[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 a 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. 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:
• private company limited by shares (‘ zrt .’) 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. 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 3.1 Company name
The designation „ korlátolt felelősségű társaság ” (limited liability company) or its abbreviation „ kft .” must be indicated in the company’s name.
3.2 Capital requirements
The current minimum amount of registered capital of a kft. is HUF 3,000,000 (approximately EUR 8,000) which can be provided as 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.
general partnership (‘ kkt .’)
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limited partnership (‘ bt .’)
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limited liability company (‘ kft .’)
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ILN Corporate Group – Establishing a Business Entity Series
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