Company Liquidation in Hungary

There are several ways a company in Hungary can cease operations and settle its debts. This article clarifies the different procedures involved like company liquidation in Hungary.

Solvent vs. Insolvent Companies

The process depends on the company’s financial health. If a company’s assets exceed its liabilities (solvent), it can initiate a voluntary liquidation procedure (végelszámolás).

However, if the company is insolvent (assets are less than liabilities), two main options exist:

Transparency and Creditor Rights

All procedures are governed by clear regulations to ensure transparency. Business partners can claim outstanding debts throughout these processes, potentially impacting the outcome. For instance, a company initiating voluntary company liquidation in Hungary might be declared insolvent and undergo an insolvency procedure instead.

Involuntary Company Liquidation in Hungary

Another option is involuntary company liquidation in Hungary (kényszertörlés), triggered by a court order due to the company’s inactivity. This could be because the company is unreachable at its registered address or has lost its tax ID. Similar to other procedures, creditors can still claim their dues, and an involuntary liquidation can evolve into an insolvency procedure.

Enforcement Proceedings vs. Company Liquidation in Hungary

It’s important to distinguish between enforcement proceedings, which aim to collect debts from a solvent company, and liquidation procedures. If a company appears insolvent, it’s wiser to initiate an insolvency procedure directly. While unsuccessful enforcement can lead to insolvency proceedings anyway, a third-party initiated process would still terminate the enforcement action.

The article concludes by mentioning that a court-ordered grace period during insolvency proceedings automatically suspends enforcement actions. If a successful agreement is reached with creditors, the enforcement is terminated altogether.

This excerpt details the processes for initiating bankruptcy and insolvency procedures in Hungary, highlighting the roles of debtors, creditors, and courts.

Initiating Bankruptcy by the Debtor

Initiating Insolvency by the Debtor

The process largely mirrors that of bankruptcy, with the following key points:

Initiating Insolvency by a Creditor

A creditor can initiate insolvency proceedings if they believe the debtor is insolvent. The application should detail the debt, its due date, and the reasoning behind the insolvency claim.

Grounds for Creditor-initiated Insolvency:

Important Note:

Cases a) and b) for creditor-initiated insolvency require the claim amount to exceed HUF 200,000.

Hungary’s Bankruptcy Procedure: Reorganization or Company Liquidation in Hungary?

This section explains the two main outcomes of a bankruptcy procedure in Hungary: reorganization through a composition agreement or liquidation through insolvency proceedings.

The Moratorium Period: A Chance for Revival

Debtor’s Role in Rescue

Creditor Participation and Voting

The Composition Agreement: A Win-Win Solution

A composition agreement aims to restore the debtor’s solvency through various measures:

Failure to Agree: Transition to Insolvency

If no agreement is reached or approved by the court, the bankruptcy procedure ends, and insolvency proceedings begin.

Insolvency Proceedings: Company Liquidation in Hungary for Debt Settlement

The goal of insolvency proceedings is to sell the company’s assets and distribute the funds to creditors. The court may grant the debtor a maximum 45-day deferment before commencing this process.

Limited Escape from Company Liquidation in Hungary

Even during insolvency, the company can avoid liquidation in two scenarios:

  1. Reaching a Composition Agreement: This requires approval from a majority vote across all creditor classes, with those approving creditors representing at least two-thirds of the total claim value.

  2. Settling All Debts: The debtor can pay all undisputed claims and provide guarantees for disputed claims and procedure costs.

The Fate of Unsalvaged Companies

If neither option above is achieved, the court will order asset division among creditors according to Hungarian law.

Conclusion: Company liquidation in Hungary

The provided articles outlined the options available to Hungarian companies facing financial difficulties. The key takeaway is that companies have a chance to avoid complete liquidation through proactive measures.

The importance of seeking legal counsel and maintaining transparency throughout these procedures is emphasized. By understanding the available options and acting promptly, companies facing financial challenges can potentially achieve a successful reorganization and avoid complete closure.

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