Hírek

Business ventures, company forms and registration process in Hungary (by Dr. Kiss Edit)

Individuals and legal entities may found new companies or acquire shares in existing companies in Hungary.

I. There are 3 possible forms of business associations listed in the Companies Act:

(1) Limited/Deposit partnership- in Hungarian: betéti társaság-bt.: In case of a deposit partnership the acting partner has unlimited liability, and the limited (or special) partner’s responsibility extends to the amount of his/her deposit. – this form is not too usual – and we don’t advise either- nowadays because of the unlimited liability (so at least one member is liable for the companies depts –with his own assets- in case the asset of the company is not enough for paying the depts.)

a. A limited partnership must have at least one general partner and at least one limited partner.

b. There is no minimum initial capital requirement to set up a company.

c. The general partner's liability is unlimited for the partnership's obligations.

d. The liability of the sleeping partners is limited up to the incidence of the subscribed capital.

e. The limited partnership form has no legal status.

(2) Limited liability company- in Hungarian: korlátolt felelősségű társaság-kft.: A company—statutorily authorized in certain states—that is characterized by limited liability, management by members or managers, and limitations on ownership transfer.

a. The members do not bear liability for the obligations of the company.

b. The liability of the members to the company is only their capital contributions.

c. The members may not be recruited through public offerings.

d. The minimum capital is HUF500.000-, and may also be established with in-kind contributions only.

e. Limited liability companies have legal status

(3) Company limited by shares (shareholder group)-in Hungarian: részvénytársaság -rt.:

a) Private Company Limited by Shares (Zrt.)

a. The members do not bear liability for the obligations of the company.

b. The share capital is minimum HUF5.000.000,-, and may also be established with in-kind contributions only. It may be established also with just one member.

c. Private companies limited by shares have legal status.

b) Hungary Public Company Limited By Shares (Nyrt.)

a. The members do not bear liability for the obligations of the company.

b. The share capital is minimum HUF20.000.000,- and may also be established with in-kind contributions only.

c. Public companies limited by shares have legal status.

II.

(1)

Regarding that the most common form is the limited liability company (ltd.) I’ m writing down the costs, and the procedures of founding an ltd. (the procedure is basically the same by the other forms - of course there are a lot of special rules as well by each forms -, but in costs there are differences).

The first step is to hire lawyer who represents the company (limited liability company), creates company deeds, and prepares other legal documents. The company must be represented by an attorney at law in the registration process, this is determined by law. The lawyer’s fee is subject to free agreement, so it varies significantly according to the services provided and company size. Attorneys charge at least from HUF 80.000,- - up to HUF 150.000 for registering a limited liability company (KFT). It depends on the type of the chosen procedure and of the asked specialities.

(2)

An initial step in funding a business venture is the preparation of written Articles of Association (or Deed of Foundation) which must be signed by all members (or their authorized representatives holding of a power of attorney). An attorney must countersign this document.

The Articles must contain (find a sample enclosed for standard electronic filling procedure):

- the name, company form and the registered office of the company;

- the name, company form and the registered office (address) of the founders;

- the scope of the company’s activities;

- the registered capital of the company, and the method (cash, or in-kind) and date of contribution by the founder;

- authorities for signing on behalf of the company;

- name and address of executive officers;

- term of the company, if it is established for a definite period;

- other matters required by the Companies Act for the different forms of business associations.

The recorded value in-kind contribution can not exceed the valuation accepted by the statutory auditor of the company. A member providing an in-kind contribution remains liable for five years to the company that their contribution was not worth less than the value stated in the Articles of Association.

Directors are elected by the Members’ Meeting (General Assembly) for fixed or indefinite term. Officers maybe re-elected or recalled at any time by the General Assembly.

To sum up the requirements for Hungary company incorporation: 1./ One shareholder and one Director (It’s neat to have at least one Hungarian director) is required, who must have a Hungarian mail address; (mother’s name, date of birth, tax number needed) 2./ Must register for VAT; 3./ Corporate shareholders are permitted; 4./ A registered address or virtual office (can be provided by our office) required in Hungary (you need a real estate (=official seat). So you should buy or rent one); 5./ Minimum share capital is approx. HUF 500,000,-, this is not mandatory; 6./ An accountant should be appointed prior to the company application.

Please note, there are a lot of other rules, so the above mentioned are “just” the most common and important rules in this topic.

Forming a corporate entity in Hungary has many advantages such as low (in some cases none) capital gains and dividends tax, but Hungarian company formation is not seen as an offshore corporate structure or a tax heaven.  Some types of companies will benefit more than others in Hungary for example a holding company.

Start your business in our country, and please don’t hesitate to contact us today.