The methods for winding up a business are regulated by Act IV of 2006 on Companies. In the event that the company is wound up without a legal successor, solvent liquidation shall take place if the company is not insolvent and the relevant legislation does not provide otherwise. Act V of 2006 on Publicly Available Company Information, Company Court Procedures and Solvent Liquidation contains detailed rules for liquidation.
Companies cease trading upon their deletion from the companies register.
Types of dissolution
The dissolution takes place on the basis of a decision by the supreme body of the company or a decision by the court of registration in judicial review proceedings (forced liquidation).
The company must report the initiation of the dissolution as a change to the registry court in fifteen days - except for simplified dissolutions. An application for the termination of Hungarian branch offices and premises in the European Economic Interest Group of a foreign-registered company must be submitted to the court of registration for each change. If the branch office is solvent, it is deleted without liquidation once it has proved that the conditions necessary for deletion as defined in the relevant material legislation have been fulfilled.
In the case of voluntary liquidation, the supreme body of the company makes a decision on the basis of the prevailing legal rules, concerning the termination of the company without a legal successor, or ordering solvent liquidation. The decision must establish the start date for solvent liquidation and select/appoint the liquidator.
Companies without legal personality (general or limited partnerships) may be registered for solvent liquidation according to a simplified procedure, if the company completes the solvent liquidation within one hundred and twenty days of the start date (simplified solvent liquidation).
If a court, acting within its review powers, declares the company to be terminated, forced liquidation is ordered. Forced liquidation also takes place if, according to the material legislation, the termination of the company without a legal successor had a causal origin, or if the company does not complete solvent liquidation within three years, or if there is no switchover to the general rules for solvent liquidation. No forced liquidation may be ordered after a decision is made on the company's insolvency, and also if a court proceeding in a criminal procedure or the prosecutor notifies the registry court on the possibility of taking any measure of criminal nature against the company Changes relating to forced liquidation orders with legal force are officially noted by the court of registration in the companies register and are published.
When filing for bankruptcy is the only option left for a business owner, it pays to cut losses, initiate proceedings sooner rather than later, and move on to a new business project.
The company must report the initiation of the dissolution as a change to the registry court in fifteen days - except for simplified dissolutions. Applications for changes of registration relating to the commencement of solvent liquidation, together with all their annexes, must be submitted in an electronic document consistent with the company type and signed by its legal representative, to the competent court of registration for the company's registered office. The application for the entry of the solvent liquidation must contain the date of the order on the initiation of the liquidation, the starting date of the liquidation, the name, tax ID of the liquidator, the address, birth date, mother's birth name in the case of a natural person, the seat, the registry number or other registration number in the case of an economic organisation not considered a legal entity or a legal entity, as well as the name, birth date, mother's birth name and address of a natural person acting as a representative, and the termination of legal relationship of the previous top official(s).
In order to conduct the solvent liquidation, the decision of the main body on the liquidation of a legal successor and the initiation of the solvent liquidation and the designation of the liquidator, as well as a declaration on the appointment of the liquidator and relating also to incompatibility, the declaration on the fact that the management notified the interest representation of the employees on the initiation of the liquidation, the certification of the pension insurance administration body and the state tax authority on the transfer of the data of the insured employees of the company, the decisions of the main body relating to the completion of the liquidation, including the reports of the supervisory board (control board) and the company's auditor, the accepted final report, the report for the last financial year in accordance with the accounting act, the decision on the division of assets, the documents relating to assignment and assumption of debts, the declaration of the liquidator on the fact that the company has settled its debts, the decision of the main body on the completion of the liquidation, the continuation of the operation, on the exemption of the liquidator from his duties, and on the election of the new senior executive(s) when the liquidation is finished without the termination of the company, as well as an announcement published by the liquidator in the case of a simplified liquidation.
About solvent liquidation
From the solvent liquidation start date, the liquidator, as a senior executive with an independent right of representation, represents the company and the former senior executives lose their mandate on the solvent liquidation start date. The subject matter of solvent liquidation is any property that the company has on the start date of the solvent liquidation, as well as any property that it subsequently acquires during the solvent liquidation, with the exception of property enumerated in the Bankruptcy Act. In the change registration application, the liquidator reports the commencement of solvent liquidation to the court of registration, and during liquidation, he will evaluate the company's assets, close any accounts receivable, settle its debts, assert its rights and fulfil its obligations and, where necessary, value its assets. Any property remaining once the creditors have been satisfied is shared among the company’s members either in cash or in kind, and the company ceases trading. Solvent liquidation must be completed within no more than three years of the start date. Liquidation may not be completed while the company has a recognised claim or debt that is not provided for in the decision to distribute assets. From the start date of the liquidation, the name of the company must be supplemented with "under solvent liquidation", or "v.a." (Hungarian abbreviation).
Obligations of senior executives during solvent liquidation
The company's former managing director is obliged to prepare a final report on the company's activities, to notify the liquidator of any matters pending and to hand over the company’s documentary materials, to prepare a document list, to notify employees (and professional associations and trade councils, if applicable) of the commencement of liquidation immediately, and to complete all tasks prescribed for him by relevant law, within thirty days of the date on which liquidation commenced. The previous senior executive of the company is liable for damages resulting from failure to perform his duties or from his improper performance.
Duties of the liquidator
The appointment of the previous senior executive is withdrawn from the starting day of the liquidation, and the liquidator will be the company's senior executive (and also its legal representative. The liquidator is responsible for any damages caused by his failure to meet his obligations. The liquidator is obliged to report the commencement of liquidation to the competent court of registration in a change registration application. The court of registration will order the commencement of liquidation proceedings, and this will be published in the Companies' Gazette.
The liquidator shall notify the following of the commencement of liquidation, as necessary, within fifteen days of publication of the liquidation: (i) the property authority; (ii) any organisations that keep records of a public nature or in the public interest, if the company has a property entered into the records; (iii) the regionally competent public labour market organisation (iv) the competent environmental protection inspectorate; (v) the financial institutions with which the company holds accounts; (vi) the managing directors of any taxpayers, social organisations or foundations operating with the material participation of the company; and (vii) the authority or court acting in any official or court procedures initiated or in process either by or against the company.
The liquidator will prepare an opening balance for liquidation, which must be adjusted within no more than 75 days following expiry of the 40-day period for creditors to submit their claims, and on the basis of the list of creditors’ claims (adjusted opening balance for liquidation), and submitted to the supreme body of the company.
During liquidation, the liquidator will evaluate the company's assets, collect any accounts receivable, settle its debts, assert its rights and fulfil its obligations and, where necessary, dispose of its assets.
If liquidation is not completed in the year during which it commenced, the liquidator shall prepare a report and tax return in accordance with the Accounting Act for every financial year as defined in the Accounting Act, and he shall also be required to notify the competent court of registration of the status of the company being liquidated, the reasons for the prolongation of the procedure, and the anticipated completion date procedure.
Social security deregistration
The liquidator must supply data on the pension insurance details of the insured persons in the way specified in the social insurance legislation. Data on the legal relationship of the insured persons until 31 December 2009 must be sent to the competent pension insurance administration body. A statement must be submitted to the state tax authority on payments relating to social insurance obligations for the period following this date. The fact of termination employment must be reported by the employers to the National Tax and Customs Administration. The employers and payers may submit the form in an electronic way to the competent state tax authority of first instance by the due date.
The certifications of the pension insurance administration body and of the state tax authority on the transfer of the data of the insured employees of the company must be attached for the purpose of the liquidation process.
Distribution of the company's assets
The Company's creditors may report their claims to the liquidator in forty days from the announcement of the initiation of the liquidation. Announcement is necessary also if there is an official or legal procedure against the company in relation to the claims. Failure to report or delayer report will not result in the loss of right, however, after the approval of the final balance sheet and the decision on the division of assets creditors may enforce their claims only in accordance with the rules relating to responsibility for the debts of a liquidated company. After the approval of the decision on the division of assets, the main organ makes a decision on the date of the issue of the assets, which may not be of an earlier date than the decision made on the dissolution of the company.
Completion of liquidation proceedings
Solvent liquidation must be completed within no more than three years of the start date. Liquidation may not be completed while the company has a recognised claim or debt in the decision to distribute assets.
When liquidation is completed, the liquidator will prepare the tax returns, the report on the last business year of the liquidated company, his recommendation on the distribution of assets, his closing report and, where necessary, recommendations on the fate of any taxpayers, social organisations or foundations operating with the participation of the company, and submit these to the supreme body for approval.
The liquidator will submit an application for deletion from the companies register to the competent court of registration, enclosing the closure documentation approved by the supreme body of the company. The deletion application is free of charge and no publication costs need to be paid for publication of the ruling to delete the company. The court of registration may delete the company from the register if the tax authority electronically informs it that there is no procedure initiated by the tax authority against the company and they will not initiate a control or execution. The tax authority will notify the court of registration without the request of the client in an electronic way in 90 days from the announcement of the final report.
You can find out whether a company is under forced liquidation from the Online Companies’ Gazette.
The Weekly Bankruptcy Bulletin is a service that needs to be registered for, and it lists all Hungarian companies in bankruptcy, liquidation or solvent liquidation proceedings.