In criminal cases involving a company, it has already been possible to prosecute not only the company’s executives but the company itself. In practice, however, this rarely happened. From 2026, the rules governing criminal proceedings against companies will change fundamentally, and companies are expected to be held accountable more frequently.
Can Companies Be Penalized?
It is less widely known that criminal proceedings are not limited to natural persons who commit an offense, nor are criminal sanctions applied solely to them. Since 2004, the law has allowed for a company to be sanctioned alongside the individual perpetrator if the company’s executive, member, employee, or supervisory board member commits a crime for the company’s benefit or through its resources. The underlying assumption is that the company gains an unlawful competitive advantage due to the committed offense (e.g., acquiring goods at an artificially low price due to VAT fraud, or winning a tender because of the executive’s corrupt conduct), and therefore it is appropriate to penalize the company as well.
When guilt is established, companies are typically fined, and in rarer cases their activities may be restricted (e.g., prohibited from engaging in certain business activities, participating in public procurements, or receiving government subsidies). Ultimately, the company could even be dissolved.
The legislation has undergone only minor revisions since 2004. Meanwhile, both the surrounding economic environment and the nature and organization of economic and online crimes have changed significantly. Legislators have recognized this, and from 2026, the criminal law measures applicable to companies will be substantially overhauled. The reforms aim to both increase the number of companies facing prosecution and ensure more proportionate criminal sanctions.
Liability for Negligent Conduct
A notable change is that while previously criminal measures against companies could only be applied in cases of intentional offenses, from next year even negligent conduct can trigger liability. For example, if a preventable workplace accident injures an employee, under the new rules not only the responsible manager but also the company may be held liable and subject to fines.
Moreover, a company can now face criminal consequences if the offense was committed by an employee and not the company’s executive, and the executive was unaware due to negligence in implementing preventive measures (previously, criminal sanctions could only be imposed if the executive intentionally failed to act). A typical example is a subcontractor bribing a procurement manager or building a manager’s vacation home, where the executive failed to supervise adequately, did not implement an anti-corruption policy, and did not train staff on preventing corruption. In such cases, the procurement manager, the executive, and the company itself may all be punished.
Newly Established and Foreign Companies Can Be Prosecuted
From 2026, criminal proceedings may also be initiated against companies established only after the offense occurred. This seemingly unusual provision primarily addresses cases where a corrupt act – such as offering an unlawful advantage (“If you expedite the construction or environmental permit, you’ll receive several million forints”) – relates to a contract executed only after the company’s establishment. The company cannot defend itself by arguing that it did not exist at the time of the offense.
Authorities will also have the power to take action against foreign legal entities, provided that Hungarian criminal law is applicable (e.g., a Hungarian individual commits money laundering using an offshore company). Practical questions remain about how authorities will enforce sanctions against companies registered in jurisdictions like the Cayman Islands or the BVI.
Companies at the Negotiation Table
Since 2018, individual perpetrators have been able to enter into settlements (plea bargain) with prosecutors. Such settlements allow the perpetrator to receive a more lenient sentence in exchange for a full confession, which prosecutors may use in proceedings against others.
In recent years, such types of settlements have become increasingly common in cases of economic crimes, particularly budgetary fraud and corruption-related offenses. At the same time, companies could not previously be parties to such settlements in any form, and the scope of the settlement could not extend to the company. Thus, even if a company executive concluded an settlement in respect of their personal liability, this did not apply to the company, which could still be sanctioned independently and severely. From 2026, companies can also enter into pre-trial settlements with prosecutors.
Corporate settlements require the company’s executive to acknowledge the company’s involvement in the offense and provide a detailed confession. Additional conditions include compensating damages, implementing internal controls to prevent future offenses (e.g., compliance programs, supplier auditing, anti-corruption policies), cooperating with authorities, and paying the fine.
If the executive is also a suspect, they must admit their own guilt. This provides practical benefits: executives who already considered settlements for themselves can now include the company, potentially reducing the overall penalties.
Reconsidered Fines: Size Matters
The system of fines for companies is being completely overhauled as well. Under the current rules, fines may reach up to three times the financial gain obtained or intended through the offense. From 2026, fines will range from a minimum of HUF 1 million to a maximum of 3–5% of the company’s previous year’s net revenue.
Accordingly, the new rule is more favourable than the current regime where the company’s net revenue does not exceed one hundred times the financial gain sought or obtained. A significant disadvantage, however, may arise for larger companies with exceptionally high net revenue but only marginal financial gain from the offense. Situations may easily arise in which the imposed fine far exceeds what would have been payable under the previous rules. Moreover, the new system does not account for cost structures or profitability; fines are based solely on revenue. Thus, a retailer operating with a profit margin of 2–3% and an investment advisory firm with a profit margin of 30–40% may face the same level of fine if their revenue is roughly the same.
Preventing Reputational Harm
Under current law, companies could be stigmatized from the outset. If they were involved in criminal proceedings (i.e., formally notified that criminal measures could later be taken against them), this fact was automatically recorded in the company register. Such information thus became immediately public, even though no prosecution had been brought and no final court judgment had been rendered, the investigation had only just begun. This could trigger a negative spiral for many companies, which could become devastating even if the company was eventually “exonerated” years later. Due to the registration in the company register, business partners might withdraw, employees could resign, banks could terminate loan agreements, and the company could be excluded from grant opportunities, public procurement, and concession procedures, among other consequences.
It is a significant relief that, from 2026 onwards, the initiation of criminal proceedings or the placing of a company under seizure will no longer be automatically recorded in the company register in all cases. According to the legislative change, the company court generally only needs to be notified if the company’s dissolution is expected as a subsequent criminal measure – a scenario that is highly exceptional. This change is highly welcome, as it allows companies to avoid irreparable reputational and commercial harm caused by such registration, and prevents them from collapsing prematurely.