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Hungary

Selling on

Updated 01/2013

Legal requirements

The transfer of holdings (shares) in companies in Hungary is essentially governed by the Companies Act, the Act on Publicly Available Company Information, Company Court Procedures and Solvent Liquidation, and the Accountancy Act, as well as the competition low provisions. In addition to this, the regulations prevailing in the sector may also apply to the company in question.

Transfer of holdings (shares) in a company

Holdings (shares) in a company may, inter alia, be transferred by means of purchase/sale (other legal title may include, for example, gifts, inheritance, swaps, contributions in kind, etc.). Holdings (shares) may be acquired through purchase/sale by foreign and domestic natural or legal persons, and by companies without legal personality. A Hungarian branch office or commercial representation of a foreign company may not directly acquire shares in another company.

General and limited partnerships

For general and limited partnerships, members may transfer their holdings to another member of the company or to a third party by means of a written contract. The transfer will take effect when the articles of association are amended.

Limited liability companies

The transfer of ownership, in the case of a limited liability company, takes place when the business share is assigned. The share may be transferred freely to members of the company. In the articles of association, the members provide each other with a right of first refusal; the transfer of business shares to third parties is otherwise restricted or subject to certain conditions. A written contract is required when transferring business shares, but the articles of association do not need to be modified.

Upon the death or cessation of a member, business shares pass to the legal successor. The articles of association can prevent such transfers, but in this case they must provide for redemption of the share by members or by the company.

Joint stock companies

The transfer of ownership of joint stock companies may involve the transfer of shares. Unless otherwise provided for by law, shares may be transferred freely. Restrictions on the transfer of shares in respect of third parties shall be effective where so permitted by law.

Step-by-step guide to the transfer of holdings (shares)

Limited liability company

Limited liability companies have the opportunity for the membership relationship of members to cease when their business shares are sold. In order for this to happen, a sale/purchase agreement is required for the business shares, as well as a report to the purchasing company, and posting of the change in the members' list. The change must be reported to the court of registration, and the manager must see to this. In the event that business shares are transferred, the rights and obligations arising from the membership are transferred from the person making the transfer to the person acquiring the business shares.

Once the change of ownership and the date on which it took place have been recorded in the members' list, the person acquiring the business shares is obliged to report to the company within 8 days. The report must be made in the form of a certified document or a private agreement with full legal force; the share purchase agreement must be attached to it, and a statement must also be made in the report, in addition to the fact of acquisition, to the effect that the person acquiring the shares has consented to be bound by the company’s articles of association.

Joint stock company

Shares are tradable securities, and so the rules relating to the transfer of securities must be applied to share transfers. Unless otherwise provided for by law, shares may be transferred freely.

Printed shares are transferred by means of the full or empty endorsement written on the reverse of the share or a sheet attached to it, while dematerialised shares are transferred by means of being credited to the securities account.

The company’s articles of association may stipulate that the consent of the limited company is required for share transfers. Depending on the provisions of the articles of association, the desired consent will be subject to the jurisdiction of the Board of Directors or of the General Assembly. If the board of directors does not make a statement on the written report of intention to transfer shares within 30 days of receipt, consent may be regarded as having been given.

Reorganisation of an economic organisation

The company shall be terminated with a legal successor in the event of a change in company form, a merger or division (collectively transformation). Unless otherwise provided for by law, the rules on setting up companies must be applied when transforming one company into another, and the legal provisions relating to transformations as described in the rules on individual company foundation must also be applied (e.g. in the event that a company is transformed into a joint stock company, the notices of transformation must contain the type and nominal value of the shares, or if a joint stock company is transformed into another company, the shares are invalidated when the company created by the transformation is registered, etc.).

Transformation of general (Kkt.) and limited (Bt.) partnerships

General partnerships can become limited partnerships and vice-versa by modifying the articles of association. The legal provisions relating to transformations need not be applied to such changes in company form.

Merger

In the event of a merger of companies, a single company is created as the legal successor to two or more companies. Mergers may occur by incorporation or concentration.

In the case of a concentration, the merging companies cease trading, and their property is transferred to the new company created by the merger, as the legal successor.

In the case of incorporation, the incorporated company ceases trading, and its property is transferred to the acquiring company, as the legal successor; the form of the company remains unchanged.

During the merger, the rules of the Act on the Prohibition of Unfair and Restrictive Market Practices relating to monitoring concentrations of companies must be applied (in which case the competent authority is the Hungarian Competition Authority).

Division

In the event of division of a company, the company’s members (shareholders) and part of the company’s property are divided into two or more companies. A division may take place through separation or spin-off. A one-man company may also be divided into two or more companies.

In the case of separation, the company undergoing the separation is terminated, and its property is transferred to the companies created by the transformation, as its legal successors.

In the event of a spin-off, the company from which a company is spun off continues to operate under the same company form following amendments to its articles of association, and a new company or companies is/are created with the participation of the spun-off members (shareholders) and part of the company’s property.

Step-by-step guide to transformations

The company's supreme body will decide on the transformation twice, unless the articles of association provide otherwise. On the first occasion, it will establish whether the company’s members (shareholders) agree with the intention to undertake a transformation, ascertain the company form to which the transformation will take place, and assess which of the company’s members (shareholders) wish to become members (shareholders) of the legal successor company.

It will also define the date of the plan for balancing assets, appoints an auditor, and entrusts the company's officers with the preparation of the plans for balancing assets, the supporting inventory plans, and other documents required for a decision to be made on the transformation.

The officers of the board prepare the transforming company's plan for balancing assets and its inventory plan, the (opening) plan for balancing assets and the inventory plan for the legal successor company, the draft articles of association for the legal successor company, and draft settlement for any persons who do not wish to participate in the legal successor company.

During the transformation, there may be new members (shareholders) joining, as well as members (shareholders) who do not wish to participate in the transformation. During settlement, remuneration for members separating from the company must be established in such a way that it is adjusted in line with the proportion of that member’s material contribution relative to the registered capital of the legal predecessor, unless the articles of association stipulate another method of settlement for the termination of membership. A member (shareholder) is entitled to the legal predecessor’s equity in the same proportion (modified by the difference in evaluation where necessary).

Deadlines

Companies are obliged to have a statement published in the Companies' Gazette regarding the decision on transformation within 8 days of the decision, and the statement must be published in two consecutive issues.

The final balance of assets must be prepared for both the legal predecessor and the legal successor companies as at the date of company registration or the date set for the transformation, within ninety days of registration of the company created by the transformation.

If the company form is changed the reorganisation of the company must be reported to the registry court competent at the seat of the legal predecessor in sixty days from signing and approving the articles of association. Deletion of the legal predecessor from the records must be simultaneously requested.

The request for the entry of the merge into the register must be submitted to the registry court competent at the seat of the legal successor within sixty days from signing and approving the articles of association of the legal successor.

The request for the entry of the incorporation into the register must be submitted to the registry court competent at the seat of the receiving company within  sixty days from signing and approving the modification of the articles of association of the receiving company, or - for lack of it - from the approval (signing) 9f the merger agreement.

The request for the entry of the division into the register must be submitted to the registry court competent at the seat of the legal predecessor within sixty days from signing and approving the articles of association of the legal successor.

In the event of reorganisation (change of company form merge, division), the deadline for assessing applications is 30 working days, starting from the date when the company documents for all the companies participating in the transformation are available to the competent registry court.

The reorganised economic organisations are obliged to report, among other things, the tax number of the legal predecessor to the tax authority, using the form drawn up for this purpose, within 15 days of the tax authority report.

The taxpayer reorganised in the tax year - including the taxpayer created with reorganisation, the receiver and the remaining company - must submit a corporate tax advance statement within 30 days from the day of reorganisation.

Taking over an existing company is a worthwhile alternative to setting up a new business.

Administrative procedures

One-stop shop

Applications for registration of changes must be submitted in an electronic document consistent with the company form and signed by its legal representative, to the competent registry court.

In the case of a " Procedure of entry of any change in memberships into the registry", the registry court officially notifies the tax authority, and if they indicate in 3 working days that the company has public debts above 15 million forints then within a supplementation procedure the registry court calls the company to submit a balance of assets authenticated by an auditor as of the day of transfer of share, the accounting day, in accordance with the general rules.

Resources

The following websites provide useful information about the foundation, operation and reorganisation of companies:

Help & advice

Help & advice

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