When acquiring shares in a business in Hungary, it is primarily company law and accounting regulations as well as competition law provisions that apply. 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 Hungarian branch office or commercial representation of a foreign company may not directly acquire shares in another company.
Concentration is (among others) when a company or a group of companies acquires a direct control over part or whole of one or more enterprises independent from it, i.e. it acquires shares and business shares guaranteeing a majority (at least 50%) voting right. Concentrations significant as regards their joint income are subject to licensing.
Ways of acquiring shares in a company
One way of starting up a business activity is to buy 100% of the shares in a company that has already been set up and registered. If permitted by the type of company in question, it is possible to join a company by buying shares. In the event of the sale of shares belonging to a member who has been excluded by a court or who has lost his legal right to membership owing to failure to make a material contribution, shares in a limited liability company may also be acquired by public auction.
For the privatisation of state owned companies, Magyar Nemzeti Vagyonkezelő Zrt. (MNV Zrt.) calls for tenders.
Other legal title relating to the acquisition of shares
Shares may also be acquired for example through gifts, swaps and contributions in kind, as well as through inheritance of shares. Transfers taking place through legal title other than a purchase agreement may be excluded or restricted by the deed of foundation of a limited liability company. If a transfer of shares to a legal successor is prevented by the articles of association of a limited liability company, the redemption of the business shares by the joint owners or the company must be provided for in the articles of association.
Necessary steps for acquiring shares in a company
Companies without legal personality
In the case of general (Kkt.) and limited (Bt.) partnerships, a third party may acquire the shares of any member by means of a contract concluded in writing. The transfer will take effect when the articles of association are amended.
Companies with legal personalities
- As a general rule, shares in limited liability companies may only be transferred if the member has paid his capital deposit in full. The acquisition of shares by a third party may be restricted by the right of pre-emption guaranteed for members, the company, or a person/persons designated by the general assembly (assuming that this is not excluded or restricted by the articles of association), and members may make the acquisition of shares conditional upon the company’s consent (in the latter case, the articles of association must regulate the conditions for granting and refusing consent, and the general assembly must decide on whether to grant consent). If there is no impediment in principle in the articles of association, the recommendation to purchase must be communicated, and those with an entitlement must then declare whether they will exercise their right of pre-emption (the deadline for members is 15 days from the reporting of the recommendation to purchase, and the deadline for the company and for persons designated by the general assembly is 30 days from the reporting of the recommendation to purchase). The person acquiring the shares is obliged to report the change in ownership and the date thereof to the company in writing within eight 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 to the effect that the person acquiring the shares acknowledges the provisions of the articles of association to be mandatory in respect of himself. Assignment of business shares does not require the articles of association to be amended, but the new member must be entered in the list of members and the change in ownership must thus be reported to the court of registration.
- In the case of private joint stock companies, printed shares are transferred by means of endorsement, while dematerialised shares are transferred by means of being credited to the securities account. The right of pre-emption, buy-back or purchase concluded in the agreement shall be valid in respect of a limited company or third parties if (i) in the case of printed shares, the share has these rights stamped on it; (ii) in the case of dematerialised shares, these rights are recorded in accordance with the provisions of the Securities Act. The types or categories of shares that may be acquired by means of transfer by specific persons may be restricted by law. In addition to this, the opportunities to transfer shares may also be restricted by the articles of association. The articles of association may stipulate that the consent of the limited company is required for share transfers. However, if the Board of Directors or the general assembly does not make a statement within thirty days of the report of intention to execute a transfer, the transfer may be regarded as having been adopted. A share transfer shall be valid in respect of a limited company, and a shareholder may exercise his shareholder rights in respect of the limited company, if the shareholder has been listed in the share register.
- Shares in a public joint stock company may only be issued as dematerialised shares. The right of pre-emption, buy-back or purchase concluded in a dematerialised share agreement shall be valid in respect of a limited company or third parties if these rights are recorded in accordance with the provisions of the Securities Act. No other restrictions may be applied to the transfer of dematerialised shares. Preferential shares that provide a right of pre-emption may not be issued by a public limited company. Shares in a public joint stock company may also be acquired in Hungary at the Budapest Stock Exchange (BSE), provided that the shares have been placed on this regulated market. A stock exchange trading company must be used for stock exchange deals. In order to close share deals, it is necessary to open the relevant accounts (these may be customer, securities, deposit or current accounts); in the case of private individuals, their ID card and tax certificate, inter alia, must also be shown.
In the case of shares issued by public joint stock companies, if the shares to be acquired involve the acquisition of influence exceeding twenty-five percent, and provided that, in addition to the shareholder acquiring such influence, nobody has influence exceeding ten percent of the voting rights or the shares involve the acquisition of influence exceeding thirty-three percent of the shares, then shares may be acquired through adoption of the public offering approved by the Hungarian Financial Supervisory 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.
Retiring business owners need to plan the transfer of their business in advance.
Some standard requirements to be completed when taking over a business are the same as when setting up a new business.
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.
Electronic company procedures
Companies may only be registered and any changes registered electronically. The application for registering a change in ownership is submitted by the legal representative (who countersigned the articles of association) authorised by the company's legal representative to the company information service.
If the consolidated income of the company/companies acquiring the shares is above a limit-value, then the concentration must be requested at the Hungarian Competition Authority.
The following sources provide useful information about acquiring shares in a business: