentary form is satisfied from the point of view of the signature if it can be clearly established from the document containing the legal act of the company that the representative - even if his signature cannot be considered as an authorised signature - signed the legal act or instrument on behalf of the company.

The Court of Appeal of Szeged, as the court of second instance took the above position in its case No. Gf. II. 30 142/2013, which was published in the Court Decisions Journal 2014/09, Issue No. 137.

Electronic signature on the extract from the commercial register

It is becoming increasingly common for companies to purchase electronic signatures for their representatives, so that they can conduct their business electronically with the same legal effect as if they were doing it on paper. However, due to the ambiguity of the Companies Act, many have questioned whether the electronic signature certificate of an individual company representative can be used for company registration (written representation of the company) even if it is not registered in the Companies Register.

In December 2020, the Ministry of Justice confirmed that electronic company registration can be exercised even if the register of companies does not contain the signature certificate of the company representative, as Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings (hereinafter referred to as the "Ctv.") only provides companies with the possibility to register the electronic signature certificate of their company representative in the register of companies.

Section 9 (4) of the Ctv. sets out the following in relation to electronic company registration: „ At the request of the company, the register of companies will also contain a certificate of the electronic address of the person authorised to register the company, in accordance with the related stipulations of a separate statutory regulation. An electronic signature with a certificate entered in the register of companies shall be deemed to be the signature of the person authorised to sign on behalf of the company.”

The purpose of the above provision was not to make filing mandatory for companies (and to give legal effect only to the filed certificate), but to give companies the possibility to extend the certified public nature of the commercial register to the area of electronic registration. Indeed, in case the signing certificate is part of a public authentic register, there can be no doubt on the receiving side that the e-signature on the document is indeed linked to the company representative and that the company representative acts in an authentic manner electronically.

The possibility of regulation can also be deduced from the codification process. The explanatory memorandum attached to the proposal for an amendment introducing Article 9 (4) of the Ctv. contained the following: „ The register of companies may in future include an electronic signature certificate of the person authorised to represent the company. If the electronic certificate is entered in the register of companies, it shall be accompanied by additional procedural advantages (e.g. free company information).” The explanatory extract quoted above was published under the subheading "Proposals to give effect to the freedom of choice of company owners". Thus, it can be inferred from the explanatory statement of the Act itself that Article 9 (4) of the Ctv. was merely an opportunity and was not intended to restrict or make the exercise of the right of electronic company representation subject to additional conditions.

Furthermore, according to the effective regulations of the Ctv., when registering a company or registering a change of company, the persons entitled to register the company no longer need to attach a paper-based specimen signature. Thus, the interpretation that the attachment is mandatory in the case of an electronic signature certificate would lead to a stricter regime for electronic specimen signatures than for paper-based ones. Since the failure to submit a paper-based specimen signature does not invalidate that signature, the validity of a signature in the form of a company signature created by an electronic signature certificate should not be affected by whether or not the signature certificate has been registered in the register of companies.

An argument that goes beyond the Hungarian legislation is that Article 25 (2) of eIDAS explicitly states that a qualified electronic signature has the same legal effect as a handwritten one. Therefore, it is not possible to refuse to accept a signature simply because it was created electronically and not on paper. As the eIDAS Regulation is a directly applicable EU regulation, its legal effects (i.e. the acceptability of an electronic signature) cannot depend on further requirements in national law. Therefore, if Section 9 (4) of the Ctv. were not an option but an obligation, and made the validity of signatures created with an electronic signature certificate dependent on registration in the commercial register, the Hungarian legislation would presumably also be in conflict with the stipulations of eIDAS.

Due to the unclear provisions of the Ctv., many interpreted that an electronic signature alone is not enough for electronic company representation, the signing certificate shall also be registered in the company register in order to create an "authorised" signature.

The Ministry of Justice explicitly stated in its clear communication issued in 2021 that "pursuant to Section 9 of the Cvt., as of 1 September 2007, the filing of the specimen signature with the Companies Registry shall no longer be mandatory. This applies to both paper-based and electronic forms of specimen signatures. The first sentence of Section 9(4) of the Ctv. expressly stipulates that upon request the company shall include a certificate of the electronic specimen signature made by the person authorised to register the company. The submission of the specimen signature in company registration or change registration proceedings, both in paper-based and electronic format has the advantage for the company that the acting representative does not have to separately certify the quality and authenticity of the specimen signature and the certificate of the electronic signature, as it is available in the commercial register. Section 9 (4) of the Ctv. does not stipulate that only electronic signatures accompanied by certificates which have been previously submitted by the company to the Companies Registry shall be deemed to be authorised electronic signatures, but that if the certificate has been submitted, the corresponding electronic signature shall be deemed to be an authorised signature, i.e. no other evidence of the signature is required. (...) In conclusion, I therefore confirm that electronic registration is possible even if the certificate of the signatory's electronic specimen signature is not included in the register of companies."(Communication without change.)

The Ministry also pointed out that in accordance with the stipulations of Section 325 (1) (d) of the Pp. an instrument signed by a legal person shall become a private document with full probative value if the person authorised to represent "has signed it in accordance with the rules applicable to him". In the case of companies, the Ctv. contains these rules - Section 8 (1) of the Ctv. (...) The right to register a company is the right to represent the company in writing and to sign on behalf of the company. On this basis, as in the case of paper-based company registration, only two criteria shall be met for electronic company registration:

• it shall be clear from the instrument itself that the natural person is acting on behalf of the company
• the representative of the company shall actually sign the document (in this case, an electronic signature that can only be linked to the signatory).

As can be seen from the above, the registration of an electronic signature certificate in the register of companies is not mandatory, but there are advantages to registering it if the company chooses to do so. If the company makes use of the option provided for in Article 9 (4) of the Ctv., the identification data of the electronic signature certificate of the company representative are entered in a public register, thus helping the receiving party to verify that the electronic document received by him has indeed been signed by the person authorised to sign. If the registration is not made and the name of the represented company is not included in the signing certificate (in the case of a so-called "organisation certificate", the name of the company is included in the certificate alongside the name of the company representative, the right of representation is verified by the trust service provider), the receiving party can ask for additional proof to verify the authenticity of the signature (similar to a paper-based specimen signature, on the basis of which hand-written signatures can be compared).

There is one major disadvantage of registration in the Commercial Register: the cost and administration of the change registration procedure, which has to be repeated when the certificate expires (currently the validity period of such certificates is 2 years).

Electronic company representation - which can be exercised with full evidential value by means of a qualified electronic signature or an advanced electronic signature based on a qualified certificate - can (also) make life much easier for companies in the current epidemic situation. It is definitely worthwhile to make use of the possibility of electronic company representation, and it is up to companies to decide whether the advantages or disadvantages of registering in a public register outweigh the benefits.