Opinion of the Advocate General — ECLI:EU:C:2021:1023
Date: 2021-12-16
Language of the case: Hungarian
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-352/20 – 1 
Case C-352/20 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
31 July 2020 
Referring court:  
Kúria (Supreme Court, Hungary) 
Date of the decision to refer:  
2 July 2020 
Applicant and appellant in the appeal on a point of law:  
HOLD Alapkezelő Befektetési Alapkezelő Zrt. 
Defendant and respondent in the appeal on a point of law:  
Magyar Nemzeti Bank 
  
Subject matter of the main proceedings 
Appeal on a point of law brought against a judgment of the court of first instance 
dismissing an action for the annulment of certain findings set out in a decision 
adopted by the Magyar Nemzeti Bank in its capacity as supervisory authority. 
Subject matter and legal basis of the request for a preliminary ruling 
Undertakings for collective investment in transferable securities – Remuneration 
policy and practice – Dividends paid to members of the board of directors, 
portfolio managers and investment managers who are simultaneously employees 
and shareholders of those undertakings – Dividends that may represent an 
incentive to take on risks allegedly incompatible with the risk profile of the 
management funds managed (as a fund manager) by the investment undertaking 
and with the interests of investors. 
Legal basis: Article 267 TFEU. 
EN 
SUMMARY OF THE REFERENCE FOR A PRELIMINARY RULING – CASE C-352/20 
 
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Questions referred for a preliminary ruling 
Do dividends distributed to [the directors concerned] 
(a) directly by virtue of their status as holders of preference shares with 
preferential rights to dividends in the investment fund manager, and 
(b) through single-member companies owned by the [directors concerned], 
which hold preference shares with preferential rights to dividends in that 
fund manager 
remain subject to the remuneration policies of investment fund managers? 
Provisions of EU law relied on 
– Directive 2009/65/EC of the European Council and of the Council of 13 July 
2009 on the coordination of laws, regulations and administrative provisions 
relating to undertakings for collective investment in transferable securities 
(UCITS) (OJ 2009 L 302, p. 32), Article 14, Article 14a and Article 14b. 
– Article 14 relates to the rules of conduct which each Member State must lay 
down and which management companies authorised in that Member State must 
observe at all times. Member States must ensure that management companies 
discharge the obligations laid down in those rules. Article 14a defines the 
purpose to be served by the remuneration policies and practices defined by 
management companies. Article 14b lists the principles to be observed by 
management companies when defining their remuneration policies. 
– Directive 2011/61/EU of the European Parliament and of the Council of 8 June 
2011 on Alternative Investment Fund Managers and amending Directives 
2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) 
No 1095/2010 (OJ 2011 L 174, p. 1), recital 28, Article 13(1) and Annex II, 
points 1 and 2. 
– The provisions cited define the principles that must govern the remuneration 
policies established and applied by alternative investment fund managers. The 
list of principles is largely the same as that contained in Article 14b of 
Directive 2009/65. 
– Commission Delegated Regulation (EU) 2017/565 of 25 25 April 2016 
supplementing Directive 2014/65/EU of the European Parliament and of the 
Council as regards organisational requirements and operating conditions for 
investment firms and defined terms for the purposes of that Directive [(OJ 2017 
L 87, p. 1)], Article 2(5). 
– The provision cited defines the meaning of ‘remuneration’ for the purposes of 
that regulation. 
HOLD ALAPKEZELŐ BEFEKTETÉSI ALAPKEZELŐ 
 
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– Paragraph II.5 of the guidelines issued by the European Securities and Markets 
Authority on the basis of Article 16 of Regulation (EU) No 1095/2010 of the 
European Parliament and of the Council of 24 November 2010 establishing a 
European Supervisory Authority (European Securities and Markets Authority), 
amending Decision No 716/2009/EC and repealing Commission Decision 
2009/77/EC (OJ 2010 L 331, p. 84). 
– The provision cited also defines the concept of ‘remuneration’. 
Provisions of national law relied on 
– A kollektív befektetési formákról és kezelőikről, valamint egyes pénzügyi 
tárgyú törvények módosításáról szóló 2014. évi XVI. törvény (Law XVI of 
2014 on the detailed rules governing collective investments and managers of 
collective investments, and amending certain laws in the financial sphere; ‘Law 
XVI of 2014’), Article 33 and Annex 13. 
– The provisions cited govern the principles to be observed by investment fund 
managers when defining and applying their overall remuneration policy. The 
list contained in Annex 13 is largely the same as that contained in Article 14b 
of Directive 2009/65 and Annex II to Directive 2011/61. As regards Annex 13, 
the referring court cites separately the provisions that were in force prior to 
18 March 2016 and those in force thereafter. 
– A Polgári Törvénykönyvről szóló 2013. évi V. törvény (Law V of 2013 
adopting the Civil Code; ‘the Civil Code’), Paragraphs 3:230, 3:231 and 3:253. 
– The provisions cited relate to preference shares, preference shares with 
preferential rights to dividends and the equality of shareholders. 
– MNB Recommendation 3/2017 (II.9) on the implementation of remuneration 
policy, paragraph 11. 
– The provision cited governs the requirements to be met when defining 
remuneration policy in cases where the employees of the organisations to 
which the remuneration policy is applied also have a majority shareholding in 
that organisation or in one of its subsidiaries. 
– MNB Recommendation 4/2018 (I. 16.) on the remuneration policy applied by 
alternative investment fund managers, paragraph 8. 
– In accordance with the provision cited, the guidelines set out in the 
recommendation are to apply to dividends or dividend equivalents paid to the 
owner of an alternative investment fund management organisation where such 
payments lead in practice to a circumvention of the relevant remuneration 
rules. 
SUMMARY OF THE REFERENCE FOR A PRELIMINARY RULING – CASE C-352/20 
 
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Brief presentation of the facts and the main proceedings 
1 The applicant in the main proceedings, HOLD Alapkezelő Befektetési Alapkezelő 
Zrt. (‘the Fund Manager’), is a company which manages alternative investment 
funds and forms of collective investment in transferable securities. The Fund 
Manager carries on that lawful economic activity pursuant to an authorisation 
issued by the Magyar Nemzeti Bank (National Bank of Hungary, ‘the MNB’), the 
defendant in the main proceedings. 
2 From 20 March 2014 and, subsequently, from 19 July 2017, the Fund Manager 
established a remuneration policy applicable to certain categories of its staff. 
3 Those categories of employee include four senior managers (‘the directors 
concerned’), the first of whom is the managing director (member of the board of 
directors), the second is a portfolio manager, the third is an investment manager 
(member of the board of directors) and the fourth is also a portfolio manager 
(member of the board of directors). They all have an employment relationship 
with the Fund Manager. 
4 The directors concerned are linked to the Fund Manager not only through their 
employment relationship but also because they are shareholders in the Fund. Their 
interest is both direct and indirect. On the one hand, the portfolio manager, the 
investment manager (member of the board of directors) and the [other] portfolio 
manager (member of the board of directors) are direct holders of preference shares 
with preferential rights to dividends in the Fund Manager. On the other hand, the 
portfolio manager (member of the board of directors) and the managing director 
(member of the board of directors) are the sole members of ― unlisted ― limited 
companies operating within a closed setting which have preference shares with 
preferential rights to dividends in the Fund Manager. 
5 The Fund Manager distributed annual dividends on the organisation’s after-tax 
results for the financial years 2015 to 2018 to the directors concerned and to those 
single-member companies. 
6 From 1 January 2016, the MNB, in its capacity as supervisory authority, 
conducted an inspection of the Fund Manager. Following that inspection, the 
MNB adopted a decision on 11 April 2019 (‘the decision of the MNB’) in which it 
called on the Fund Manager, gradually but within a period of ninety days from 
receipt of the decision, to take the steps necessary in its business to ensure that the 
definition of its remuneration policy and practices complies with the relevant 
legislative provisions. The MNB also adopted other measures and imposed a 
penalty on the Fund Manager as part of its supervisory activities. 
7 The Fund Manager brought an administrative-law action against the decision of 
the MNB. In its action, it sought an order declaring certain findings contained in 
that decision to be invalid and requiring the MNB to start new proceedings. 
HOLD ALAPKEZELŐ BEFEKTETÉSI ALAPKEZELŐ 
 
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8 The court of first instance dismissed the Fund Manager’s action. The Fund 
Manager brought an appeal on a point of law against that judgment before the 
referring court, which has submitted a request for a preliminary ruling to the Court 
of Justice. 
Essential arguments of the parties to the main proceedings 
9 The MNB takes the view that the dividend paid directly or indirectly by the Fund 
Manager to the directors concerned may have resulted in those directors’ having 
an interest in the Fund Manager making short-term profits and, to that end, in 
them taking on risks incompatible with the risk profile of the funds managed by 
the Fund Manager, with the Fund Manager’s management rules and with the 
interests of the participants. The MNB considers that, in distributing the dividend, 
the Fund Manager circumvented the rules on deferred payment of performance-
based remuneration and infringed the provisions of Law XVI of 2014. 
10 In the light of the foregoing, the MNB considered it irrelevant that the Fund 
Manager had a volume of own funds higher than that required by law, that the 
directors concerned had obtained their shares prior to the entry into force of Law 
XVI of 2014 and that it was in the interests of those directors, as owners of the 
Fund Manager, for the Fund Manager to post good results in the long term as well. 
According to the MNB, both the Civil Code and Law XVI of 2014 are jointly 
applicable to the distribution of dividends, and the decision of the MNB is also in 
line with Commission Recommendation 2009/384/EC of 30 April 2009 on 
remuneration policies in the financial services sector (OJ 2009 L 120, p. 22).  
11 The Fund Manager argues that the decision of the MNB is, first and foremost, 
unlawful because the dividend distributed to the directors concerned is not 
considered to be ‘variable remuneration’ and does not therefore fall within the 
scope of remuneration policy. It argues that, for the purposes of the legal 
instruments of the European Union and the national rules cited, ‘variable 
remuneration’ must be understood as being the sums paid to an employee for 
discharging his or her occupational activity in accordance with performance 
criteria. The directors concerned, on the other hand, received the dividend in their 
capacity as shareholders and irrespective of their performance in the context of 
their employment relationship. In the opinion of the Fund Manager, the decision 
of the MNB is also discriminatory, since it infringes the provisions of the Civil 
Code relating to the equality of shareholders. The Fund Manager also regards as 
unlawful the fact that the decision of the MNB included the single-member 
companies of the directors concerned within the scope of remuneration policy, 
despite the fact that those single-member companies are legal persons independent 
of their owners. According to the information on the balance sheet, there is no 
correlation between the dividend distributed to those limited companies and the 
dividend later distributed by those companies to the directors concerned. 
Similarly, the Fund Manager regards as a purely subjective supposition the 
SUMMARY OF THE REFERENCE FOR A PRELIMINARY RULING – CASE C-352/20 
 
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proposition that the dividend distributed to the directors concerned may represent 
an incentive to obtain short-term profits.  
12 According to the court of first instance, while it is true that dividends are not 
technically distributed for the discharge of occupational activity against 
performance criteria, they must nonetheless be regarded as remuneration in the 
light of their actual effect. It takes the view that dividends are an alternative 
channel of pay which may indeed represent an incentive for the directors 
concerned to obtain short-term profits, to take on risks contrary to the interests of 
investors and to circumvent the principles of remuneration policy.  
13 What is more, there was no balance in the Fund Manager between the fixed 
remuneration of the directors concerned and the dividend distributed to them. 
Thus, while their fixed remuneration amounted to a few million forints per year, 
the amount of the dividend was in the hundreds of millions of forints. For that 
reason, payment of at least 40% of the dividends should have been deferred for at 
least three years, in line with the life cycle of the investment funds managed and 
the redemption of investment fund shares.  
14 As regards dividends distributed to the single-member companies, the court of 
first instance took the view that these too represented an economic benefit for the 
directors concerned. For that reason, the form in which those directors 
subsequently decide to distribute dividends through the single-member companies 
has no bearing on the fact that the foregoing considerations are also applicable to 
those dividends.  
15 On appeal on a point of law, the Fund Manager claimed that the court of first 
instance had committed an error in applying to it legislative provisions that are in 
fact aimed at investment funds. It states that dividends are not a form of variable 
remuneration because the right to receive them is independent of the occupational 
performance of the directors concerned. According to the Fund Manager, it has 
not been demonstrated either in the proceedings pursued by the MNB or in the 
proceedings before the court of first instance that it infringed the principles of 
remuneration policy. The Fund Manager also denies that the distribution of 
dividends has any additional content, over and above the rights derived from 
ownership of the shares, aimed at remunerating the work of the directors 
concerned. 
16 The MNB contends that the judgment at first instance should be upheld. It 
contends that the dividend distributed by the Fund Manager may exceptionally be 
regarded as remuneration. 
Brief presentation of the reasons for the request for a preliminary ruling 
17 The referring court must determine whether the dividends which the directors 
concerned receive directly and indirectly through the limited companies they own 
fall within the scope of remuneration policy. 
HOLD ALAPKEZELŐ BEFEKTETÉSI ALAPKEZELŐ 
 
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18 The directors concerned not only work for the Fund Manager but also own it. This 
is an important consideration for the purposes of remuneration practice, since the 
directors concerned, in their capacity as shareholders, may take decisions which 
determine the economic results of the Fund Manager and, therefore, the 
subsequent distribution of dividends on shares. At the same time, however, those 
directors, in their capacity as employees of the Fund Manager, are involved in 
defining and supervising the Fund Manager’s remuneration policy, since these are 
matters falling within their responsibility. In the light of the ‘dual’ legal status 
which the directors concerned thus enjoy, the uncertainty arises as to whether the 
amounts obtained by those directors through their employment relationship and 
the amounts they receive both directly and indirectly by virtue of their status as 
shareholders must also be examined from the point of view of the application of 
the principles of remuneration policy. 
19 When the rules on remuneration policy were laid down, account was taken 
principally of the economic receipts arising from the employment relationship of 
the employees. Recital 28 of Directive 2011/61 states that the provisions on 
remuneration are to be without prejudice to, inter alia, applicable legislation 
regarding shareholders’ rights. The Commission considered it necessary to define 
the concept of ‘remuneration’ in Delegated Regulation 2017/565 (see recital 40). 
20 As regards Hungarian law, Law XVI of 2014 does not define the concept of 
remuneration, while the a javadalmazási politikának a hitelintézet és a befektetési 
vállalkozás mérete, tevékenységének jellege, köre és jogi formájából eredő 
sajátossága figyelembevételével történő alkalmazásáról szóló 131/2011. (VII. 18.) 
Korm. rendelet (Government Decree No 131/2011 of 18 July 2011 on the 
application of remuneration according to the size, nature and content of the 
activities of credit institutions and investment service undertakings and the 
particularities arising from their legal form) is not applicable to the Fund 
Manager. 
21 The definitions contained in Delegated Regulation 2017/565 and in the guidelines 
issued by the European Securities and Markets Authority are not sufficiently 
unequivocal to make it possible to determine whether the dividend paid directly or 
indirectly to the directors concerned, not by virtue of their relationship with the 
Fund Manager as its employees but by virtue of their relationship with it as its 
owners, must be regarded as an economic receipt subject to remuneration policy. 
22 Given that Annex 13 to Law XVI of 2014 corresponds to Directive 2009/65 and 
Directive 2011/61, the referring court considers that the dispute before it calls for 
an interpretation of the provisions of EU law cited in the order for reference.