HUNGARY Law and Practice Contributed by: Szabolcs Mestyán, John Fenemore, Balázs Rokob and Nóra Kertai, Lakatos, Köves & Partners
2.9.6 Risks for a Lender if a Borrower, Guarantor or Security Provider Becomes Insolvent The insolvency laws applicable to borrowers, guar - antors or security providers should be considered in order to identify risks for lenders. Where Hungarian insolvency proceedings are applicable, insolvency proceedings may be started by any creditor of the debtor company or by the debtor company itself. Such proceedings are highly regulated and harden - ing periods apply, where certain transactions may be challenged by either the liquidator or another creditor. The liquidator also has the right to terminate contracts previously concluded with immediate effect. Tight deadlines apply to all parties, including credi - tors. All proceedings may include a moratorium peri - od, during which creditors’ rights are restricted. 2.9.7 Imposition of Moratoria in Connection With Insolvency Proceedings Moratorium provisions apply in terms of the following. Bankruptcy Proceedings A moratorium is the period between the date of pub - lication of request for the initiation of bankruptcy pro - ceedings until a rejection or commencement of the process. A 180-day moratorium starts on the date of publication of the commencement of the bankruptcy proceedings and lasts until the end of such proceed - ings. Overall, this period may last up to 365 days. Liquidation Proceedings If a liquidation proceeding is declared “strategically important” by the Hungarian government, with regards to companies conducting certain activities, a 90-day extraordinary moratorium may also apply in the case of liquidation proceedings. Reorganisation Proceedings A moratorium applies from the date of receipt of the order imposing the moratorium for up to 170 days in public reorganisation, or a 90-day-long moratorium, which may be extended by further 60 days in the case of closed reorganisation procedure, while the reorgan - isation plan is developed and presented to the speci - fied creditors.
start of the bankruptcy proceeding and the creditor cannot enforce any claims regarding such payments. Effects of Reorganisation Proceedings Suppliers and service providers in a long-term rela - tionship with a company under reorganisation may not terminate their contracts (with certain exceptions) with the company because of the reorganisation pro - ceeding, provided that the company’s director con - firms to the supplier or service provider in writing that the company will be able to perform its due payment obligations. Effects of Restructuring Proceedings During the moratorium, the creditors to whom the moratorium applies may not suspend the performance of essential executory contracts (eg, lease agree - ments) stemming from the debtor’s outstanding debts arising from the non-payment of debts incurred and due before the moratorium; such contract may not be terminated and may not be amended in any way or form to the debtor’s disadvantage. Potential Delays of Repossessing the Aircraft in the Case of Termination of the Lease If an aircraft is not owned and is only used by the les - see, it should not be in conflict with the interest of its creditors, as the aircraft is not a part of the insolvency estate. In practice, it cannot be ignored that an insol - vency officer may attempt to hinder the repossession of the aircraft. During bankruptcy proceedings, the feasibility of termination is limited. Subordination of Lease Payments to Creditors’ Claims It is possible that subordination of the lease pay - ments to other creditors’ payments may be suggested under the restructuring plan in the case of bankruptcy, restructuring or reorganisation procedures. In the case of liquidation proceedings, a statutory waterfall of creditors’ claims applies. Under such a waterfall, lease payments (if unsecured) would rank among “other claims”, behind, eg, secured creditors and employees.
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