HUNGARY Law and Practice Contributed by: John Fenemore, Szabolcs Mestyán, Adrienn Mándoki and Nóra Kertai, Lakatos, Köves & Partners
guidelines for agreements between the institutional lenders and the corporate debtors on individually negotiated moratoria. Due to the informal nature of out-of-court restructur - ing processes, the consent of all affected stakehold - ers is required. It is not common in local transactions, but in complex cross-border financings underlying credit agreements sometimes contain terms permit - ting a majority or supermajority of lenders to bind dis - senting lenders to changed credit agreement terms. 3.2 Legal Status No regulated out-of-court restructuring proceed - ing is available in Hungary. The Hungarian National Bank published a recommendation on the negotiated restructuring process of claims against co-financed corporate borrowers, but this is not mandatory (see 3.1 Out-of-Court Restructuring Process ). 4. Statutory Restructuring, Rehabilitation and Reorganisation Proceedings 4.1 Opening of Statutory Restructuring, Rehabilitation and Reorganisation The two main types of formal proceedings aimed at recovering a financially distressed debtor by way of attempting to draw up a reorganisation plan and reach an agreement with its creditors are bankruptcy pro - ceedings ( csődeljárás ), and preventive restructuring ( szerkezetátalakítás ). 2021 Reorganisation Proceed - ings, which are in many ways very similar to bank - ruptcy, may only be initiated on the basis of a specific decision of the Hungarian Government (see 1.2 Types of Insolvency ). These proceedings may be initiated by a creditor or by the debtor itself, with the approval of its shareholders. In principle, bankruptcy proceedings may be com - menced by a debtor that is unable or is expected to be unable to meet its financial obligations as they fall due. In case of a bankruptcy, creditors of the debtors must report their claims to be eligible to participate.
A preventive restructuring ( szerkezetátalakítá s) may only be opened in case insolvency is probable – ie, a situation where there are reasonable grounds for believing that the company will, in the absence of tak - ing any measures, not be able to meet its financial obligations as they fall due. The scope of restructur - ings may, at the discretion of the debtor, be limited to certain creditors. 4.2 Statutory Restructuring, Rehabilitation The ultimate aim of these proceedings is to draw up a reorganisation or restructuring plan (including a com - position) that is agreed to by the relevant creditors and approved by the competent court (see 4.3 The End of the Restructuring, Rehabilitation and Reor- ganisation Procedure ). According to court practice, a composition in a bankruptcy must contemplate and provide the appropriate conditions for the continua - tion of the business of the debtor – ie, courts do not approve the composition if its real aim is to provide recovery for the creditors outside of an insolvent liqui - dation, without a real intention to continue the debtor’s business. It is likely that courts will apply the same doctrine to restructurings as well. Creditors Creditors are put into separate classes (voting sepa - rately) in both bankruptcy and preventive restructuring ( szerkezetátalakítás ) proceedings (see 4.6 The Posi- tion of Shareholders and Creditors in Restructuring, Rehabilitation and Reorganisation ). and Reorganisation Procedure The Aim of These Proceedings Claims of dissenting creditors or a dissenting class of creditors can be modified without the consent of such creditors, provided that the required majority of credi - tors voted in the affirmative and the reorganisation or restructuring plan otherwise complies with statutory requirements. The required majority is available if: • in bankruptcy proceedings, the majority of eligible votes in both the secured and unsecured credi - tor class was cast in the affirmative, provided that dissenting creditors are not subject to terms less favourable than those applicable to consenting
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