Liquidation Proceedings in Hungary

How Does the Liquidation Process Work in Hungary

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1. Initiation of Liquidation Proceedings

Liquidation proceedings may be initiated where the statutory requirements under Hungarian insolvency law are satisfied.

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A creditor may initiate proceedings in appropriate circumstances, and the debtor may also have the right or obligation to initiate proceedings depending on its financial situation and the applicable legal requirements.

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For creditors, it is particularly important to establish that the claim exists, has become due and that the statutory conditions for initiating liquidation proceedings are satisfied.

The Court's Decision to Order Liquidation

The court examines whether the statutory requirements for liquidation have been met.

If the legal requirements are satisfied, the court orders the liquidation proceedings.

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The commencement of liquidation has significant legal consequences for the debtor company's management, assets and creditors.

3. Appointment of the Liquidator

When liquidation proceedings are ordered, the court appoints a liquidator.

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The liquidator is responsible for carrying out the liquidation process in accordance with Hungarian law. This includes identifying and managing the debtor's assets, registering and assessing creditors' claims and, where appropriate, arranging for the sale of the debtor's assets.

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4. Filing and Registration of Creditors' Claims

Creditors must report their claims to the liquidator within the applicable statutory deadline.

A creditor should ensure that its claim is properly documented and submitted within the prescribed time limit.

The liquidator registers and assesses the claims and manages the debtor's assets during the proceedings. The Hungarian insolvency register also records information concerning the deadline for lodging claims and the appointed liquidator.

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5. Assessment and Sale of the Debtor's Assets

The liquidator assesses the debtor company's assets and financial position and takes the measures required for the liquidation process.

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Depending on the circumstances, assets such as real estate, vehicles, equipment, inventory, receivables and other property may be realised in accordance with Hungarian law.

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The proceeds are then used for the purposes of the liquidation proceedings, including the satisfaction of creditors' claims according to the statutory order of priority.

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6. Satisfaction of Creditors' Claims

Creditors' claims are satisfied from the assets available in the liquidation estate according to the priority rules established by Hungarian law.

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The amount ultimately recovered by a creditor depends, among other things, on the value of the debtor's available assets, the total amount of registered claims and the legal classification and priority of the particular claim.

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7. Closing of the Liquidation Proceedings

Once the liquidation process has been completed, the liquidator prepares the required reports and accounts and submits the necessary documents for the closing of the proceedings.

Following the completion of the liquidation, the debtor company may be removed from the Hungarian company register and cease to exist without legal succession.

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What Can a Creditor Do in Hungarian Liquidation Proceedings?

A creditor should assess its legal options as soon as it becomes apparent that a debtor may be unable to pay its debts.

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Depending on the circumstances, legal assistance may be required to determine whether liquidation proceedings can be initiated and whether other legal remedies should be considered.

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Once liquidation proceedings have commenced, it is particularly important for creditors to:

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• submit their claims within the applicable deadline;

• provide appropriate documentation supporting the claim;

• monitor the liquidation proceedings;

• communicate effectively with the liquidator; and

• protect their legal position throughout the proceedings.

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What Does Liquidation Mean for the Debtor Company?

The commencement of liquidation proceedings has significant consequences for the debtor company and its management.

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The company's managing director must cooperate with the liquidator and comply with the obligations imposed by Hungarian law.

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The conduct of the managing director may also become relevant in subsequent liability proceedings where the company's assets or the interests of creditors may have been adversely affected.

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Liquidation proceedings may also involve tax law and matters before the Hungarian Tax and Customs Administration (NAV), such as tax debts, tax authority proceedings, cancellation of a tax number or questions concerning the liability of directors and other company officers. In such complex cases, it is particularly important to assess the corporate and tax law aspects of the matter together.

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Frequently Asked Questions About Liquidation in Hungary

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When can liquidation proceedings be initiated against a company in Hungary?

Liquidation proceedings may be initiated when the statutory requirements under Hungarian insolvency law are satisfied. The specific circumstances must be examined on a case-by-case basis, including the existence and maturity of the creditor's claim and the debtor's financial situation.

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Who can initiate liquidation proceedings in Hungary?

Depending on the circumstances and the applicable statutory requirements, liquidation proceedings may be initiated by a creditor or by the debtor.

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What happens after a Hungarian court orders liquidation?

The court appoints a liquidator, who takes responsibility for carrying out the liquidation process, including managing the debtor's assets and dealing with creditors' claims.

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What should a creditor do if a Hungarian company does not pay its debt?

The creditor should first assess the legal status of the debt and the debtor's financial situation. Depending on the circumstances, initiating liquidation proceedings may be one of the available legal options.

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When should a company or creditor seek a Hungarian lawyer?

Legal advice should ideally be obtained before initiating liquidation proceedings or taking significant action in an existing liquidation case, particularly where substantial amounts are involved, the debt is disputed, or the interests of several creditors are affected.

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Legal Assistance in Hungarian Liquidation Proceedings

Major Gábor Law Firm provides legal assistance to creditors, debtor companies and managing directors in connection with Hungarian liquidation proceedings.

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We assist clients with matters including communication with the liquidator, creditors' claims, the legal position of creditors and debtors, and the review of managing directors' obligations and potential liability.

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If you are dealing with a Hungarian liquidation proceeding or a company that may be unable to pay its debts, obtaining legal advice at an early stage can help you assess your options and protect your legal position.

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