HUNGARY Law and Practice Contributed by: John Fenemore, Szabolcs Mestyán, Adrienn Mándoki and Nóra Kertai, Lakatos, Köves & Partners
lished may be acquired by the creditor to the extent of the secured claim. In the case of a call option, the creditor acquires own - ership of the secured asset by unilateral declaration. In the case of a security assignment, the creditor (to whom the claim is assigned) acquires ownership by the performance of the debtor subject to the relevant Hungarian law. 2.4 Unsecured Creditors Unsecured creditors have certain rights and rem - edies to collect their claims outside the context of formal restructuring or insolvency proceedings. These include sending payment notices, setting off claims or retaining title to goods (if this is permitted under the underlying agreements). The creditors may initiate a simplified order for pay - ment procedure for claims under HUF3 million (approx - imately EUR8,000) through a notary. If the debtor does not contest the payment order, it becomes enforce - able. The rights and remedies available to unsecured creditors mostly depend on the provisions of the underlying agreements. 3. Out-of-Court Restructuring 3.1 Out-of-Court Restructuring Process Lenders generally tend to be open to out-of-court restructurings, which are viewed as more efficient alternatives to formal insolvency proceedings (with a potentially much higher overall recovery rate for credi - tors) in Hungary. However, in the absence of statu - tory incentives and laws or other mandatory provi - sions governing these processes, established market practice only exists to a limited extent. The willingness of institutional lenders to enter into out-of-court restructurings is enhanced by the fact that the Hungarian National Bank (HNB) published a recommendation in 2017 on the negotiated restructur - ing process of claims against co-financed corporate borrowers, which is addressed to credit institutions, investment firms and insurers. The recommendation 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 restructur - ing, the success of which can help to avoid generally lengthy and costly judicial enforcement and insolven - cy proceedings. Providing a framework, the recom - mendation primarily aims to draw up broad principles of negotiation. However, compliance with these principles during the restructuring process takes place in various specific ways, taking into account all the circumstances of the particular case, the proposals of the advisers and the information obtained in the course of due diligence. Under the framework, one key good practice is that if the borrower notifies a lender about its payment dif - ficulties, that lender will inform the other institutional lenders and, to the extent necessary, set up a restruc - turing panel. The primary objective of a restructuring panel is to ensure efficient information sharing among the institutional lenders and between institutional lenders and the co-financed corporate borrower; to co-ordinate the activity of the institutional lenders and their communication with the borrower; to provide a platform for dispute resolution; and, if applicable, to give instructions to and co-ordinate the joint advisers of the institutional lenders. The recommendation suggests the application of a de facto moratorium as a temporary behaviour, during which the institutional lenders providing co-financing that fall within the scope of the recommendation refrain from initiating legal debt adjustment proceed - ings against the co-financed corporate borrower or taking any steps to enforce any claim or collateral provided in favour of such lenders. The recommen - dation expects that the de facto moratorium lasts for the shortest possible time. The purpose of a moratorium is to encourage co- operation between the institutional lenders and the corporate debtors and to allow the institutional lend - ers to assess the financial situation of the debtor. In addition to setting out the general principles of a de facto moratorium, the recommendation provides
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