Limited Liability Company

Foreign investors usually prefer to establish a limited liability company (“ltd.”) in Hungary. Nevertheless, banks and insurance companies must adopt the form of a joint stock company, for which the minimum capital is 20 million HUF.

In many ways, the Hungarian ltd. is similar to the German GmbH. It is a legal entity giving limited liability to the shareholders, while granting the shareholders considerable flexibility to arrange their affairs as they wish.

The minimum share capital of a ltd. is 3 million HUF. Application for registration of the company at the court may be made only when the entire capital contribution in kind and half of the cash contributions have been received. Contributions in kind may be any marketable object or intellectual work of pecuniary value, or any right representing pecuniary value. If the consent of a third party is required for future transfer of the object or work, it may only be accepted if the consent is granted in advance.

The articles of association must be formally recognized by all shareholders and may be modified by the shareholders’ meeting with at least a 75% (seventy five percent) majority.

The shares of a ltd. (with the exception of own business shares) are freely transferable to other members of the company. Only fully paid shares may be transferred to non-shareholders, however, other shareholders, the company itself or third persons appointed by the members meeting shall have the right of first refusal.

A ltd. must appoint one or more natural persons as directors, provided that the first directors must be named in the articles of association. Unless approved by the shareholders’ meeting, a director may not engage in business activities similar to that of the company.

The ltd. must appoint a supervisory board if the share capital exceeds 50 million HUF, or if the number of full-time employees exceeds 200 (two hundred).

In addition, an auditor must be appointed if the share capital exceeds 50 million HUF and in case of one-man limited liability companies.

The following documents are required to establish a company in Hungary:

1. contract of association (deed of association) of the company;
2. specimen of signature;
3. statement of acceptance by the executive officers, the auditor, and if appointed, the members of the board of supervisors;
4. the document of authorization and acceptance of a foreign owner’s delivery agent in Hungary;
5. in case of the participation of a foreign company, the extract from the Register of Companies of the foreign company and its attested translation in Hungarian;
6. registration in a Hungarian chamber of commerce;
7. power of attorney for the legal representative;
8. Register of Members;
9. bank verification on the payment of monetary deposits, receipt of contribution in kind;
10. if the company employs an auditor, the auditor’s assessment of the value of in-kind contributions.

A court fee of 2% (two percent) of the company’s capital, at maximum 300.000 HUF, must be paid at the foundation of the company. A 20.000 HUF publication fee has to be paid as well.

During the registration proceedings, the company may operate as a pre-company, and such status shall be indicated with the affix “registration in progress” on the business association’s documents and in the course of its legal transactions. During this period the company may not carry on activities subject to official license, and no amendment to the contract of association, or change of owners may occur.

The court of registration has to register the company within 60 (sixty) days, provided that any notice regarding any necessary correction or rectification must be mailed to the company within 45 (forty five) days of the filing of the registration request. Registration is usually completed in a couple of weeks.