A cross-border merger provides a solution for the merger of undertakings having their registered office in separate countries and their registration in a Member State of their choice.
Most companies are business associations, i.e. general partnerships (közkereseti társaság, Kkt.), limited partnerships (betéti társaság, Bt.), private limited companies (korlátolt felelősségű társaság, Kft.) or public/private limited companies (részvénytársaság, Rt); however, cross-border merger is only available to limited liability companies (private limited companies, public/private limited companies, European companies and, in certain cases, cooperative associations).
The process of the merger is very similar to the process of domestic mergers, the rules of which serve as background rules for the cross-border merger of limited liability companies.
1. The decision-making body of the undertaking makes a decision on the cross-border merger on the basis of the management’s proposal. The decision-making body usually makes a decision on the merger at two meetings.
The decision-making body must assess whether the members wish to be involved in the cross-border merger. The members can make a decision in this respect after the receipt of the draft terms of the cross-border merger.
The executive officers of the companies involved in the merger must prepare a joint draft merger contract. At the same time, the executive officers must draw up a report for the members in which they justify the merger, explain its effect on the members, creditors and employees, as well as prepare the draft balance sheet and the draft property inventory required for the merger.
The auditor must make a statement on the draft balance sheet in the audit report. This report may be omitted if all members of all the companies involved in the merger unanimously so decide.
The joint draft of the merger contract and the notification of creditors must be published in the official journal of the Ministry of Justice, the Company Gazette, 30 days prior to the final decision on the merger.
In order to ensure that the public is fully informed, the audit report and the report of the executive officers must be submitted to the Registry of Companies; legal representation is mandatory during the proceedings.
If the annual average number of full‑time employees of any of the business associations involved in the merger exceeds 200 people, the participation of employees in the supervisory board to be set up must also be ensured in the company resulting from the merger.
After the publication of the communication in the Company Gazette, an application may be submitted to the Registry of Companies for a certificate confirming that the company meets the requirements of the merger.
If a Hungarian company is acquired by a foreign company, this certificate is to be submitted to the foreign Registry of Companies as proof that the tasks relating to the merger in Hungary have been carried out in line with the legal requirements, and on this basis, the merger may also be registered abroad.
If a foreign company is acquired by a Hungarian company, the merging company must obtain the certificate abroad; the application for the registration of the merger may be submitted to the Registry of Companies within 6 months from the issue of the certificate.
According to the general rules on mergers, once the merger documents have been accepted, another publication is required in the Company Gazette, in two consecutive issues, for the protection of the creditors.
Under certain conditions, the creditors of the merging company may request a guarantee from the company due to the merger. The Registry of Companies may not register the merger in the register of companies until the adequate guarantee has been provided.
If the registered office of the new company is in Hungary, the merger must be notified to the Registry of Companies having competence over the location of the registered office of the resulting company as part of a procedure amending a registration, where legal representation is mandatory.
The Registry of Companies must register the merger in the register of companies, remove the Hungarian company that ceases to exist as a result of the merger and register the newly established company into the register of companies.
The last step of the procedure is the preparation and submission of the final property inventory and balance sheet, which must be submitted to the Registry of Companies within 90 days from the registration of the company resulting from the merger.
Information on further detailed rules on the cross-border merger will be provided by the legal representative.
2. It is also possible to establish private limited companies (Kft.) or public/private limited companies (Rt.) with a registered office in Hungary for the purpose of acting as an acquiring company in a cross-border merger. In this case – until the transposition of the relevant EU Directive – a company having its registered office in another Member State is able to relocate its registered office to Hungary not by merging with another, existing company, but by establishing a Hungarian company – which does not actually operate until the merger – in order to allow for the foreign company to merge with it, thereby ensuring its continuous operation.
Such a Hungarian company must be established under specific rules. Upon the establishment of the Hungarian company, a declaration must be provided that the company is founded for the purpose of acting as an acquiring company in a cross-border merger.
In the course of the establishment of the Hungarian company, the draft merger documents may also be submitted. In this case, the joint draft of the merger contract and the merger report must be drawn up and signed by the executive officer of the acquired company.
The Hungarian acquiring company provides a time limit of one year from its registration for the conduct of the merger. If the merger is not requested at the Registry of Companies during the one-year time limit, the Registry of Companies will remove the Hungarian company from the register of companies.
After the registration of the merger, the successor Hungarian undertaking must operate under the general rules applicable to the legal form of the company; the restrictions on its operation will be removed. The Hungarian undertaking will receive a tax number and may start its actual activities upon the registration of the merger by the Registry of Companies. From its registration to the registration of the merger, the operation of the acquiring company will be limited to ensuring that the requirements of the merger are met.
Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 as regards cross-border conversions, mergers and divisions fundamentally reforms the rules of cross-border conversions, mergers and divisions; companies relocating their seats to a different Member State may continue their activities in the Members State of their new registered office without the cessation of their previous activities, obligations and rights; these all remain unchanged. Hungary must transpose the Directive by 31 January 2023.
1. Publication of the intention of cross-border merger in the Company Gazette
In the case of a cross-border merger, as a rule, the company must publish a communication three times in the Company Gazette, the official journal, in order to ensure that the creditors of the company become aware of the intention of merger and may request a guarantee in the amount of their claims. After the expiry of the time limit available for submitting the claim, the creditors may no longer request a guarantee from the company.
2. Submission of the application for the amendment of a registration
Once the documents required for the merger have been obtained, the application is drawn up by the legal representative. The application consists of a form and multiple annexes, the adequacy of which is checked by the Registry of Companies. If the application contains significant omissions, the Registry of Companies will reject (or dismiss) it after its formal examination. (The law considers certain annexes to be included in the application so important that in the event of their omission, the Registry of Companies will dismiss the application without even starting its substantive examination.)
After its substantive examination, if necessary, the Registry of Companies will issue a call for rectification with a 30-day time limit. In the event that the applicant fails to (adequately) provide the missing documents or information, the Registry of Companies will dismiss the application.
If the Registry of Companies concludes that the applicant for the certificate failed to (adequately) fulfil their obligation, it may refuse to issue the certificate with reference to the deficiencies.
Deadlines applicable to clients:
The application for the amendment of a registration regarding a cross-border merger may be submitted to the Registry of Companies within 6 months from the date of issue of the certificate.
Deadlines applicable to the Registry of Companies:
The legal representative must annex the filled in application form to the application for the amendment of a registration, as well as the documents to be annexed, listed in Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings, and, if necessary, proof of the payment of the fees incurred in connection with the procedure.
Documents to be submitted to the Company Gazette:
There are two types of payment obligations in the amendment procedure. A fee must be paid for the procedure at the Registry of Companies and a publication fee must be paid for the publication of the changes in the Company Gazette.
The fee to be paid for the registration of the merger is HUF 50 000.
PUBLICATION OF THE COMMUNICATION IN THE COMPANY GAZETTE DIRECTLY BY THE COMPANY
HUF 15 000 per communication
The publication fee must be paid to bank account No 10032000-01810039-00000000 of the Ministry of Justice.
The amendment procedure is carried out by the General Court operating at county level. In the course of the amendment procedure, the General Courts act as Registries of Companies. (The Registry of Companies is not a specialised court; it operates as part of the General Court.)
The procedure is carried out by the Registry of Companies of the General Court having competence over the location of the registered office of the company.
The order granting the application for the amendment of registration is final and binding (res judicata), i.e. not subject to appeal.
The company may lodge an appeal against the order rejecting the application for the amendment of a registration.
Legal representation is also mandatory in the course of the proceedings at second instance.
The appeal is heard by the Court of Appeal having competence over the location of the registered office of the company.
The appeal must be submitted to the Registry of Companies acting in the first instance.
Sum of the appeal fee: HUF 30 000
If the Registry of Companies fails to make a decision within 15 days in a general company procedure and the additional time limit (3 business days) provided by the Head of the Registry of Companies, and there is no ongoing tax procedure before the tax authority, or 90 days have passed since the closure of the tax procedure, the Registry of Companies will issue the certificate.
Date on which description was drawn up: 29 April 2020
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Act CXL of 2007 on Cross-border mergers of limited liability companies
Act CLXXVI of 2013 on the Reorganisation, merger and division of legal persons
Act V of 2006 on Public company information, company registration and winding-up proceedings
Act XCIII of 1990 on Fees
Act CXXX of 2016 on the Code of civil procedure
Act CXVIII of 2017 on the Regulation of the judicial civil non-contentious procedures and certain judicial non-contentious procedures
IM Decree No 21/2006 of 18 May 2006 of the Minister of Justice on Certain aspects of the company registration procedure and the register of companies
IM Decree No 22/2006 of 18 May 2006 of the Minister of Justice on the Publication and publication fee of communications published in the Company Gazette
IM Decree No 24/2006 of 18 May 2006 of the Minister of Justice on Certain aspects of the electronic company registration procedure and register of companies
IM Decree No 25/2006 of 18 May 2006 of the Minister of Justice on the Electronic payment of fees and publication fee in company procedure and other company matters