WHY CHECK YOUR DEBTOR’S COMPANY INFORMATION REGULARLY IN HUNGARY?

18 September 2019

Even winning a lawsuit and having the positive judgment in your hands are of no use if the debtor company is terminated in the meantime. In this case, the "winning" judgment will only be a worthless piece of paper, despite that you have spent a fortune on debt recovery. In this short article, we summarize the most important rules and deadlines so that you can avoid staying empty-handed at the end of the debt collection in Hungary despite winning the lawsuit.

1. What should I check?

Voluntary dissolution, bankruptcy, liquidation and compulsory strike-off proceedings may result in the termination of a company without succession. Such procedures are dangerous for the creditors, since even though you are entitled to a claim, there will be no entity from whom you could recover the claim. Although the mentioned procedures have different aims, the consequences affecting the creditors are similar:

Once your debtor becomes subject to voluntary dissolution, bankruptcy, liquidation or compulsory strike-off proceeding, you will only be able to enforce your claim if you register it in the procedure at the start.

In order to do so, you must be aware of the termination procedure within the time limit for notification.

2. Where to check my debtors?

The commencement of the winding-up proceedings and the commencement dates are published in the Company Gazette which is accessible online and free of charge. In addition, during such proceedings, the company names contain an indication referring to the proceeding (“under liquidation” = u.l. (in Hungarian) and so on) so you only have to search the name of your debtor in the Companies Register.

It's even easier if you use the monthly fee-based company monitoring service of the Companies Information Center or other sites, which providers notify you by email of any changes to the debtor's company information and you will have time to consult with a legal professional.

3. How often should I check?

After the commencement of the termination proceeding is published in the Company Gazette, a relatively short time is available to register your claim, which is summarised in the table below.

4. Late registration

In the case of liquidation and compulsory strike-off, practical experience shows that the chances of recovering claims registered after the above deadline are minimal.

In case of voluntary dissolution, the debtor has assets, so the court must take into account the claims registered after the above deadline, but before the closure of the proceedings.

In the event of a successful reorganization in bankruptcy proceedings, the belatedly notified claim is lost.

In case of unsuccessful reorganization, bankruptcy proceedings are transformed into liquidation proceedings, where the claim can be registered.

It is important to know that in neither of these cases will you lose the right to sue the former directors or members of the ceased company to establish their underlying liability, if the conditions are met. Unfortunately, this is much more complex and costly than enforcing the original claim.

5. Conclusion

If your debtor is subject to a proceeding leading to its termination, you can only enforce your claim if you registered it in the procedure. Since the law provides a short deadline for it, you should regularly monitor the debtor's company information. Since it is not an exaggeration to say that the registration is often the last chance to enforce your claim, as a creditor, pay particular attention to debtor monitoring, and seek legal advice if necessary.