MTA » Topics » Corporate Governance

This excerpt taken from the MTA 20-F filed May 21, 2009.

Corporate Governance(1)

The Deutsche Telekom Group and the Magyar Telekom Group are committed to good and responsible corporate management (e.g. German Corporate Governance Code(2), Sarbanes-Oxley Act(3)). We expect all employees of the Deutsche Telekom Group and the Magyar Telekom Group to support and observe these principles within their range of personal responsibilities.

 

This excerpt taken from the MTA 20-F filed Jun 17, 2008.

Corporate Governance

        Magyar Telekom Plc. is governed by four separate bodies: the general meeting of shareholders, the Supervisory Board, the Audit Committee and the Board of Directors. Their roles are defined by law and by the Company's memorandum and Articles of Association and may be described generally as follows:

    General Meeting of the Shareholders

        The supreme decision making body of the Company is the general meeting of shareholders. If required, extraordinary general meetings may be held at any time. A general meeting is convened as frequently as set forth in the Articles of Association, but no less than once a year.

        The Board of Directors must call an annual general meeting to approve the audited statutory financial statements for the prior year. Shareholders holding at least five percent of the outstanding shares may require the Board of Directors to hold an extraordinary general meeting. The Board of Directors and the Supervisory Board also have the right to call an extraordinary general meeting. The Court of Registration may call a general meeting if, following the request of shareholders holding at least five percent of the outstanding shares, the Board of Directors fails to call a general meeting within the periods prescribed by law or the Articles of Association.

        The Board of Directors must call a general meeting within eight days to take necessary measures when:

    due to losses, the equity of the company has decreased to less than two-thirds of the share capital;

    the equity of the Company has decreased to less than HUF 20 million;

    the Company is on the brink of insolvency or has stopped making payments and its assets do not cover its debts;

    the number of members of the Board of Directors falls below six;

    the number of members of the Supervisory Board falls below six;

    the number of members of the Audit Committee falls below three; or

    the auditor and the Board of Directors fail to conclude the assignment contract regarding the auditing activities within 90 days upon the date of the general meeting that elects the auditor.

        Typically, the Board of Directors calls general meetings. To call a general meeting, the Board of Directors must publish a notice of the meeting and an agenda at least 30 days before the scheduled date of the meeting on the website of the Budapest Stock Exchange and is also published on the website of the Company. The Company must notify each director, the Supervisory Board and the auditor that a general meeting has been called within eight days following publication of such notice.

        A general meeting meets a quorum if shareholders representing more than half of the voting shares are present in person or by proxy.

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        If the general meeting does not have a quorum, it will be reconvened on the same day. A reconvened general meeting will have a quorum for those matters on the original agenda, regardless of the number of shareholders present.

        The general meeting of the shareholders has the sole right to:

    1.
    approve and amend the Articles of Association unless otherwise provided by law;

    2.
    increase (except for the cases falling within the scope of authority of the Board of Directors) or decrease the Company's registered capital unless otherwise provided by law;

    3.
    amend the rights attached to a series of shares or change their class;

    4.
    merge, consolidate, separate, terminate, dissolve, liquidate or transform the Company into another form of association;

    5.
    decide on the approval of a public offer on own shares;

    6.
    decide on issuing convertible or subscription right bonds unless otherwise provided by law;

    7.
    to elect, remove and determine the remuneration of the members of the Supervisory Board, the Audit Committee and the Board of Directors;

    8.
    elect, remove and determine the remuneration of the Auditor of the Company and to define the contents of the essential elements of the contract to be concluded with the auditor;

    9.
    approve the financial statements, the management report and to decide on the utilization of after tax earnings;

    10.
    approve changes in the Company's registered scope of activities;

    11.
    designate persons entitled to subscribe for new shares in a closed subscription;

    12.
    decide on measures that are capable of disturbing the relevant process in case of obtaining information on a public offer;

    13.
    approve listing of the Company's shares on a stock exchange;

    14.
    approve delisting of the Company's shares from a stock exchange subject to any group of shareholders agreeing to make a public tender to purchase the shares in relation to delisting;

    15.
    decide on the acquisition of the Company's own shares unless otherwise provided by law;

    16.
    approve an issue that is within its competence pursuant to law or the Company's Articles of Association;

    17.
    transfer or encumber a valuable right held by the Company that enables it to continue a specific activity of the Company;

    18.
    transfer all or substantial part of the Company's assets;

    19.
    generally approve acquisitions of shares which would result in a person or persons acting in concert holding ten percent or more of the outstanding voting shares of the Company;

    20.
    approve payment of a dividend advance determined on the basis of interim accounting unless otherwise provided by law;

    21.
    decide on the exclusion of subscription preference right; and

    22.
    evaluate the work of the members of the Board of Directors in the previous business year and decide on granting relief to the members.

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    The Supervisory Board

        The Supervisory Board oversees management of the Company. It may request information from executive officers or managerial employees of the Company and may inspect books and documents of the Company. Supervisory Board members shall bear unlimited, joint and several liability for damages caused to the Company due to violation of their supervisory obligations.

        The Supervisory Board comprises a minimum of three and a maximum of 15 members. Its members shall be elected by the general meeting of shareholders for a period of three years. It may assign certain supervisory tasks to any of its members or may delegate supervisory tasks among its members on a permanent basis. The members must act in person, not through a representative. No members of the Supervisory Board may receive any instruction from his or her employer or our shareholders as to fulfillment of their duty and obligations as Supervisory Board members. The Supervisory Board carries out its activities in accordance with rules of procedure established by the Supervisory Board, which are approved by the general meeting of shareholders.

    The Audit Committee

        The general meeting elects a three to five member Audit Committee from the independent members of the Supervisory Board for the same duration as the membership of the relevant members in the Supervisory Board. The Audit Committee shall act independently within its scope of authorities provided for in the Act on Business Associations, Act CXX of 2001 on the Capital Market and the Articles as well as the rules of the Budapest Stock Exchange and the New York Stock Exchange and the regulations of the SEC. The Audit Committee oversees the work of the Company's independent auditor, evaluates the operation of the financial reporting system and the efficiency of the internal audit function.

    The Board of Directors

        The Board of Directors is the executive body of the Company and represents the Company in dealings with third parties, courts of law and other authorities. The Board of Directors exercises its rights and performs its duties as an independent body.

        The Board of Directors comprises a minimum of six and a maximum of eleven members. The members of the Board of Directors are elected for a term of three years from the date of the annual general meeting until May 31 of the third year subsequent to the date of the said general meeting, with the exception that if the general meeting in the third year is held prior to May 31 then their assignment lasts until the date of such general meeting. Members of the Board of Directors may be removed or re-elected by the general meeting at any time. The Board of Directors carries out its activities in accordance with rules of procedure established by the Board of Directors and subject to the provisions of applicable law and the Articles of Association.

        A member of the Board of Directors must act with the due care that can be generally expected from persons in such a position and shall be held liable, in accordance with provisions of general rules of civil law, for damages to the Company caused by their failure to carry out their tasks in the best interest of the Company. If the damage was caused by the resolution of the management as a body, those members are exempted from such liabilities who did not participate in the voting or voted against the resolution in question. The members of the Board of Directors shall bear unlimited, joint and several liability for all and any damage resulting from untruthfulness of any data, right or fact entered into the share register or any damage resulting from a late or non-existing entry.

This excerpt taken from the MTA 20-F filed May 11, 2005.

Corporate Governance

        Hungarian stock corporations are governed by three separate bodies: the general meeting of shareholders, the Supervisory Board and the Board of Directors. Their roles are defined by law and by the Company's memorandum and Articles of Association and may be described generally as follows:

General Meeting of the Shareholders

        The supreme decision making body of the Company is the general meeting of shareholders. If required, extraordinary general meetings may be held at any time. A general meeting is convened as frequently as set forth in the Articles of Association, but no less than once a year.

        The Board of Directors must call an annual general meeting to approve the audited statutory financial statements for the prior year. Shareholders holding at least one-tenth of the outstanding shares may require the Board of Directors to hold an extraordinary general meeting. The Board of Directors and the Supervisory Board also have the right to call an extraordinary general meeting. The Court of Registration may call a general meeting if, following the request of shareholders holding at least one-tenth of the outstanding shares, the Board of Directors fails to take any action within 30 days, or if the Board of Directors fails to call a general meeting within the periods prescribed by law or the Articles of Association.

        The Board of Directors must call a general meeting within eight days to take necessary measures when:

due to losses, the equity of the company has decreased to less than two-thirds of the share capital;

the equity of the Company has decreased to less than HUF 20 million;

the Company has stopped servicing its debts and its assets are not sufficient to repay its debts;

the number of members of the Board of Directors falls below six;

the number of members of the Supervisory Board falls below six; or

upon the request of holder of the Series "B" Share.

        Typically, the Board of Directors calls general meetings. To call a general meeting, the Board of Directors must publish a notice of the meeting and an agenda at least 30 days before the scheduled date of the meeting in the official journal of the Budapest Stock Exchange. The Company must notify each director, the Supervisory Board and the auditor that a general meeting has been called within eight days following publication of such notice.

        A general meeting meets a quorum if shareholders representing more than half of the voting shares are present in person or by proxy. If an agenda item requires an affirmative vote of a holder of the Series "B" Share, for a quorum, the holder of the Series "B" Share must also be present at the meeting in person or by proxy.

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        If the general meeting does not have a quorum, it will be reconvened within 15 days. A reconvened general meeting will have a quorum for those matters on the original agenda, regardless of the number of shareholders present, except for matters requiring the holder of the Series "B" Share to be present.

        The general meeting of the shareholders has the sole right to:

    1.
    approve and amend the Articles of Association unless otherwise provided by law;

    2.
    increase (except for the cases falling into the scope of authority of the Board of Directors) or decrease the Company's registered capital unless otherwise provided by law;

    3.
    amend the rights attached to a series of shares or change their class;

    4.
    merge, consolidate, separate, terminate, dissolve, liquidate or transform the Company into another form of association;

    5.
    convert shares from bearer form to registered form or vice-versa;

    6.
    decide on issuing convertible or subscription right bonds unless otherwise provided by law;

    7.
    elect members of the Supervisory Board, the Board of Directors and the Company's auditor;

    8.
    remove and fix remuneration of members of the Supervisory Board, the Board of Directors and the Company's auditor;

    9.
    approve the financial statements and the amount of dividends to be distributed if the Company is distributing dividends;

    10.
    approve changes in the Company's registered scope of activities;

    11.
    designate persons entitled to subscribe for new shares in a closed subscription;

    12.
    alter the number or nominal value of the Series "B" Share and the rights attached to the Series "B" Share;

    13.
    approve listing of the Company's shares on a stock exchange;

    14.
    approve delisting of the Company's shares from a stock exchange subject to any group of shareholders agreeing to make a public tender to purchase the shares of those shareholders who do not vote in favor of delisting;

    15.
    approve dematerialization of securities the Company has previously issued in printed form;

    16.
    approve an issue that is within its competence pursuant to law or the Company's Articles of Association;

    17.
    transfer or encumber a valuable right held by the Company that enables it to continue a specific activity of the Company;

    18.
    transfer all or substantial part of the Company's assets;

    19.
    generally approve acquisition of shares which would result in a person or persons acting in concert holding ten percent or more of the outstanding voting shares of the Company;

    20.
    approve payment of a dividend advance determined on the basis of interim accounting unless otherwise provided by law;

    21.
    change the corporate form from a public to a private company; and

    22.
    approve repurchase of shares and accept a public tender offer in respect of treasury shares.

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The Supervisory Board

        The Supervisory Board oversees management of the Company. It may request information from executive officers or managerial employees of the Company and may inspect books and documents of the Company. Supervisory Board members shall bear unlimited, joint and several liability for damages caused to the Company due to violation of their supervisory obligations.

        The Supervisory Board comprises a minimum of three and a maximum of 15 members. At present the Supervisory Board consists of 8 members. Its members shall be elected by the general meeting of shareholders for a period of three years. It may assign certain supervisory tasks to any of its members or may delegate supervisory tasks among its members on a permanent basis. The members must act in person, not through a representative. No members of the Supervisory Board may receive any instruction from his or her employer or our shareholders as to fulfillment of their duty and obligations as Supervisory Board members. The Supervisory Board carries out its activities in accordance with rules of procedure established by the Supervisory Board, which are approved by the general meeting of shareholders.

The Board of Directors

        The Board of Directors is the executive body of the Company and represents the Company in dealings with third parties, courts of law and other authorities. The Board of Directors exercises its rights and performs its duties as an independent body.

        The Board of Directors comprises a minimum of six and a maximum of eleven members. The members of the Board of Directors are elected for a term of three years from the date of the annual general meeting until May 31 of the third year subsequent to the date of the said general meeting, with the exception that if the general meeting in the third year is held prior to May 31 than their assignment lasts until the date of such general meeting. Members of the Board of Directors may be removed or re-elected by the general meeting at any time. The Board of Directors carries out its activity in accordance with rules of procedure established by the Board of Directors and subject to the provisions of applicable law and the Articles of Association.

        The member of the Board of Directors must act with the degree of care that can be generally expected from persons in such a position and shall be held liable, in accordance with provisions of general rules of civil law, for damages to the Company caused by their failure to carry out their tasks in the appropriate manner. The members of the Board of Directors shall bear unlimited, joint and several liability for all and any damage resulting from untruthfulness of any data, right or fact entered into the share register or any damage resulting from a late or non-existing entry.

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