Winding up - Hungary
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
Solvent liquidation 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).
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. 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.
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.
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 object of solvent liquidation is any property that the company has on the solvent liquidation start date, 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. The liabilities of a company are statute-barred after a period of five years from termination. From the start date of the liquidation, the name of the company must be supplemented with "under solvent liquidation", or "v.a." (Hungarian abbreviation).
Social security deregistration
Employers must report the termination of employment relationships to the National Tax and Customs Authority.
The document may be submitted electronically by employers and payers to the competent State tax authority of first instance, by an appropriate deadline.
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 forty-five days of the date on which liquidation commenced.
Duties of the liquidator
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 property of such a nature; (iii) the competent customs authority, state tax authority, pension fund, licensing authority (if the company pursues activities that require a licence); (iv) the state labour organisation competent for the area; (v) the competent environmental protection inspectorate; (vi) the financial institutions with which the company holds accounts; (vii) the managing directors of any taxpayers, social organisations or foundations operating with the material participation of the company; and (viii) 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, close any accounts receivable, settle its debts, assert its rights and fulfil its obligations and, where necessary, value 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 prolongation of the procedure, and the anticipated procedure completion date.
Distribution of the company's 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.
Completion of liquidation proceedings
Liquidation may not be completed while the company has a recognised claim or debt in the decision to distribute assets.
The liquidator will submit an application for deletion from the companies register to the competent court of registration, enclosing, among other things, 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. Following receipt of the deletion application, the court of registration suspends the deletion procedure until it obtains a certificate from the National Tax and Customs Authority (clearance certificate). The court of registration will delete the company from the companies register no later than 90 days from the publication of the closing report (provided that it also receives information on the basis of the data obtained from the National Tax and Customs Authority, to the effect that the company does not have any recorded public debts, and is not undergoing procedures by the tax authority, and no monitoring or implementation is being instigated).
Property may not be sold before the ruling on deletion of the company from the companies register.
You can find out whether a company is in liquidation (or winding up, or undergoing bankruptcy proceedings) 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.
Check also the legislation on this topic in: