The Hungarian Ministry of Justice acknowledged the recent criticism aimed at the difficulties regarding the enforcement of monetary claims in the country and plans to amend the relevant laws to make creditors' lives easier. As currently envisaged, these amendments will in the near future change such fundamental laws as the Civil Code, the act on court enforcement, and the act on insolvency and bankruptcy proceedings. This article provides a summary of the envisaged amendments.
 
Civil Code

The main aim of the revision of the Hungarian Bankruptcy Law, effective September 2009, was to make the bankruptcy proceeding more attractive for creditors as well as debtors, to make clearing debt in the course of a bankrutpcy proceeding more effective and, with the increasing number of bankruptcy agreements, to decrease the number of liquidators.  

From 4 August 2011 special insolvency rules now apply to those Hungarian companies which the Government classifies as “highly important” from a national economic perspective. Insolvency proceedings can be started as a special procedure.

Classification

A new electronic database of bankruptcy and liquidation petitions, open to any company, is being set up by the National Judicial Office.

This will enable any company to obtain a certificate showing whether it has had a bankruptcy or liquidation petition filed or liquidation proceedings initiated against it (but in each case not yet finally decided).

The introduction of the database and certificate system into the Bankruptcy Code is the result of concerted lobbying by the American Chamber of Commerce in Hungary and CMS Budapest Office.

Shareholders who fail to intervene to stem the losses in a company they control may be held personally liable for the company’s debts if it is subsequently liquidated, according to the Supreme Court.

Under Hungarian law, a shareholder’s liability (in a limited liability company) is usually limited to their capital contribution. The corporate ‘veil’ can only be pierced (making the shareholder personally liable for the company’s debts) in special circumstances.

Potential liability for wrongful trading

In Hungary the Act no. XLIX of 1991 on the insolvency and compulsory winding up procedure (hereinafter referred to as “Insolvency Act”) established the term “wrongful trading”. Under section 33/A of the Insolvency Act a manager of a company shall be personally liable if after the occurrence of threatening insolvency (i.e. when the company is unable to settle its liabilities when due) the director’s duties have not been fulfilled based on the priority of the company’s creditors’ interest.

Under Hungarian insolvency law, creditors secured by mortgages or pledges are entitled to privileged satisfaction of their claim, meaning concretely that they are entitled to receive the whole proceeds reached in the course of the realization of the pledged property after deduction of the (i) cost of keeping the property in good repair and of maintenance, and costs of selling the pledged property; and (ii) the liquidator’s fee up to 5% of the net purchase price.

Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie Ügyvédi Iroda is a member of Baker & McKenzie International, a Swiss Verein. Futhat a bank a pénze után? Nem várt kockázatot rejt a pénzügyi szolgáltatók számára a Csődtörvény a refinanszírozás szempontjából. A hitelezőkkel megeshet, hogy a már kiegyenlítettnek hitt követelésüket a felszámoló az adós nevében visszakövetelheti a törvény egyik rendelkezése értelmében.

The new Act CV of 2015 on debt settlement procedure for private individuals provides an opportunity for debt settlement both outside and within the scope of a court procedure.

Major parties to the procedure:

The Hungarian Parliament has adopted a new legal regime setting out debt settlement procedures for private individuals.  The act will enter into force on 1 September 2015, and will have a huge impact on the business of banks and financial undertakings in Hungary.