According to the prevailing laws, no special permit is required to establish a business enterprise in Hungary. Companies can be founded by natural or legal entities, Hungarians and foreign nationals alike. Even a single person can found a joint-stock company (JSC; either Nyrt. or Zrt. in Hungarian, depending on whether it is public or private, respectively) or a limited liability company (LLC, or Kft. in Hungarian); the only requirement is that the headquarters of such companies must be located within Hungary.

 

The Company Act determines five different corporate forms that may serve for investors as a basis to carry out business activity in Hungary. All of these forms can exclusively be established and operated by foreign owners and management:

• unlimited partnership (Kkt)
• limited partnership (Bt.)
• limited liability company (Kft.)
• company limited by shares, which may be privately founded (Zrt.) or publicly founded (Nyrt.)

 

Companies duly formed and registered under Hungarian law may undertake obligations and acquire rights in their own name (i.e. they have the right to acquire property, may conclude contracts, file lawsuits or be subject to actions brought against them). As a general rule, companies may freely pursue activities; however, a license of the competent authority is required for certain activities. Thus, for example, banks can only be founded and operated as a company limited by shares. Companies with foreign participation may be established in any business entity form without an authority license or permission.

 

 

Unlimited partnership (Kkt)

In an unlimited partnership, the liabilities of its members are joint and unlimited for the partnership's obligations. No minimum initial capital requirement is set forth by law and its members are not required to take part personally in the activities of the partnership. By law, every member is entitled to represent the partnership unless its articles of association state otherwise. The partnership must have at least two members.

 

Limited partnership (Bt)

A limited partnership must have at least one general partner and at least one limited partner. The general partner's liability is unlimited for the partnership's obligations (multiple general partners are jointly and severally liable) while the limited partner's liability is limited to the extent of his capital contribution. By law, only the general partner is entitled to represent the partnership unless its articles of association state otherwise.

 

Limited liability company (Kft)

A Kft is established with a predetermined amount of initial capital provided by its founders, and may have only one member (a sole-member Kft). The liability of its members is limited to the provision of the company's initial capital (and, if so stated in the articles of association, other contributions). As a general rule, members are not otherwise responsible for the company's liabilities. A Kft's members may not be recruited through public offerings. The members' rights and their title to the company's assets are represented by quotas in the company. No securities may be issued in respect of the quotas, which may be (i) ordinary quotas (quotas providing identical membership rights) or alternatively (ii) preferred quotas (only if the company's articles of association so provide), which may entitle their holders to, for example:

- dividend preference

- eference in voting rights etc.

 

Company limited by shares (Rt)

An Rt is established with a predetermined amount and nominal value of shares. The liability of its members is limited to the provision of the nominal or issue value of the shares.

 

An Rt may be established via a private offering (its shares are offered only to its founders) or a public offering (its shares are offered to the public). The difference must be indicated in the company's name as “Zrt” (private) or “Nyrt” (public).

 

Shares are securities that embody a shareholder's membership rights in the company. Only private Rts may issue printed share certificates, public Rts may only have dematerialized shares (registered in the shareholders security account held by a financial institution).

 

Shares may be (i) ordinary shares, (ii) employee shares,  (iii) interest-bearing shares, (iv) redeemable shares. or (v) preference shares, which have the following sub-categories:

-          dividend preference shares

-          preference with respect to the liquidation ratio

-          preference with respect to voting rights

-          (only in the case of private Rts) preference with respect to the appointment of executive officers or members of the supervisory board

-          (only in the case of private Rts) shares ensuring pre emption rights

 

Differences between a Kft. and an Rt.

 

Main changes in corporate legislation

 

Pursuing business activities in a non-corporate form

 

Mergers and acquisitions

 

Last updated August 2008.