tag: M&A

For international investors, acquiring or establishing a business in Hungary involves more than negotiating commercial terms. Mergers, acquisitions, and joint ventures may require approval from the Hungarian Competition Authority (“HCA”) before they can be completed. Failure to comply with merger control rules can result in significant fines, delays, or even the prohibition of a transaction.

Including an earn-out provision in a corporate sale transaction can be an effective way to ensure a smooth and efficient transfer of a company. However, it may also introduce significant tax challenges. As such, it’s important to approach the inclusion of such a provision with careful consideration.

A shareholder’s ownership percentage does not always reveal who truly controls a company. In an acquisition, joint venture or minority investment, influence depends as much on negotiated governance rights as on the shares held. This is particularly relevant for foreign investment in Hungary. An investor may want existing management to run the business while retaining a say over decisions that could materially affect its investment. The aim is to protect the investment without slowing the company down.

Since COVID, we have been living with a rule that makes the acquisition of ownership by foreigners in certain Hungarian companies operating in strategic sectors subject to government approval. Although we can no longer speak of a state of emergency, the rule is expected to stay with us for long – albeit with several modifications along the way, as happened in January this year.

More than two years ago as a transitional rule, the acquisition of ownership interest in Hungarian companies by foreigners became subject to authorisation. The rule seems to have become permanent in the meantime, though many questions of legal interpretation remain unanswered. Some market players are following the process with resignation, others with serious reservations.

More than two years ago as a transitional rule, the acquisition of ownership interest in Hungarian companies by foreigners became subject to authorisation. The rule seems to have become permanent in the meantime, though many questions of legal interpretation remain unanswered. Some market players are following the process with resignation, others with serious reservations.

When the idea of selling the company matures in the mind of a business owner, there’s still a long way to go before the company can be successfully sold. There are many legal and tax matters to be seen to as part of the process – and these should not be left to the last minute. We discuss a few of these here.

Since 2014, the “new” Civil Code has allowed companies to deviate from statutory rules in terms of their operation and organization. Up until now, however, it wasn’t clear what was included and what wasn’t: what they could actually deviate from and what they had to adhere to. A new amendment expected to enter into force in January next year will clear the rules up while also easing them off at the same time, thus increasing Hungary’s competitiveness in terms of company law as well.