The cross-border merger of a Hungarian company to another EU country

There is an available legal solution to relocate a Hungarian company to another country within the European Union. 

The detailed rules are set out in Act CXXIV of 2021 on the cross-border transformation, merger, division and other legal harmonization amendments of capital companies. 

In addition to the above specific legislation, the provisions of the Hungarian Civil Code and the Companies Act must also be applied.

Hungarian companies are able to decide, in compliance with the provisions of this legislation, to transfer their registered office to another EU country, whereby the regulations applicable to companies in that country will take over control of their operations instead of the Hungarian legal system.

However, not all Hungarian companies are eligible for this relocation. For example, a company that is subject to bankruptcy, liquidation, compulsory dissolution, or civil non-contentious proceedings aimed at enabling the company to reorganize or restructure its financial or asset situation or operations in agreement with its creditors cannot be relocated to another country.

It is a process whereby a Hungarian company, while retaining its legal personality, transforms its corporate form into a capital-forming company under the law of the host Member State without being dissolved without a legal successor (liquidation or winding-up) and transfers at least its registered office to the host Member State.

This may be a cross-border merger, where companies located in different EU Member States merge, or a cross-border division, where at least two companies operating in the European Union but in different Member States are divided.In practice, the process involves the company's supreme body making two decisions on the cross-border transformation, although the owners may also decide that, with appropriate preparation, all decisions will be made at a single meeting of the supreme body.

First, the chief executive officer prepares a proposal and obtains the preliminary consent of the company's members regarding the cross-border transformation. If there is a supervisory board, its opinion must also be sought. The first decision also determines which specific company form the members will choose in the other country. The resolution must also specify which owners wish to become members of the successor company and the amount of their capital contribution. 

The balance sheet drafts must be dated and the members must entrust the executive officer with the preparation of the draft transformation documents.

The draft balance sheets and draft inventories of assets, if the company has them, must also be reviewed by the supervisory board, and at least the draft balance sheets and the draft inventories of assets supporting them must also be reviewed by an independent auditor.

The chief executive officer shall also prepare a transformation report for the members and employees.It is interesting to note that the draft transformation plan and a number of supplementary documents must be submitted to the court at least 30 days prior to the date of the owners' meeting that will make the final decision on the transformation, unless the company makes these documents available on its own website during the same period.

The court then publishes two notices of the transformation in the Company Gazette so that the company's creditors can request security for their claims if the transformation jeopardizes the satisfaction of their claims.It is important to note that a cross-border transformation does not extinguish claims against the company.

Finally, the members of the company decide on the cross-border transformation and the approval of the transformation documents by a majority of at least three-quarters.

The company then submits an application for a certificate to the court, which the court sends electronically to the tax authorities and a number of other government agencies for information. These agencies also conduct their own investigations and inform the court of their findings. 

The court will only issue the certificate if no facts have come to light during these multiple investigations that would prevent the transformation.

The purpose of the certificate is to provide the necessary information to the competent court in the other country for the registration of the successor company established there.In this blog post, we have not addressed the detailed procedural steps of cross-border transformation in the successor state. 

If you have any further questions regarding the topic, please contact Ecovis Zalavári Legal Hungary. 

This blog article is for information purposes only and does not constitute an official legal opinion or legal position applicable to an individual case. Ecovis Zalavári Legal Hungary disclaims any legal liability for the use of this blog article in an individual case.