Introduction
Directive (EU) 2022/2381 of the European Parliament and of the Council (hereinafter: the “Directive“) aims to improve gender balance on the boards of publicly listed companies. The Directive is the result of more than a decade of EU legislative efforts responding to structural gender imbalances in corporate governance structures. The Directive seeks to promote substantive equality at the highest levels of economic decision-making, thereby giving concrete effect to the principles enshrined in the Charter of Fundamental Rights of the European Union and Article 157 of the TFEU.
The Directive
Scope
The Directive applies exclusively to listed companies and does not apply to micro, small or medium-sized enterprises. The regulation thus focuses on the level of corporate hierarchy where strategic decision-making is concentrated and where gender inequalities are most pronounced.
Quantitative objectives (“quota-type regulation”)
The Directive establishes binding outcome targets for Member States. Under this framework, companies concerned must ensure that, by 30 June 2026, at least one of the following targets has been achieved:
- at least 40% of non-executive directors belong to the underrepresented sex; or
- at least 33% of all director positions are held by the underrepresented sex.
A notable feature of the regulation is that it does not apply exclusively to women, but rather uses the broader category of the “underrepresented sex”.
Regulation of selection procedures
The Directive not only sets quantitative targets but also introduces mandatory procedural standards. In particular:
- the obligation to apply transparent and objective selection criteria;
- the so-called “tie-break rule”, under which, in cases of equal qualifications, preference must be given to a candidate of the underrepresented sex;
- the obligation to provide reasons for decisions upon request by unsuccessful candidates.
“It is important to emphasize that the regulation does not introduce absolute quotas but seeks to ensure a more balanced composition through the correction of selection procedures.”
Reporting and transparency obligations
The Directive imposes an annual reporting obligation on companies concerning the gender composition of their boards. Where a company fails to meet the targets, it must provide reasons for the shortfall and describe the corrective measures to be taken.
Sanctions and enforcement
The Directive also sets mandatory minimum requirements regarding enforcement. Member States must introduce effective, proportionate, and dissuasive sanctions and ensure their actual application. Possible sanctions particularly include fines and the invalidity or annulment of the relevant directorship appointment. In addition, Member States must designate competent supervisory authorities and publish lists of the companies concerned.
Deadlines and implementation
The key deadlines related to the implementation of the Directive are:
- transposition into national law: 28 December 2024;
- compliance with targets: 30 June 2026.
Accordingly, the regulation creates a real compliance obligation in the near term.
Assessment and expected impact
The Directive signals a significant paradigm shift in corporate governance:
- it replaces earlier soft law instruments with binding quantitative targets;
- it establishes a uniform minimum level across the EU;
- it is closely linked to ESG considerations and investor expectations.
Empirical evidence suggests that mandatory quotas lead to faster progress in achieving gender balance.
Towards the Hungarian implementation of the Directive
Hungary has not yet taken measures to implement the Directive. The analysis of Hungarian implementation requires the combined interpretation of three regulatory layers: (i) the Directive (EU) 2022/2381, establishing the EU-level results obligation; (ii) Hungarian company law—primarily Act V of 2013 (Civil Code, “Ptk.”) governing companies limited by shares; and (iii) capital market and corporate governance soft law, in particular the Budapest Stock Exchange (BSE) Corporate Governance Recommendations and the disclosure and supervisory practice of the Hungarian National Bank (MNB).
The transposition of the Directive into Hungarian law can only be coherent if the EU objectives on gender balance are implemented in a manner consistent with the organizational logic of the Civil Code, while being enforceable through capital market transparency mechanisms.
Corporate structure rules applicable to companies limited by shares
Under Hungarian law, the organizational structure of public limited companies may follow different models:
- a dual system (management board + supervisory board); or
- a unitary board system (board of directors).
This organizational pluralism is particularly relevant for implementation, as EU terminology distinguishes between “executive” and “non-executive” directors, whereas Hungarian company law traditionally operates through an institutional separation of management and supervisory functions.
Accordingly, Hungarian legislation must first determine how the 40% target is to be mapped onto positions defined under the Civil Code:
- in the dual system: primarily supervisory board members, or—more broadly—non-executive members of the management board;
- in the unitary system: the non-executive functions within the board of directors.
A central question is therefore whether the legislator will:
- introduce a separate, special compliance regime applicable only to listed companies; or
- integrate gender balance rules directly into the Civil Code.
The former appears more likely, as the Directive applies only to listed companies and does not justify a comprehensive overhaul of company law. A targeted regulatory framework for listed companies would preserve the flexibility of the Civil Code while introducing specific compliance obligations.
Scope of affected Hungarian companies
The Directive applies to “listed companies”, which in Hungary corresponds primarily to public limited companies whose shares are admitted to trading on a regulated market.
Accordingly:
- not all public companies (nyrt.) will be affected;
- only those listed on a regulated market (typically the Budapest Stock Exchange) will fall within scope.
Due to the relatively small and concentrated Hungarian market, the practical impact will affect a limited number of issuers, allowing for more tailored compliance mechanisms.
The exclusion of SMEs is also relevant in Hungary, where company size and stock exchange presence do not always fully coincide. It would therefore be advisable for Hungarian law to directly adopt the size thresholds of the Directive.
Transposition of quotas and selection procedures
Hungarian implementation must reflect the Directive’s dual structure:
- a quantitative target (40% / 33%); and
- a procedural compliance regime.
This requires regulation of:
- nomination and selection procedures;
- documentation of decision-making criteria;
- information rights of unsuccessful candidates.
In Hungary, this will likely be implemented through capital market or corporate governance rules, rather than amendments to the Civil Code, preserving shareholder autonomy while ensuring transparency.
A key practical issue will be the formalization of nomination processes. Where nomination committees exist, integration will be straightforward; where shareholder-dominated, less formal processes prevail, minimum procedural guarantees will need to be introduced.
Role of the BSE Corporate Governance Recommendations
The BSE Corporate Governance Recommendations already serve as a key soft law instrument, operating on a “comply or explain” basis.
They provide an existing framework into which:
- diversity policies,
- nomination procedures, and
- board composition requirements
can be incorporated.
However, the Directive introduces elements that cannot be implemented solely through soft law (e.g. mandatory quotas, sanctions). Thus:
- hard law will define binding obligations;
- soft law (BSE recommendations) will operationalize and elaborate on these standards.
Role of the MNB: supervision and enforcement
The Hungarian National Bank (MNB) plays a central role as supervisory authority. It is highly likely that:
- reporting obligations under the Directive will be integrated into the MNB disclosure system;
- compliance will be monitored through existing supervision mechanisms.
Regarding sanctions:
- administrative fines and disclosure-related sanctions are the most likely tools;
- invalidity of appointments (as mentioned in the Directive) is legally more sensitive under Hungarian law and less likely to be broadly applied.
Practical implications for Hungarian issuers
For Hungarian listed companies, the key consequence is that board composition will become a matter of mandatory compliance, rather than purely voluntary governance practice. This will require reviewing current board composition, updating nomination and succession planning processes, and integrating diversity considerations into HR and governance strategies. The 30 June 2026 deadline means that gradual adjustment aligned with board cycles may be limited.
Conclusion
Hungarian implementation will be successful if it preserves the coherence of Civil Code structures, provides clear compliance frameworks for listed companies, and ensures transparent monitoring via the MNB. The main open questions include:
- how Hungarian board roles correspond to EU executive/non-executive categories;
- whether Civil Code amendments are needed;
- how deeply BSE corporate governance mechanisms will be integrated.
Ultimately, these choices will determine whether the Directive becomes merely a formal obligation or a genuine corporate governance reform in Hungary.
