The purpose of company liquidation in Hungary is to dissolve a company and satisfy the claims of its creditors. The legal grounds for company liquidation are set forth in the Bankruptcy Act. Any company in Hungary that wants to end its activities needs to observe the proceedings for this purpose as described by law.
The liquidation of a Hungarian company begins after a local court decides that the company is insolvent. The insolvency can be declared based on a few conditions and the process can be initiated by the company itself or at the request of a creditor, if the company has outstanding debts. Our company formation experts can help you if you want to wind up a company in Hungary.
| Quick Facts | |
|---|---|
| Legislation applicable to liquidation procedures |
Company liquidation in Hungary is based on the following rules of law: – Act XLIX of 1991; – Act XLIV of 2021; – EU Directive (EU) 2019/1023. |
|
Types of liquidation |
Bankruptcy, voluntary and mandatory liquidation. |
|
What is bankruptcy? |
Bankruptcy happens when the company is not able to pay its debts and requests for a period of time in which it will find suitable ways to repay the said debts and settle its financial issues. The purpose of the procedure is not to directly wind up the company, but to apply specific strategies so that it can generate profit again. |
| Duration of bankruptcy formalities | 120 days (but it can be extended to maximum 365 days). |
| Duration of the voluntary/mandatory liquidation |
Company liquidation in Hungary through the voluntary procedure can take up to 3 years, while the mandatory liquidation can be completed in maximum 2 years. |
| Entity in charge with liquidation formalities |
The liquidator. |
| Main options to start the voluntary liquidation |
Simplified or ordinary voluntary liquidation. |
| Institution managing the Insolvency Register in Hungary |
Hungary has an Insolvency Register that is administered by the Company Information and Electronic Company Registration Service. |
| Information on the companies listed on the Register |
The Register provides information on the type of insolvency (liquidation or bankruptcy), the date when it was registered, court registration details, details of the liquidator and debtors, etc. |
| Publication obligations for companies entering the liquidation process | All companies must publish information on the initiation of bankruptcy or liquidation in the Companies Gazette. |
| Parties that initiate the voluntary liquidation |
The creditors. |
| Parties that initiate the mandatory liquidation |
The Hungarian courts. |
| When can’t a company initiate bankruptcy formalities? |
When the company has been involved in a previous bankruptcy and less than 2 years have passed since that event or when there are still unsettled claims with the creditors from the previous bankruptcy. |
| What are the obligations of a company in order to start the voluntary liquidation? |
Company liquidation in Hungary may start through the voluntary procedure when the company has terminated its activities, its employment contracts and its contracts with clients or suppliers. |
| Services provided by our team |
Our team can help investors select the most suitable way to handle a company in financial distress. We can assist in bankruptcy or liquidation formalities, prepare the financial documents, submit them with the competent authorities. |
Table of Contents
Legislation regulating company liquidation in Hungary
In order to close a company in Hungary, one of the following options must be selected, based on the particularities of the company: liquidation, which can be mandatory or voluntary, or bankruptcy. These must be done following the legislation in the field, which is given by the following:
- the Insolvency Code (also referred to as the Bankruptcy Act) – (Act XLIX of 1991);
- the European Regulation of Insolvency Proceedings (2015/848);
- the EU Directive (EU) 2019/1023 on preventive restructuring;
- the above-mentioned legislation was introduced in the Hungarian Act XLIV of 2021.
Our team of specialists in company formation in Hungary can provide more information on the applicable legislation and can also assist clients in the process of restructuring a legal entity.
The liquidation process in Hungary
A company is declared insolvent through a court order if the legal entity is unable to pay its debts to a creditor within 15 days from the due date of a payment notice received from the creditor as per a contractual obligation.
Insolvency can also be declared if the company is unable to pay its debts after receiving a court order to do so or if the company fails to comply with its obligations set forth in a bankruptcy procedure.
If one of these conditions applies to a Hungarian company, then the court can order the liquidation of the company within 60 days after the receipt of the request. The court also appoints a liquidator that will handle the process. Once the liquidation of a Hungarian company is published in the Companies Gazette it becomes final and binding.
Options for dissolving a company in Hungary
The liquidation procedure is a way of ensuring that the company is closed in a proper manner and all of the remaining debts are satisfied. It is possible to satisfy the creditor’s claims through negotiation and amicable understanding and thus the legal disputes can be avoided.
The liquidation of a company can take several months and up to several years. Our Hungarian company formation specialists can assist you throughout the entire procedure and can offer you details about other ways to end the activity of a company, like filing for bankruptcy.
The procedure may need the assistance of a team of accountants in Hungary, who can verify the company’s financial documents throughout the entire liquidation procedure.
Companies can also benefit from a simplified liquidation procedure since 2018, in certain conditions. This is available for companies that can complete the procedure in a period of 150 days since the initiation of the liquidation.
We invite you to watch a short video presenting how to close a company in Hungary:
How can a company file for bankruptcy in Hungary
Bankruptcy is one of the legal options company owners have prior to deciding to wind up a company in Hungary. This procedure applies when a company can’t pay its debts and after bankruptcy is initiated, legal and financial options will be analyzed so that debts can be settled. Below, our specialists in company registration in Hungary highlight some of its characteristics:
- the company will receive a 120 days moratorium, during which it can find ways to settle the debts with the creditors;
- once the procedure starts, the administrators of the company must announce the company’s partners on the bankruptcy proceedings (in a period of maximum 5 days);
- partners can file their claims in a period of maximum 30 days;
- the law stipulates that bankruptcy can be prolonged for more than 120 days, but it can’t take longer than 365 days.
Provided that the parties do not reach an agreement, it is necessary to start the liquidation process. Through this, it is understood that the authorities will close a company in Hungary.
Duration of the liquidation process
Depending on the route (voluntary or mandatory company liquidation in Hungary), one should prepare to spend a lot of time until the procedure is terminated. One can wind up a company in Hungary in a period of maximum 3 years through voluntary liquidation, or in 2 years, for the mandatory procedure.
Please know that after the procedure is completed, its investors can open a Hungarian company again, provided that they will have the necessary capital to invest in a different business. Those who do want to open a company in Hungary after the liquidation of a business can address our team of advice on the most suitable investment path.
Our consultants will help you close a company in Hungary, regardless of the procedure applicable to your business. For more information about company liquidation in Hungary, please do not hesitate to contact our company formation experts in Hungary.