HOW TO SHUT DOWN YOUR LLC IN HUNGARY?

24 August 2023

There are times when you reach a point when you decide it is better to finish your business in Hungary e.g. if you have a non-prospering company without perspectives. However, the situation is not so simple, and leaving the company behind may be risky. In this short article we summarise the legal aspects of company shutdown which is worth to read if you considering closing the company.

1. Sanctions imposed by the tax authority

It is important to note that, even if the company has no income, until it is terminated, it must pay taxes, file tax returns and reports.

In case of non-compliance with these obligations, the tax authority can impose fines, suspend, or delete the company’s tax number.

If the tax authority suspends or deletes the tax number, it will inform the company court and request the termination of the company.

2. Winding up procedure

If you would like to legally terminate the company, you can start a winding up procedure.

In winding up procedure, the company repays all of his debts, and the company court terminates the company at the end by deleting it from the company register.

The rules on winding up procedure are summarised in another article.

3. Liquidation procedure

If there is no chance that the company can repay its debts, the company manager can request a liquidation against its own company. The application for liquidation by debtor requires the prior consent of the debtor's single member.

If you just disappear without winding up the company or requesting liquidation, sooner or later the company court will start a liquidation procedure, based on the information of the tax authority, or from creditors.

Following the filing of the request for liquidation procedure, the court will examine whether the company is legally insolvent. Insolvency is not a financial, but rather a legal concept, which means that the debtor is no more able to pay its dues.

In case if the company is not insolvent, liquidation cannot be ordered at the request of either the debtor or the creditor.

At the start of the liquidation, the directors are replaced by a liquidator who sells the assets of the company, recovers claims, then allocates the collected money between the creditors.

In case of liquidation, the CEO of the company has to cooperate with the liquidator in several ways starting with providing closing balance sheet and handing over the company documents. We summarised the consequences of the non-compliance with these responsibilities in our previous article.

After the liquidation procedure is completed, the company shall be deleted from the company register.