The main piece of Hungarian insolvency legislation is Act XLIX of 1991 on bankruptcy and liquidation proceedings (hereinafter “Insolvency Act”) which regulates two types of insolvency proceedings: bankruptcy proceedings and liquidation proceedings.
At the European Union level, Regulation (EU) 2015/848 of the European Parliament and of the Council on Insolvency Proceedings also governs this area, distinguishing between main and secondary insolvency proceedings. The common basis for all insolvency proceedings is the existence of an insolvent business entity.
The Insolvency Act defines both bankruptcy and liquidation proceedings.
Both types of proceedings fall under the jurisdiction and competence of the regional court where the debtor’s registered office is located and are conducted as civil non-contentious procedures.
In Hungary, restructuring proceedings („szerkezetátalakítási eljárás”) can be initiated under the Act LXIV of 2021 on Restructuring and the Harmonization of Certain Laws (hereinafter: „Restructuring Act”), which was adopted to implement the EU Directive (2019/1023) on preventive restructuring,
The Restructuring Act was aimed to address the difficulties of viable businesses and preventing insolvency. Compared to insolvency proceedings, restructuring provides significantly more flexibility for the debtor. The process can be conducted privately, which safeguards the debtor’s market reputation. Additionally, during restructuring, the debtor can benefit from a moratorium, with the possibility of limiting its scope to specific creditors, while continuing day-to-day operations, regular business activities, and payments without interruption.
The stakeholders also have a substantial role in appointing a restructuring expert at the start of the process. Importantly, the failure of restructuring does not automatically result in liquidation, alleviating pressure on businesses.
Reorganisation („reorganizáció”) is another voluntary procedure introduced temporarily in response to the COVID-19 pandemic. It can be initiated in cases of impending insolvency and shares many similarities with bankruptcy, though it offers greater flexibility in some respects. Since, as of the date of this guide, debtors can only initiate these proceedings until 31 December 2024, we refrain from discussing this procedure in detail.
Lenders in Hungary are generally open to out-of-court restructurings, as they have a potentially much higher overall recovery rate than insolvency and enforcement proceedings, however, – strictly speaking – no regulated out-of-court restructuring proceeding is available in Hungary.
A pre-insolvency procedure is available under the Restructuring Act, the purpose of which is to adopt and implement a restructuring plan with the creditors focusing on preventing the debtor’s future insolvency and ensuring it’s viability. This procedure is finished by the court’s approval of the restructuring plan.
The Hungarian National Bank published a recommendation on the negotiated restructuring process of claims against co-financed corporate borrowers in 2017, however it is not mandatory and there is a perception among market players that it does not work particularly well in practice.
The recommendation gives guidance and a general framework for the process of negotiated restructuring, the success of which can help to avoid generally lengthy and costly judicial enforcement and insolvency proceedings.
The Hungarian National Bank states that one good practice is that if the borrower notifies a lender about its payment difficulties, that lender will inform the other ones and, to the extent necessary, set up a restructuring panel. This is to ensure efficient information sharing among the institutional lenders and between lenders and the borrower; to provide a platform for dispute resolution; and, if applicable, to give instructions to and co-ordinate the joint advisors of the institutional lenders.
The recommendation also suggests the application of a de facto moratorium as a temporary measure, that lasts for the shortest possible time, during which the institutional lenders that fall within the scope of the recommendation refrain from taking any steps againts the borrower to enforce any claim or collateral provided in favour of such lenders.
The purpose of a moratorium is to encourage co-operation between the institutional lenders and the corporate debtors and to allow the lenders to assess the financial situation of the debtor. The recommendation includes guidelines for agreements between the lenders and the debtors as well.
Due to the informal nature of out-of-court restructuring processes, the consent of all affected parties is required.
Under the Insolvency Act, a bankruptcy settlement involves an agreement between the debtor and its creditors regarding the conditions for resolving the debtor’s obligations. This agreement can include debt reductions, payment extensions, forgiveness or assumption of specific claims, equity acquisition in the debtor’s business, guarantees or other securities, and acceptance of a financial recovery program. Additionally, the agreement may specify how it will be monitored and implemented, potentially including oversight mechanisms such as the appointment of auditors or the introduction of joint signing rights for the debtor’s management.
The law provides flexibility in the terms of the settlement, but it sets specific formal and substantive requirements. For example, the settlement must be documented in writing and signed by the approving creditors, the debtor’s representatives, and countersigned by the insolvency practitioner.
Substantively, it must include details such as the participating creditors, their recognized claims, the approved reorganization plan, and any adjustments to payment terms. The settlement must also avoid terms that are clearly unfair or excessively disadvantageous to certain creditor groups.
The agreement only takes effect after judicial approval, which ensures its legality and enforceability. Once approved, the settlement has the force of a judicial decision and provides the basis for legal enforcement. If the debtor fails to meet its obligations under the settlement, creditors may initiate liquidation proceedings.
Creditors who do not register their claims during the bankruptcy process cannot later enforce them against the debtor, except in liquidation proceedings initiated by others. This exclusion highlights the importance of timely participation in the bankruptcy process.
In the case of the restructuring process, the debtor decides which creditors to involve in the process. Creditors who are included are subject to a payment moratorium to facilitate negotiations, while the debtor must continue fulfilling obligations to those not included.. However, if all creditors are involved, the payment moratorium applies universally, and the process becomes public, thereby increasing judicial oversight.
A key element of the restructuring procedure is the cross-class cram-down, which allows approval of the restructuring plan even without unanimous creditor consent. Under previous rules, restructuring required the agreement of all affected creditors, but now the law only requires majority approval within each creditor class. Once approved by the creditors, the plan is submitted for judicial approval, where the court verifies compliance with formal and legal requirements but does not assess its economic feasibility.
If a creditor class rejects the plan, the debtor may request court approval to extend the plan’s binding effect to all classes, provided specific legal conditions are met.
If the plan is not approved by creditors or the court, the restructuring procedure fails, and the payment moratorium ends. However, a failed restructuring does not automatically lead to insolvency proceedings.
Creditors must still satisfy general insolvency criteria before initiating such actions.
Several types of securities are available for creditors. Mortgages over real estate must be registered in the Land Registry, whereas mortgages over personal property, floating charges, and transfers via security are registered in the collateral register managed by the Hungarian Chambers of Notaries.
Account pledges are enforceable under applicable laws and the terms of the underlying agreements. Ownership pledges, though not requiring registration, are uncommon in practice because they necessitate the transfer of possession of the pledged property. Floating charges provide security over assets described in detail. Additionally, security may also take the form of a transfer by way of security or a security deposit.
In liquidation, bankruptcy, and preventive restructuring proceedings, creditors are divided into various categories based on the type of claim they hold. In addition, creditors shall also be divided whether they are secured or unsecured. The latter division is typically treated separately in decision-making processes, and the approval of a specified proportion from both groups is often necessary to finalize a composition.
In bankruptcy proceedings, creditors are classified into secured and unsecured groups. In preventive restructuring, creditors are divided into more detailed categories: secured creditors, business-related creditors, subordinated creditors (such as those affiliated with the debtor), and the last category includes other creditors.
In bankruptcy, reorganisation, and preventive restructuring (szerkezetátalakítás) proceedings, claims are typically subject to a statutory moratorium. However, certain privileged claims are exempt from this moratorium, such as claims arising from the supply of goods and/or services essential for the continuation of the business (provided their purchase was approved by the insolvency practitioner), as well as certain taxes and other public debts.
The assets of the debtor company are not divided equally between creditors. Therefore, the creditors’ claims are further classified to establish the order of satisfaction during liquidation, as follows:
If a bankruptcy or preventive restructuring (szerkezetátalakítás) successfully results in a composition agreement, there is no obligation for the arrangement to adhere to the claim priorities that would apply in an insolvent liquidation. Stakeholders are generally free to determine the terms for implementing the reorganisation or restructuring.
To protect their claims, creditors may utilize various forms of security. For instance, they may employ call options for collateral purposes, allowing the creditor to acquire ownership of the secured asset through a unilateral declaration. In the case of a security assignment, ownership of the assigned claim passes to the creditor upon the debtor’s performance, as governed by relevant Hungarian law.
Secured creditors have the right to enforce pledges, subject to applicable laws and the terms of the underlying agreements.Pledge enforcement can occur through court enforcement proceedings, simplified court enforcement procedures, the sale of the relevant asset (either publicly or privately), acquisition of the secured asset, or other methods outlined in the agreements.
During insolvency proceedings, secured creditors benefit from preferential ranking, granting them higher priority for claim satisfaction compared to unsecured creditors.
Furthermore, during restructuring or insolvency, creditors have the right to access information, participate in proceedings, file appeals against court orders, and request the disqualification of practitioners involved in the process, where such actions are allowed by law. Creditors may also exercise set-off rights, although these are subject to restrictions, particularly during a moratorium when set-off is generally prohibited.
Unsecured creditors, while having fewer protections, retain certain rights and remedies. Ultimately, the rights and remedies available to unsecured creditors are largely determined by the terms of the underlying agreements, which define the scope of actions they can take to pursue their claims outside formal restructuring or insolvency processes. These include issuing payment notices, offsetting claims, or retaining title to goods, provided such actions are permitted under the terms of the agreements.
Restructuring
The restructuring process aims to stabilise the situation of companies in financial difficulty in a flexible way. In the restructuring process, the debtor and creditors agree on a plan, the implementation of which will restore the debtor’s solvency, ensure its viability and enable it to meet its obligations. Restructuring is a highly flexible procedure, as the debtor and creditors are free to define the framework of the plan described above. In Hungarian law, the procedure is regulated by Act LXIV of 2021 (Restructuring Act).
Approval of the procedure
Once the debtor has voted for the restructuring plan, its approval always requires a court decision. In approving the restructuring plan, the court will primarily examine the completeness of the content of the restructuring plan, rather than the economic and legal expediency or the detailed content of the measures contained therein. These elements are only assessed when a counter-affidavit is filed in connection with the approval. In this case, the court will only carry out a thorough examination of the counter-memorial and, if necessary, appoint a restructuring expert. If the expert appointed by the court is already involved in the procedure but the technical issues raised justify it, the court may appoint another expert.
The court may decide to approve, reject or refuse the restructuring plan. Approval is granted if the plan complies with the prescribed principles and there are no glaring contradictions which would jeopardise the achievement of the plan’s objective, namely the prevention of insolvency. If, in the course of the procedure, the debtor’s measures do not comply with the legal requirements but the deficiencies can be remedied, the court may order the plan to be approved again, setting a time limit. If the debtor fails to comply or if the deficiencies cannot be remedied, the court will reject the request for approval.
Approval of the plan is refused if the irregularities relating to its adoption cannot be remedied by a repeat vote or if the debtor fails to comply with the obligation to repeat the vote. The court may also assess the economic effects of the plan on the basis of a counter-check and if it is found that the plan is not suitable to avoid insolvency, the application for approval is rejected.
Classification of creditor claims
In order to prepare the restructuring plan, the debtor should, prior to the restructuring decision, draw up a list of creditors whose claims require reconciliation within the restructuring framework. After consultation with the creditors concerned, the debtor must determine the final classification of the creditors, which is regulated in detail in the Restructuring Act [Articles 42-43]. The Restructuring Act stipulates the data to be taken into account when determining the classification of the creditors [Article 41(3)]. It is important to note that the order of the creditor classes laid down in the Act does not imply an order of satisfaction.
No new affected creditor, with the exception of transitional and new financing creditors and creditors notified after the publication of the general moratorium, may enter the restructuring procedure, nor may affected creditors submit new claims.
The creditor concerned may contest its own or another creditor’s classification and may challenge the amount of the claim taken into account by the debtor. If the debtor has also classified the creditor with the disputed claim, the creditor may initiate a review of the classification.
The debtor has the right to request that the court approve the classification of the creditor in advance.
Process of the procedure
Non-litigation proceedings relating to restructuring fall exclusively within the jurisdiction and competence of the Metropolitan Court, where legal representation is mandatory. The opening of the proceedings depends on the decision of the owners of the debtor company and can be initiated if there is a likelihood of insolvency and the debtor decides to open restructuring proceedings. The proceedings last until the restructuring plan is implemented or fails.
Initially, the procedure is confidential and only becomes public under certain conditions, for example if the debtor involves all creditors and asks for a general moratorium. The debtor is free to decide who to involve in the procedure. Creditors who are included are granted a moratorium on payments during the conciliation period, while creditors who are not included remain obliged to honour their contractual obligations. If all creditors are included, the moratorium becomes general, the publicity of the procedure is ensured and the court’s jurisdiction is extended in parallel.
The central element of the procedure is the forced settlement, in particular the cross-creditor class forced settlement. The restructuring plan must be adopted by majority vote in each creditor class and the court approval of the plan once voted on is mandatory. If the plan is not voted on by all creditor classes, the debtor may apply to the court for approval of the plan by way of compulsory arrangement, provided that the legal conditions are met.
The procedure will be deemed unsuccessful if the creditors do not accept the restructuring plan or it is not approved by the court. The proceedings will also fail if a restructuring plan accepted by the creditors is not completed within 365 days of the opening of the proceedings or if the debtor fails to issue such a plan within 120 days of the opening of the proceedings. In this case, the moratorium will be terminated. It is important to stress that the failure of the restructuring procedure does not in itself constitute a basis for opening winding-up proceedings against the company.
Listing of creditor claims
A restructuring plan approved by a final order of a court shall also constitute a debtor’s acknowledgement of debts in respect of recognised and uncontested debts existing between the debtor and the creditor concerned on the date of the amendment of the contract covered by the restructuring plan in a notarial deed and the date of the acceptance of the restructuring plan by the creditors concerned.
The creditors’ requirements are therefore contained in the restructuring plan; compliance with them is a legal obligation. The debtor must classify the relevant creditor claims in the appropriate creditor classes. At the same time, the debtor must demonstrate that the restructuring plan is capable of realistically avoiding insolvency and maintaining its economic activity. If a restructuring expert is involved in the procedure, the expert must examine the plan, in particular its economic and legal suitability for avoiding the insolvency of the debtor and maintaining the viability of its business.
The expert will also assess whether the restructuring plan meets the requirements of good faith and whether it does not manifestly and manifestly prejudice the legitimate interests of a class of creditors. As an annex to the plan, the debtor shall include a statement that the claims of the non-affected creditors are secured and a declaration that the implementation of the plan will not impair the basis of satisfaction of the non-affected creditors.
The restructuring plan should include a separate provision for disputed creditor claims. Although creditors with a disputed claim are not entitled to vote on the plan, if it is established in a separate procedure that the disputed claim is justified, the debtor is obliged to use the amount set aside in the plan to satisfy that creditor.
Cram-downc, Cram-up
In restructuring proceedings, for the adoption of the restructuring plan with the creditors, it is possible for a majority of creditors to override a class or classes of dissenting creditors (cross-class cram-down).
Closure of the procedure
If the vote on the restructuring plan by each creditor class does not result in the necessary consensus for its adoption among all classes of creditors, the debtor, the debtor’s equity holder with at least a majority stake or, with the debtor’s consent, any creditor concerned may turn to the court with the purpose obtaining the court’s approval of the restructuring plan by way of a compulsory agreement between the creditor classes.
Such approval by the court will extend the restructuring plan to the disagreeing creditor classes and will have the same legal effects as if it had been approved by the court with the consensus of all the creditor classes concerned.
Reorganisation (please note that as of the date of this guide, debtors can only initiate these proceedings until 31 December 2024)
As part of the response to the coronavirus pandemic, a new procedure has been introduced with the primary aim of rescuing businesses and avoiding liquidation proceedings. This procedure, which currently exists in the form of a regulation but will be regulated by law, is the reorganisation procedure.
The aim of the procedure is to restore the assets, financial and solvency situation of firms in financial difficulty and to ensure that they can continue their economic activity. Under the reorganisation, the debtor is granted a 90-day moratorium on payments to creditors involved in the reorganisation. The procedure also protects the interests of creditors, as debts settled in the context of a reorganisation are considered as an admission of debt by the debtor. If the debtor breaches the terms of the reorganisation agreement, the debt becomes immediately enforceable without the need for a notice or legal proceedings.
Approval of the procedure
A reorganisation procedure can be public or non-public (in which case it is not entered in the Companies Register). The difference between the two is that in a non-public reorganisation procedure, the reorganisation plan must be approved by all creditors involved in the procedure. Therefore, it does not seem to be possible in a non-public reorganisation procedure to conclude a compulsory agreement covering also disagreeing creditors.
A reorganisation plan is considered to be accepted by the creditors if at least 750% of the votes of the total number of creditors with voting rights are in favour of approving the plan. On this basis, secured creditors may be allowed to accept the reorganisation plan despite their objections and thus be subject to the compulsory arrangement. However, the interests of creditors are protected by an important legal barrier, which stipulates that no creditor may receive less than 60% of its capital claim.
Process of the procedure
The decision to initiate the reorganisation procedure must be taken by the company’s supreme body, such as the general meeting. The application for the procedure must be submitted to the Metropolitan Court, which has exclusive jurisdiction and competence to conduct the procedure. Representation by a lawyer is mandatory during the reorganization procedure. The procedure shall be conducted by a reorganisation expert appointed exclusively by the National Reorganisation Non-profit Ltd.
The procedure may not be opened if the company is being restructured or if the restructuring has failed within one year, a decision rejecting the restructuring application or terminating the restructuring procedure has been taken and one year has not yet elapsed since the decision became final.
The application to the court must be accompanied by the resolution of the general meeting, the company’s accounts and the reorganisation plan. The appointed expert will carry out a preliminary examination within 5 days of the application being filed and, if the company is deemed fit to proceed, the court will order a 90-day moratorium. This moratorium may be extended for a further 60 days at the request of the company, on the basis of the expert’s opinion.
The order to open proceedings does not have to be published in the Official Gazette, but the company may decide to waive the anonymity of the proceedings and may decide to opt for publication. In this case, the entry “r.a.” (under reorganisation) in the company registration document.
The reorganisation plan gives creditors, including the National Tax and Customs Board and municipalities, the possibility to grant a payment discount or waive part of their claims in order to ensure the sustainability of the company. The deadline for the plan should also be fixed, but should not exceed two years. If the company reaches an agreement with all creditors involved in the reorganisation, the court may approve the final reorganisation plan accepted by the creditors within 10 working days.
A reorganisation plan approved by a final order of the court shall constitute a debt acknowledgement in respect of recognised and uncontested debts. As a result, if the debtor defaults on the debt, the creditor does not need to issue a notice, order for payment or legal proceedings, and the debt can be directly enforced.
Listing of creditor claims
A reorganisation plan approved by a final court order constitutes both an authenticated amendment to the contract between the undertaking and the creditor involved in the reorganisation plan and, in respect of the recognised and uncontested debts outstanding at the date of acceptance by the creditors involved in the reorganisation, an acknowledgement of the undertaking’s debts.
Cram-downc, Cram-up
A new cross-class cram down procedure may be applied to dissenting classes of creditors and/or members.
End of procedure
The court will approve the reorganisation plan and declare the reorganisation procedure complete if the reorganisation expert concludes in his expert opinion that the implementation of the reorganisation plan will enable the company to preserve or restore its viability and solvency within reasonable prospects and that the reorganisation plan complies with the law. Otherwise, the court shall refuse to approve the reorganisation plan by order.
Comparison of the restructuring and reorganisation processes
Both restructuring and reorganisation procedures offer firms in financial difficulties the possibility to survive and do so in a much more flexible way than bankruptcy or liquidation procedures would.
Restructuring proceedings aim at long-term financial stabilisation, involving creditor classes, and require a majority vote of creditors to adopt the plan. The aim of the procedure is to avoid insolvency and to keep the company afloat.
The aim of the reorganisation procedure is to restore the financial situation of the company and maintain its viability by granting creditors a 90-day moratorium. The court will approve the reorganisation plan if it is accepted by all creditors concerned and the final plan may include a debt acknowledgement, which will ensure immediate enforceability.
In the Hungarian legal system, two types of insolvency proceedings are prominent in practice: bankruptcy proceedings and liquidation proceedings. The bankruptcy and liquidation proceedings of business organisations are governed by Act XLIX of 1991 (Insolvency Act).
Bankruptcy proceedings
Bankruptcy proceedings in Hungary are a legal process during which the debtor is granted a stay of payment to attempt to reach a bankruptcy settlement. To initiate such proceedings, the management of the debtor’s business entity may file a request with the court. However, there are cases where a debtor cannot request bankruptcy proceedings: if a restructuring process is underway, if bankruptcy proceedings are already ongoing, or if a liquidation request has been submitted and the first-instance ruling ordering liquidation has already been issued.
When the court orders bankruptcy proceedings, it appoints a supervisor to oversee the debtor’s activities. The second phase of the process is the moratorium period, during which the debtor has the opportunity to hold negotiations with creditors to reach a settlement. This moratorium begins after the publication of the court’s order and lasts until midnight on the second working day after the 180th day, but it can be extended with the creditors’ consent. However, the total duration of the moratorium cannot exceed 365 days from the start of the bankruptcy proceedings.
Creditors must report their claims against the debtor within 30 days of the publication of the court’s order initiating the bankruptcy proceedings. During the moratorium, the debtor seeks to negotiate a settlement with creditors through bankruptcy meetings, where creditors vote on the debtor’s proposed settlement terms and reorganization plan.
The settlement typically involves agreements on debt resolution terms, such as concessions on debts, eased payment conditions, partial forgiveness, or assumption of certain liabilities. It may also include acceptance of the debtor’s reorganization and loss-reduction program, as well as any measures the parties deem necessary to preserve or restore the debtor’s solvency. The court ultimately decides whether to approve or reject the settlement.
If no settlement is reached, or if it does not comply with legal requirements, the court will terminate the bankruptcy proceedings, officially declare the debtor insolvent, and order the debtor’s liquidation.
Liquidation proceedings
The purpose of liquidation proceedings is to ensure that creditors are satisfied in accordance with the law during the dissolution of an insolvent debtor without legal succession.
The court may order the liquidation of a debtor either ex officio or upon request. Ex officio liquidation is initiated if no bankruptcy settlement is reached during the debtor’s bankruptcy proceedings, if the settlement does not meet legal requirements, or based on notifications from the company registry court or a criminal court. Liquidation can also be initiated upon the request of the debtor, a creditor, or the debtor’s liquidator.
During liquidation, the court may grant the debtor up to 45 days to settle its debts upon request. If the debtor pays off the debt and the creditor withdraws their petition, the court terminates the liquidation proceedings.
Once the ruling declaring insolvency becomes final, the court promptly appoints a liquidator and publishes a notice of the liquidation order in the Company Gazette. Creditors must file their claims with the liquidator within 40 days of the publication. The liquidator records and categorizes these claims. Claims against a debtor that are filed more than 40 days but not more than 180 days after the publication of the insolvency are registered by the liquidator and, except in the case of an agreement, the claim can only be satisfied if there is assets available to cover them after the earlier filed claims have been settled.
After the 40-day deadline for claim submissions has passed, and before the submission of the final liquidation balance sheet, the debtor and creditors may reach a settlement at any time, which must be submitted to the court for approval.
The liquidator assesses the debtor’s assets and liabilities, enforces the debtor’s claims, and sells the debtor’s assets.
If the debtor pays all registered, acknowledged, or uncontested debts during the proceedings and provides security for disputed claims and the liquidator’s fees, the court may terminate the liquidation procedure without the dissolution of the company.
If no settlement is reached and creditors’ claims are not satisfied, the court, upon the liquidator’s request and based on the submitted final liquidation balance sheet and asset distribution proposal, issues a ruling concluding the liquidation. This ruling addresses the debtor’s dissolution, the allocation of costs, the liquidator’s remuneration, and the (partial) satisfaction of creditors’ claims.
European insolvency regime
The European Union looks back at a long history of harominaztion on the field of insolvency and restructuring proceedings. From the 1960’s and 1970’s the EC members attempted to conclude international instruments on bankruptcies, composition in order to realize the seamless flow of recognised judgments amongst themselves. The current legal act governing the question between EU member states is the Regulation (EU) 2015/848 on insolvency proceedings. This regulation establishes EU-wide rules which determine the Court with jurisdiction to open an insolvency case, the national law and the recognition of the court’ decision in these matters.
The EU Insolvency Regulation primary aim is to ensure the efficient and coordinated handling of insolvency cases while balancing the interests of debtors and creditors. The regulation supports business restructuring over liquidation when possible, contributing to economic stability across Member States. It excludes certain sectors such as insurance companies and credit institutions, as well as Denmark, which opted out of its provisions.
Under the regulation, jurisdiction for initiating insolvency proceedings is determined by the location of the debtor’s “center of main interests” (COMI), typically where the company or individual conducts most of its business activities. Secondary proceedings can be opened in other Member States, but these are limited to the assets located in that jurisdiction. The regulation aims to reduce conflicting actions by promoting cooperation and information sharing between courts and insolvency practitioners across borders.
The law of the Member State where proceedings are initiated governs key aspects of the case, including how the debtor’s assets are managed and creditors’ claims are treated. Decisions made by courts under the regulation are automatically recognized in all other Member States, which facilitates efficient enforcement and minimizes legal obstacles in cross-border cases. Moreover, the regulation mandates that all Member States maintain online, publicly accessible insolvency registers interconnected through the European e-Justice portal, enhancing transparency and accessibility. (accessible on the following link: https://e-justice.europa.eu/447/EN/insolvencybankruptcy )
For businesses in distress, the regulation introduces preventive measures to encourage early action. Pre-insolvency proceedings allow companies to reorganize and avoid full insolvency. Additionally, special provisions address insolvency within corporate groups, fostering communication and coordination among parties to achieve a unified resolution.
This unified approach provides clarity and efficiency in handling cross-border cases while ensuring creditor protection and promoting economic recovery across the EU. In Hungary, these rules complement local practices, enhancing the effectiveness of insolvency management for businesses with international ties.
Non-EU insolvency
In non-EU cases, recognition of foreign insolvency proceedings in Hungary is governed by the Hungarian Private International Law Act and bilateral treaties, where applicable. Courts assess whether the foreign proceedings meet reciprocity and public policy standards before granting recognition. Relief in such cases may include protective measures like asset preservation or enforcement of foreign judgments.
For cross-border cases, Hungarian courts, particularly under the EU framework, are encouraged to engage in cooperation and coordination with foreign courts and insolvency practitioners. This often involves the exchange of information and joint efforts to manage cases efficiently. Outside the EU, formal protocols or arrangements for coordination are less common but may occur depending on bilateral agreements or case-specific needs.
These frameworks ensure Hungary’s insolvency system aligns with international practices, promoting fair outcomes for creditors and debtors across borders.
Dr. Borbála Maglai
Attorney at Law
Dr. Lilla Majoros
Attorney at Law
Dr. Réka Fülöp
Attorney at Law
Email: reka.fulop@kcgpartners.com
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