HUNGARY Law and Practice Contributed by: Szabolcs Mestyán, John Fenemore, Balázs Rokob and Nóra Kertai, Lakatos, Köves & Partners
3.1.2 Effect of Exchange Controls or Government Consents There are no exchange controls or prohibitions on remitting or repatriation of proceeds in force in Hun - gary. Accordingly, no Hungarian regulatory approval or other consent is required for any payments to be made under a loan, guarantee or security document, in either Hungarian forints or a foreign currency. 3.1.3 Granting of Security to Foreign Lenders Subject to the licensing requirements referred to in 3.1.1 Restrictions on Lending and Borrowing , there are no restrictions applicable to borrowers in connec - tion with the granting of security to foreign lenders. 3.1.4 Downstream, Upstream and Cross-Stream Guarantees Under Hungarian law, downstream, upstream and cross-stream guarantees are all permitted in most circumstances, with certain restrictions applying to, among others, some insurance companies and funds. There is no general requirement for corporate ben - efit, although certain restrictions may apply, eg, if the security provider does not receive compensation for the provision of security; the secured creditors or the liquidator of the security provider may challenge the security agreement. 3.1.5 Lenders’ Share in Security Over Domestic SPVs It is advisable in aviation finance transactions for a lender to take share security over a domestic SPV that has ownership over the aircraft, and Hungarian law recognises share pledge agreements. Although notarisation is not a perfection requirement, it is mar - ket practice to incorporate share pledge agreements into a notarial deed to ensure direct enforceability. 3.1.6 Negative Pledges Negative pledge provisions are recognised under Hungarian law towards the security provider. Negative pledge provisions will not bind a subsequent owner of the asset acquired in breach of the negative pledge. 3.1.7 Intercreditor Arrangements No material restriction or requirement is imposed on intercreditor arrangements under Hungarian law.
3.1.8 Syndicated Loans The concept of agency and the role of an agent under a syndicated loan is recognised under Hungarian law. 3.1.9 Debt Subordination The concept of debt subordination is generally permit - ted and recognised under Hungarian law. Debt can be subordinated by means of a contractual subordina - tion. 3.1.10 Transfer/Assignment of Debts Under Foreign Laws The transfer or assignment of all or part of an out - standing debt under an English or New York law-gov - erned loan is permissible and recognised in Hungary. Certain provisions of the Rome I Regulation and the Private International Law Act may need to be con - sidered. 3.1.11 Usury/Interest Limitation Laws According to the Hungarian Civil Code, a usurious contract is null and void. A contract stipulating exces - sive interest may be qualified as a contract with undue consideration which is voidable. 3.2 Security 3.2.1 Typical Forms of Security and Recourse In aviation finance transactions, typical forms of secu - rity and recourse are as follows: • an aircraft mortgage; • a security assignment (over lease rent payments, insurance proceeds, requisition and total loss proceeds); • a share pledge; • an account pledge; • a floating charge; • a parent company guarantee; • airframe and engine warranties arrangements; • a security deposit; and • a deregistration power of attorney. 3.2.2 Types of Security Not Available There is no type of security that cannot be taken over an aircraft or related collateral.
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