A merger is a type of transformation that is regulated by corporate law. In Hungary, foreign and Hungarian natural and legal persons, and companies without a legal entity, may set up a company, become a partner in an existing company or obtain shares in a company.
A single company may be created as the legal successor of two or more companies when the companies merge. Mergers may occur by incorporation or concentration. Rules of cross-border mergers of companies that combine their capital are different from the rules relating to mergers, and are laid down by separate legislation (they are not covered by this summary).
Mergers between large companies must comply with legislation on market practices.
The Hungarian Competition Authority is an independent body set up to monitor the freedom and integrity of market competition and authorise mergers between companies.
During 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. Both the rights and obligations of incorporated companies are transferred to the legal successor.
During a merger, the merging companies cease trading, and their property (rights and obligations) is transferred to the new company created by the merger, as the legal successor.
Concentration pursuant to the Competition Act
Companies may merge to create a concentration if:
- two or more companies that were previously independent of each other concentrate, one is incorporated into another, or part of the company becomes part of another independent company (merger);
- one company, or several companies jointly, directly or indirectly takes over one or more other companies that are independent of it, in whole or in part;
- several companies that are independent of each other jointly create a company that they direct and which is capable of performing all the functions of an independent company in the long term.
The supreme bodies of the companies participating in the merger shall make a decision on the merger on two occasions, unless otherwise provided for by the deed of foundation. On the first occasion, it shall be determined, based on the submissions of the senior officers or supervisory committee (if there is one), that they agree with the intention to merge, the recommended method for doing so, the form in which the legal successor company will operate, and who wishes to participate in the merger. They will also define the date of the plans for balancing assets and creating the inventory of assets, appoint an independent auditor, and entrust the senior officers with preparing the necessary documents, including the merger agreement (or draft thereof), and the plans for balancing assets and creating the inventory of assets. A transformation plan will also be drawn up where relevant.
The management representatives of the merging companies prepare the draft merger agreement, which must define:
- the names, registered offices and company registration numbers of the merging companies, as well as the form, name and registered office of the company that is to be created;
- the merger method (incorporation, concentration);
- in the event of incorporation, the necessary draft amendments to the articles of association of the acquiring company;
- in the event of a concentration, the draft articles of association of the new company;
- anything stipulated by law, or which the supreme bodies of the companies participating in the merger deem necessary.
The works council operating at the companies must be informed of the merger within 15 days of adoption of the merger agreement. In the event of a final decision by all companies involved, the companies affected by the merger are obliged to have a statement published in the Companies' Gazette regarding this within 8 days of the final decision, and the statement must appear in two consecutive issues.
In the event of transformation, 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 court of registration. If the company undergoing the transformation defines the transformation date, the transformation will not take place on the date of registration of the company, but on the date specified by the company. The registry court simultaneously deletes the legal predecessor(s) and the incorporated firm(s).
Buying an existing company, with an already established structure, can be a good way of expanding your business.
Mergers that fulfil defined conditions may only take place once preliminary authorisation has been given by the Hungarian Competition Authority.
A licence from the Hungarian Competition Authority is required for mergers between companies with joint net revenue of more than fifteen billion forints (approx. 51.5 million euros), if at least two of them jointly achieved net revenue of more than five hundred million forints (approx. 1.7 million euros) in the year prior to the merger.
The companies have to submit an application to the Hungarian Competition Authority, which, depending on the complexity of the case, will examine the merger using either a simplified or comprehensive procedure.
The form required for submitting a merger application can be downloaded from the Hungarian Competition Authority website.
The Hungarian Competition Authority will decide on whether the merger can be authorised based on the results of a merger control. The decision will be made as part of the simplified procedure if the merger does not significantly reduce competition in the relevant market, especially as a consequence of the creation or reinforcement of market dominance. The cut-off date for the simplified procedure is 45 days, which may be extended by 20 days on one occasion.
If the case requires further investigation in order to assess the impact that the merger would have on the market, owing to the complexity of this, the concentration must be evaluated using the comprehensive procedure; in such cases the final decision must be made within 3 months, which may be extended by 60 days on one occasion. Should the Authority find that the merger does not significantly reduce competition in the relevant market, especially as a consequence of the creation or reinforcement of market dominance, it may not refuse to issue a licence.
Electronic company procedures
Companies may only be registered and any changes registered electronically. The application for registration of a merge is submitted by the legal representative (who countersigned the articles of association) authorised by the company's legal representative to the company information service.
The company information service provides free company information on a separate website, which is for guidance and may not be used as an official document. The company details of a registered company, and a copy of the stored extract from the companies register may be queried from the database by company registration number, name or tax number.
Companies are obliged to have a statement published in the Companies' Gazette regarding the transformation within 8 days of the final decision, and the statement must be published in two consecutive issues.
The Company Information Service provides free company information through a separate website. The company details of a registered company that cannot be used for official documents may be requested on the basis of the company's registration number, name and tax number in the database.