Blog » 6 MUST-KNOWS ABOUT LIQUIDATION PROCEDURES IN HUNGARY
6 MUST-KNOWS ABOUT LIQUIDATION PROCEDURES IN HUNGARY
19 February 2018
When, why and how can you start liquidation procedure against your non-paying customer in Hungary? How long can you register your claim? What are the chances that you get your money in liquidation? We summarized the 6 must-knows of liquidation procedures in Hungary in this article.
What it is for?
The goal of the liquidation procedure (or often called as insolvency procedure) is to put out of business insolvent business actors, by distributing their assets among creditors and by terminating them in a regulated manner.
In practice, you will start liquidation procedure against your debtor to put him under pressure, so that he pays the money he owes you, to avoid being terminated on grounds of insolveny.
What insolvency means?
Insolvency is not a financial, but rather a legal concept, which means that your debtor is no more able to pay its dues. In the following cases the debtor company is presumed to be insolvent:
- the debtor has not paid or disputed a contractual debt within 20 days after due date, despite a written notification of the creditor
- the debtor has not paid upon an enforceable judgment or other court order
- enforcement proceedings against the debtor were unsuccessful
- the bankruptcy procedure was not successful or the debtor breaches the agreement with creditors concluded in a bankruptcy or an insolvency procedure
- it turns out in a voluntary liquidation procedure that the assets of the company will not cover all its liabilities and the shareholders do not oblige themselves to hold the creditors harmless for the uncovered liabilities.
In cases under points 1-2), your claim must be higher than HUF 200.000, to start liquidation.
You can see that in the above cases, the debtor might not be insolvent from business point of view, because it can have money on his accounts. However, from legal point of view, the debtor company must be considered insolvent, and if any of the above conditions is met, the judge puts it under liquidation.
Who can start liquidation procedure?
In the vast majority of cases, you as creditor can start liquidation against their non-paying business partners based on point 1-2) above.
Of course, the management of the company can also start liquidation against the company itself, and in certain cases, official authorities starts the procedure, if they receive any information which shows that the company might be insolvent.
How to register claims in liquidation procedure?
If the judge puts the debtor company under liquidation, he appoints an insolvency administrator, and publishes the starting of liquidation procedure in the Official Gazette.
In this case you, as creditors have 40 (forty) days to register your claim against the debtor at the insolvency administrator, by paying a 1% registration fee. For those creditors missing the above deadline, there is another 180 (one-hundred-eighty) days within which the claim can be registered.
After the expiry of the second deadline, your claim is lost, so be aware not missing the 40 (180) days’ deadline.
How claims are satisfied in liquidation procedure?
The insolvency administrator can sell the assets of the debtor and he is responsible for satisfying the claims registered in 40 (forty) days in the following order or priority:
- Costs of the insolvency procedure (which include all salaries and payments to employees, fee of the insolvency administrator, etc.)
- Claims secured by mortgage;
- Alimony, life rent, annuity and similar claims;
- Customer claims and claims of small companies (<50 employees, <10 Million EUR turnover or balance sheet size)
- Taxes and other contributions to the state;
- Other claims;
- Interest and other penalties;
- Claims of related parties and the management of the company.
What if there is no enough money?
If the assets of the debtor do not cover all claims, the claims in the higher classes shall have priority over claims in lower classes. If the assets do not cover the claims in a certain class, the creditors in that class shall be satisfied proportionally.
If there are creditors who submit their claims after the 40 days following the date of publication in the Company Gazette, but still within 180 days, their claim will be classified separately from the claims submitted within 40 days. If after satisfying the claims registered within 40 days, there is still money to be distributed, the claims registered within 180 days shall be satisfied in the above order of priority.
LAWFUL DISMISSAL IN HUNGARY - PART VI: TERMINATION WITHOUT NOTICE
In the last two articles of our series on “lawful dismissal” we present the most severe sanction that can be applied to an employee, the immediate (formerly: extraordinary) termination. This measure is applied in serious incidents only, so many employers believe that they will not need to use the sanction. But, as we know, the devil does not sleep and it is in the details, so the employer needs to be prepared for this scenario as well to avoid further inconvenience.Read more »
5 CURRENT GDPR-FINES ACROSS EUROPE – LEARN FROM OTHERS’ MISTAKES
The supervisory authorities in Europe controlling compliance with the GDPR have not sat on their hands in the last couple of months. In this short article we collected five interesting cases from the recent past. The wide discretionary powers of the data protection authority is well illustrated by the fact that sometimes the GDPR fine was only EUR 2000, but in another case a company has been fined for EUR 11,5 Million! Continue reading if you would like to avoid the same or similar expensive errors.Read more »
LAWFUL DISMISSAL IN HUNGARY - PART V: PROTECTION AGAINST DISMISSAL
In the previous articles on the lawful dismissal, we discussed that, ranging from the employee’s behaviour to the employer’s reorganization, there can be many legitimate reasons for dismissal by the employer. However, irrespective of the legitimate reason, the employment relationship cannot be terminated if the employee is protected against dismissal by law (i.e. the Labour Code). From our article, you can learn about these protections.Read more »