A Comprehensive Guide to Corporate Compliance in Hungary

In today’s global business landscape, compliance with corporate regulations is essential for ensuring legal integrity and sustainability. This guide provides a detailed overview of corporate compliance requirements in Hungary, covering various aspects from entity formation to ongoing obligations.

Form of Entity: Private Company Limited by Shares (Zrt.) and Limited Liability Company (Kft.)

Zrt. (Private Company Limited by Shares):

Separate legal entity with predetermined share capital.
Shareholders’ liability limited to their capital contributions.
Managed by a board of directors or a single director.
Annual shareholders’ meeting required.
Minimum share capital requirement: HUF 5 million (USD 16,000).

Kft. (Limited Liability Company):

Separate legal entity with capital provided by quotaholders.
Quotaholders’ liability limited to their contributions.
Managed by managing directors or a board of directors.
Annual quotaholders’ meeting required.
Minimum capital requirement: HUF 3 million (USD 10,000).

Entity Set-Up and Incorporation Process

Establishment through execution of articles of association and registration with the Court of Registration.
Mandatory representation by a Hungarian attorney at law during registration.
Registration has a constitutive effect, creating the legal entity.

Minimum Capital Requirement

Zrt.: At least HUF 5 million (USD 16,000).
Kft.: At least HUF 3 million (USD 10,000).

Legal Liability

Shareholders/quotaholders’ liability limited to their capital contributions.
Liability may extend in cases of abuse of limited liability.

Tax Presence

Resident companies taxed on worldwide income, subject to double tax treaty provisions.
Corporate shareholders exempt from taxation on dividends.

Annual Corporate Maintenance Requirements

Preparation, submission, and publication of annual financial statements.
Failure to comply may result in penalties and withdrawal of tax number.

Director/Officer Requirements

Directors/managing directors appointed by shareholders/quotaholders.
Natural persons with legal capacity and no restrictions can serve as directors.
Appointment of corporate directors possible in Kft.

Local Corporate Secretary Requirement

Not applicable in Hungary.

Local Legal or Admin Representative Requirement

Representation by a Hungarian attorney at law mandatory during registration.

Business Expansion and Exit Strategy

No need to change structure as business expands.
Sale of equity stake or voluntary dissolution for exit.

Summary of Director’s, Officer’s, and Shareholder’s Authority

Shareholders/quotaholders primary decision-making body.
Directors/managing directors responsible for day-to-day operations.

Public Disclosure of Identity

Directors’ identity publicly disclosed.
Shareholders/quotaholders’ identity disclosed if ownership exceeds 50%.

Quorum Requirements for Shareholder and Board Meetings

Quorum and majority requirements set by shareholders/quotaholders or board.
Flexibility allowed to diverge from default requirements.

Auditing of Local Financials

Auditor compliance with Hungarian qualification requirements.
Mandatory for companies operating on double-entry bookkeeping.

Increasing Capitalization

Capital increase by resolution of shareholders/quotaholders meeting.
Supplementary contributions may be ordered to cover losses in Kft.

Conclusion

Compliance with corporate regulations is vital for the smooth operation and sustainability of businesses in Hungary. By adhering to the guidelines outlined in this comprehensive guide, companies can ensure legal integrity and mitigate potential risks associated with non-compliance.