THE FOUNDATION OF BUSINESS ASSOCIATIONS IN HUNGARY

1. General Rules of Founding Business Associations in Hungary

With the exception of limited liability companies and joint stock companies, at least two members are required for the foundation of a business association.

Certain economic activities can be only pursued in possession of the permit of the respective authority. The pursuance of certain economic activities are subject to qualification. In the latter case at least one member, employee or contracting party shall satisfy the qualification requirements prescribed by law as the basis of the permit.

The corporate documents have to be submitted to the competent company registry by an attorney-at-law  within 30 days following the signing. The company may commence with its operation following the submission of the corporate documents to the company registry.

The corporate documents shall be signed both by the members of the company and its executive officers. The signature sample of the executive officer shall be countersigned by the attorney.

2. Founding Limited Partnership in Hungary

The main features of this type of business association can be described as follows.

Members undertake to pursue joint business activity in a way that at least one member (general partner) has unlimited liability for the obligations not covered by the assets of the partnership jointly and severally with other general partners, while at least one other member (limited partner) is only obliged to provide the contribution undertaken in the articles of association.

With the exceptions set forth in the Companies Act (the limited partner is only liable for debts until 5 years from the termination of its function as general partner), the limited partner is not liable for the obligations of the partnership.

The registered capital of the limited partnership is not determined by law, the members may freely determine it.

Costs of founding a limited parnership:

It is possible to establish limited partnership by using sample deed of association. In  the latter case the registration fee is only HUF 15,000.

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3. Founding a Limited Liability Company in Hungary

Limited liability companies are business associations established with an initial capital (registered capital) consisting of capital contributions (which is accommodated as cash or as contribution in kind) of the members.

The obligation of the members towards the company includes only the provision of their contributions. According to the general rule of the Companies Act, the members are not liable for the obligations of the company.

Limited liability company can be established by one single person, as well.

The amount of the initial capital of a limited liability company may not be less than 500,000 HUF (approximately EUR 2.000). If the company consists of only one member the minimum of initial capital is HUF 100,000.

A Hungarian bank account shall be opened with the name of the company and thereafter the initial capital shall be payed to that account. The managing director can also deposit the amount of the initial capital to the cash office of the company which shall be certified by the declaration of the managing director and countersigned by an attorney at law.

Foreign citizens can also hold the function of managing director. The managing directors may be appointed for an unlimited period of time. If the managing director has no registered domicile in Hungary, he may authorize a Hungarian delivery agent, although it is not necessary. Attorney at laws can act as delivery agents of the foreign citizens.

Costs of founding a limited liablility company:

It is possible to establish a limited liability company by using sample deed of association. In the latter case the registration fee is only HUF 15,000.

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4. Founding Joint Stock Companies in Hungary

Joint stock companies are business associations established with a share capital (registered capital).

The obligation of the shareholders to the company includes the provision of the issue value of the shares. According to the general rule of the Companies Act shareholders are not liable for the obligations of the company.

Joint stock companies may be private or public. The shares of the private joint stock company are not marketed to the public while the shares of public joint stock companies are available to the public.

The minimum amount of the initial capital is HUF 20 million in case of a public joint stock company, while HUF 5 million in case of private joint stock company.

Costs of founding a joint stock company:

It is possible to establish a limited liability company by using sample deed of association. In the latter case the registration fee is only HUF 15,000.

Budapest, July 2008

DISCLAIMER:
The information contained in this article is provided for general information only. Considering the nature of online advising is inadequate for all-around complete advising Dr. Andras Toth-Kalaszi Law Firm is no responsible for the on-line advices, and it's not amenable to any action.

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