On 1 August 2020, amendments to Act XLIX of 1991 (the Insolvency Code) are scheduled to come into force, which have been designed to promote the cooperation between debtors and creditors in bankruptcies and allow for the use of electronic communications in insolvency procedures.

The key changes contained in the amendments include the following:

Pre-emption right for the Hungarian state

In a bid to assist struggling companies amid the uncertainty brought on by the pandemic, Hungary issued Government Decree No. 249/2020, which amends the Bankruptcy Code and gives companies breathing space while they explore options for rescue.

The changes created by the decree, which came into force on 29 May 2020, will be in effect only during the state of the emergency and include the following:

A draft bill on amendment to the Bankruptcy Code (Act XLIX of 1991 on bankruptcy proceedings and liquidation proceedings) was introduced into the Parliament on 12 April 2017 and is currently under review. If the draft bill was approved and published, the new rules would be applicable to the new liquidation proceedings and to new management liability related lawsuits. Lawmakers would grant a 2-month period to prepare for the changes.

Key areas for change are:

1. Fiduciary security interests would be elevated to the same level as pledge-type security

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Summary

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:

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.

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.

Short stories

Amendments to the Czech Insolvency Act 2016

Changes to Hungarian bankruptcy law mean that priority will be given to creditors who pledge property as security or collateral. Minor changes to Hungarian corporate legislation require companies to list specific court registration information on their official correspondence and websites.

Introduction