The opening of safeguard or reorganisation proceedings does not automatically terminate a current agreement notwithstanding any contractual clause providing for termination.

Termination by a lessor

The Hungarian Supreme Court has ruled that in a lawsuit initiated by an insolvent debtor, a creditor’s claim arising after the commencement date of the liquidation cannot be enforced as a set-off claim against the debtor.

Background

The Court of Cassation has considered whether company insolvency proceedings may be extended to a managing director and shareholder who has made payments to himself from the company's bank account.

Background

Restructuring proceedings in Hungary provide a more flexible solution than bankruptcy and liquidation proceedings and potentially an effective alternative for companies in financial difficulties.

Key benefits

Commencement pre-insolvency

Objective

The new preventive restructuring procedure aims to deal with companies in financial difficulty before serious problems arise. The measures focus on preventing the insolvency of businesses to preserve their viability.

Main characteristics

On 16 September 2021, ordinance 2021-1193 implemented the European Directive on preventive restructuring frameworks into French law. The Ordinance applies to proceedings opened from 1 October 2021.

Key features

Although no insolvency law-specific regulatory changes have been introduced in Hungary due to COVID-19, the Hungarian Government has adopted numerous extraordinary measures that may have a profound effect on how companies deal with solvency and liquidity related problems under the new circumstances.

Firstly, although the bankruptcy procedure is to be initiated by the management of the company, the prior approval of the main body of the company (ie the shareholders) is required. Due to the curfew currently in effect, in-person shareholders’ meetings are mostly prohibited.

The French Government made temporary changes to the insolvency law in order to protect companies, employees and managers from the cash flow consequences of the state of health emergency (Government order dated 27 March 2020 (No. 2020-341)).

When a debtor is in cessation of payments, it generally has 45 days from the 'cash-flow insolvency' to file for insolvency. The Government decided that the cash-flow insolvency of an enterprise shall be assessed based on its status on 12 March 2020 or the time of the expiry of the state of health emergency increased by three months.

Following the EU Insolvency Regulation Nr. 2015/848 (the “Regulation”) coming into force, the Hungarian legislator has accordingly amended the Hungarian Insolvency Code (the “Code”) with effect from 28 October 2017.

Summary

As from 1 July 2017, several amendments to the Hungarian Insolvency Code will come into force which will grant some creditors a much better position in their debtors’ insolvency procedures.

Current Legislation