WHICH COMPANY FORM TO CHOOSE IN HUNGARY?

29 March 2023

Finding the most appropriate company form is essential for every business. Hungarian company law offers a wide range of company forms available for foreign entrepreneurs and investors. We prepared this summary to help you to find the form that mostly fits your business goals.

1. Structures for foreign business only

In case that a foreign investor does not want to establish an onshore Hungarian company, the following business structures are available:

• Representative office
• Branch office

A representative office is useful business structure for a foreign company which intends to familiarise itself with local business conditions before embarking on an investment. A representative office cannot pursue core business activity, its scope of activity is limited to the following:

• assisting and representing the parent company with contract negotiation; it is the foreign parent company who is bound by the contract;
• marketing, advertising and exhibiting products on behalf of the parent company.

A branch office is an organisational unit of the foreign parent company and it is authorised to carry out normal business activities independently. The foreign parent company

• shall continuously provide the assets necessary for the operation of the branch office and the settlement of its debts.
• bears joint and several liability for debts incurred during the activity of the branch office.

2. Hungarian company forms

The Civil Code[i] permits the formation of the following companies for foreign and domestic investors

•  General partnership
•  Limited partnership
•  Limited liability company (LLC)
•  Private Company limited by shares
•  Public Company limited by shares

General Partnership (“Kkt.”)

In a General Partnership (“Kkt.”) the partners have secondary, joint, several and unlimited liability for the obligations of the company. There is no requirement for minimum subscribed capital.

Limited Partnership (“Bt.”)

In case of founding a Limited Partnership (“Bt.”) the company must have at least one member with limited (limited partner) and one member with unlimited liability (general partner) for the obligations of the company.

The general partner has secondary, joint, several and unlimited liability for the obligations of the company, the limited partner has liability limited to his contribution to the capital of the company. There is no requirement for minimum subscribed capital.

Limited Liability Company (“Kft.”)

In the Limited Liability Company (“Kft.”) the liability of the members towards the company is limited to their capital contributions. The members are (with certain very specific exceptions) not liable for the obligations of the company.

The minimal subscribed capital is HUF 3.000.000 (~EUR 8k). The capital contributions may be provided in cash or in kind. The articles of association may set forth the obligation of accessory contribution and/or additional payment.

Private company limited by shares (Zrt.) and public company limited by shares (Nyrt.)

There are two forms of the company limited by shares: Private company limited by shares and Public company limited by shares. The main difference is that the shares of the public company are listed in the stock exchange.

The shareholders are not liable for the obligations of the company. The shareholders‘ liability towards the company, as in case of the limited liability companies, covers merely their personal capital contributions.

In case of founding a Private Limited Company (“Zrt.”), the minimum subscribed capital is HUF 5.000.000 (~EUR 13k). The subscribed amount of capital in a Public Limited Company (Nyrt.) must be at least HUF 20.000.000 (~EUR 52k).