[ESTABLISHING A BUSINESS ENTITY IN HUNGARY]
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otherwise. While the liability of the members of partnerships for the debts of the company is, in general, unlimited, the other two company forms offer limited liability to the shareholders. As a consequence, in the business practice, the ‘kft.’ and the ‘zrt.’ forms are the most popular forms of companies. According to the provisions of the Civil Code, establishing public companies limited by shares (‘ nyrt .’) upon foundation is no longer possible. Such companies may only be created by the transformation of private companies limited by shares since March 2014. Kft. and zrt. company forms provide a more secure framework for investors by limiting their financial exposure to the amount of their capital contribution. They also offer greater flexibility in terms of internal structure and governance, which can be adjusted to the specific needs of the business. Because of their advantages, they are widely used both by domestic entrepreneurs and foreign investors entering the Hungarian market.As the kft. and zrt. forms are the most commonly used forms of business entities in Hungary, in the forthcoming sections we give a general overview and comparison of these two company types. 3. Limited liability companies a. Company name The designation „ korlátolt felelősségű társaság ” (limited liability company) or its abbreviation „ kft .” must be indicated in the company’s name. The company name must clearly differ from other registered companies.
The current minimum amount of the registered capital of a kft. is HUF 3,000,000 (approximately EUR 8,000) which can be provided as a cash or as an in-kind contribution. An in-kind contribution may be any marketable thing of value or intellectual work, any intangible property or any claim that is recognised by the debtor or that has been granted by a final and definitive court decision. The contribution of each member may not be less than HUF 100,000 (approximately EUR 250). The contribution may not necessarily be divisible with HUF 10,000 in contrast to the previous regulation. It is not mandatory to pay up the amount of the registered capital upon the establishment of the Company; however, the payment of dividends,the transfer of business quotas and the increase/reduction of the registered capital cannot be completed until the payment of the registered capital. The performance of such obligation can be delayed by two calendar years at most, starting from the incorporation date. Hungarian law also enables the members of a kft. to denominate the registered capital of the respective company in EUR or USD. In such case, the books of the company must also be kept, and the annual report must be prepared in the same currency. Consequently, a careful financial planning is required, as tax filings and other financial obligations must also comply with the selected currency.
c. Membership rights
b. Capital requirements
ILN Corporate Group – Establishing a Business Entity Series
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