[ESTABLISHING A BUSINESS ENTITY IN HUNGARY]
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ESTABLISHING A BUSINESS ENTITY IN HUNGARY 1. Introduction Since 1990, the Hungarian economy is based on the principles of market economy and considers the freedom of economic competition as a priority. On such basis, the regulation of business associations went through significant changes before evolving into its current form in Act V of 2013 on the Civil Code („ Civil Code ”). The current regulations entered into force on 15 March 2014, replacing the provisions of Act IV of 2006 on the business associations. Both pieces of legislation present a set of rules that is reliable and enables market participants to customise their companies to their respective needs. Generally, the Civil Code allows greater flexibility for the founders of Hungarian companies when determining the contents of the company’s establishing documents. This is so because, as opposed to the compulsory provisions of the previous regulations, deviation is generally allowed from the relevant rules of the Civil Code, subject to certain limitations. Hungary has been a member of the European Union („ EU ”) since 2004. EU membership ensures the free movement of goods, services, capital, and persons, which significantly facilitates cross-border business activities. Companies established in Hungary benefit from access to the EU single market and are subject to harmonised EU regulations, which enhances legal certainty and predictability for investors. Furthermore, EU funding opportunities and various investment incentives contribute to Hungary’s appeal as a business location within the region. In particular, the harmonisation of company law provisions within the EU provides a clear
legal framework for cross-border corporate transformations between companies established in different Member States, thereby facilitating corporate restructurings and integrations at the EU level. Hungary offers a stable legal and business environment within the EU, making it an attractive destination for corporate expansion. Navigating the local legal framework effectively requires awareness of both domestic company law and relevant EU regulations. Choosing the appropriate business form and understanding the implications of ownership structures are essential first steps in the process. The purpose of this summary is to outline a high-level overview of the main aspects that need to be considered in case of establishing a Hungarian business entity or acquiring a shareholding interest in a Hungarian company. 2. Company forms in Hungary Companies may only be founded in the forms regulated in the Civil Code. The available company forms are the following:
general partnership (‘ kkt .’)
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limited partnership (‘ bt .’)
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limited liability company (‘ kft .’)
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• private company limited by shares (‘ zrt .’) The initial capital contribution required for the pursuit of joint economic activity are contributed by the members of the company, who share in the profits and bear the losses jointly. The profits of the company shall be distributed among the members in proportion to their capital contributions, and losses shall likewise be undertaken in the same proportion, unless the members agree
ILN Corporate Group – Establishing a Business Entity Series
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