Hungary: Acquisition of companies

The structure of the procedure of company acquisitions in Hungary is quite like that of other jurisdictions. Our team acts on behalf of its clients mainly in share deals, asset deals. Other than these two major forms of acquisitions, the acquisition of a business unit is yet another well-known and much-used solution with its specific labour- and tax law related rules.

The basic and foremost rules of M&A transactions may be found in Act V of 2013 on the Civil Code of Hungary which contains the general provisions of all legal persons, the basic rules of the transformation, merger and demerger thereof. The special rules of transformation, merger and demerger are incorporated in Act CLXXVI of 2013 on the Transformation, Merger and Demerger of Certain Legal Persons – as the implementation of Directive 2005/56/EC of the European Parliament and of the Council – describing the actions along with the necessary documentation, financial requirements when a legal person wishes to transform of mergers, demergers and spin-offs.

Acquisitions may be subject to merger control procedure which does not majorly differ from that of other EU countries. However, the FDI regime has gone through quite a change during the pandemic. There are two separate FDI notification regimes in Hungary:

• general rules – FDI Regime under Act LVII of 2018 which is based on the EU rule (Regulation (EU) 2019/452 of the European Parliament and of the Council of 19 March 2019 establishing a framework for the screening of foreign direct investments into the Union); and 
• special rules – FDI notification under Act LVIII of 2020: due to the COVID pandemic the government introduced a second FDI regime which is still in effect. Under the special FDI rules, FDI notification obligation is triggered if a foreign entity acquires the ownership (in part or in full) of a strategic company and the value of the deal exceeds HUF 350,000,000 (approx. EUR 875,000 subject to exchange rate). The Act defines “foreign investor” as a natural or legal person from third countries (outside of the EU or EEA) or legal persons from the EU or EEA if the person (natural or legal) holding a majority control in the legal person within the meaning of the Civil Code from a third state. Government Decree No. 289/2020 (VI.17.) lists the “strategic” activities. Any company that carries out at least one of these strategic activities is considered a “strategic company” and thus falls under the special FDI rules. Such transactions are to be notified to the competent minister who either acknowledges or prohibits the transaction within 30 days (as per the main rule).