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Company Liquidation in Hungary

Company Liquidation in Hungary

Company liquidation is the phase in which a Hungarian business has ended its activity voluntarily or forcibly and must be closed. If a legal entity decides to be liquidated, the regulations of the Hungarian Act IV of 2006 on Companies must be followed.

Below, our lawyers in Hungary explain how a company can closed. You can rely on us for tailored services associated with business termination.

The two ways to liquidate a company in Hungary

Just like in other jurisdictions, closing a company in Hungary can occur in two ways:

  1. voluntarily, when the decision is made by the owners (shareholders);
  2. compulsory, when the decision is issued in a court of law as a consequence of the liquidation being petitioned by one or more creditors.

It is important to distinguish between the two procedures as they are distinct. Also, for each of them, certain conditions must be fulfilled.

Our law firm in Hungary is at your service if you have a company you want to close.

Conditions to wind up a company in Hungary

According to the Company Law, there are several conditions that need to be fulfilled in order to shut down a business activity in Hungary. They are independent from one another. Here they are:

  • a company can be liquidated if it was created for a limited period and the time to close it has come;
  • a company can also be closed based on the mutual decision of the shareholders;
  • failing to comply with the requirements of the Company Law is also ground to liquidate a Hungarian business;
  • the inability to pay its debts can also lead to the dissolution of a company.

The first two motives are usually invoked for voluntary liquidation, while the other two are grounds for the compulsory procedure.

If you find yourself in any of these situations with your company, do not hesitate to consult with one of our Hungarian attorneys who can help you. In certain cases, restructuring measures can be taken to avoid liquidation.

Company winding up steps in Hungary

The company liquidation procedure implies following strict steps, depending on its type. When it comes to the voluntary one:

  • the first step is for the shareholders to convene a meeting and record the decision to terminate the business;
  • during the same meeting, they can also appoint the liquidator;
  • then, a liquidation notice must be filed with the Trade Register;
  • following that, the liquidator must make the inventory of the assets and proceed to the payment of the creditors.

In the case of a compulsory company liquidation procedure, the first step is for the creditors to file a petition with a Hungarian court. The judge will appoint the liquidator who will proceed to the payment of the debts.

Company liquidation procedure in Hungary

If the company liquidation is initiated at the request of a creditor based on an overdue amount of an invoice, he may elaborate a request not sooner than 20 days from the due date of the invoice related to the company liquidation. The request for company dissolution must show the reason why it is requested, the amount that is due, and the deadline of payment. The usual term is five days from receiving it. The claims are usually delivered through post, this way the creditor proves the delivery.

A civil action may be instituted if the debtor considers that the claim is not correct but he/she must pay it first in order to avoid the company liquidation which may occur before ending the civil action.

All the claims are deposited at the Court which must notify the debtor immediately. A 45 days delay in payment may be requested by the debtor but if the debtor doesn’t send an answer in 8 days the Court has the right to begin the process of company liquidation.

The announcement regarding the company liquidation is posted in the Company Gazette. The announcement will state the due amount, the procedure for delivering the claims, and the maximum term of stating the claim. Usually, the claims must be delivered to the appointed liquidator within 40 days of posting the announcement and no later than 180 days.

The same day the announcement is published in the Gazette, the process of company liquidation may begin. An appointed person, called a liquidator, is taking all the necessary measures to end the process with success. The liquidator has the same authority as the former management, except that all his attributions must be used with the final scope of company liquidation. He has the authority to close or start new contracts, audit, and auction the company’s assets in order to accomplish his tasks for liquidating the business.

The liquidator must be aware that in the first stage, all the claims of the creditors must be satisfied and only after that, the rest of the assets are distributed among the company’s members.

The Court is requesting the cancellation of the Hungarian company from the commercial registers after all the claims are covered and all the remaining assets are distributed among the members. Please note that the same law applies to those who immigrate to Hungary.   Our law firm in Hungary can also help investors in other matters, such as registering a new legal entity, obtaining permits or registering a trademark

How long does it take to liquidate a company in Hungary?

Normally the Hungarian company liquidation process takes from a few months to several years depending on the size of the company, whether the claims are disputed or not, or if other conflicts occur.

Most businesses to close in Hungary were shops in 2023

According to data gathered by the Central Statistics Office and cited by a local newspaper, many shops were closed in 2023 in Hungary. In numbers:

  • 4,500 stores were closed between May 2022 and May 2023;
  • they represented 4% of the total number of shops operating in the country;
  • out of all of them, 1,000 were supermarkets and 800 were clothing stores.

Our lawyers are also at your service if you are interested in immigration to Hungary. We can help you apply for residency followed by Hungarian citizenship.

Please contact us for legal representation on this matter.