HUNGARY Law and Practice Contributed by: John Fenemore, Szabolcs Mestyán, Adrienn Mándoki and Nóra Kertai, Lakatos, Köves & Partners
Unsecured creditors have the right to certain informa - tion and participation rights in the course of restruc - turing and insolvency proceedings. In addition, they may file appeals against the competent court’s orders (where applicable law allows) as well as requests for disqualifying the relevant practitioner. Representation of the Creditors In bankruptcy proceedings creditors may form a cred - itors’ committee provided that the members of the committee represent: • at least one-third of creditors; and • hold debt respectively at least 50% of the claims against the company. The committee makes its decisions with majority votes. Alternatively, creditors may decide to elect a creditors’ agent who has the functions and powers of the committee. The creditors’ committee or credi - tors’ agent represents the relevant creditors in front of the court and in communication with the insolvency practitioner and has the right to certain information. In the context of bankruptcy proceedings (which are generally controlled by the bankruptcy trustee or liq - uidator), all creditors are entitled to file objections against the individual actions taken by the relevant insolvency practitioner. Under certain circumstances, the competent court may order a stay on the enforce - ment of the relevant action and therefore frivolous and/or vexatious objections may temporarily frustrate the proceedings. However, individual creditors (whether they be secured or unsecured) are not able to disrupt the overall pro - ceedings. Creditors’ rights in a preventive restructuring ( sze- rkezetátalakítás ) are less formalised (in particular in terms of organisation), but overall can have more con - trol over key decisions during the process and, simi - larly to a bankruptcy, have approval rights in respect of certain transactions of the debtor, as well as chal - lenge rights in respect of certain court orders. In bankruptcy proceedings, preventive restructur - ings ( szerkezetátalakítás ) and 2021 Reorganisation
Proceedings, the relevant bankruptcy/restructuring/ reorganisation plan cannot be approved without the consent of a certain proportion of secured creditors. In addition, creditors providing interim and/or new financing in a restructuring enjoy certain special pro - cedural protections under some conditions (in particu - lar, the right to challenge such financing in subsequent insolvency proceedings is widely excluded). Unsecured Trade Creditors Trade creditors are generally treated in the same way as any other (secured or unsecured, as the case may be) creditor. However, where the continuing provision of certain goods and services is crucial for the con - tinuation of the business of the debtor, certain special rules and exceptions may apply to trade creditors. In particular: • in a bankruptcy or the 2021 Reorganisation Pro - ceedings, the statutory moratorium does not apply to claims arising from the supply of goods and/or services necessary for the continuation of the busi - ness, to the extent the purchase of the same was approved by the insolvency practitioner; and • in a bankruptcy, preventive restructuring ( szerkeze- tátalakítás ) or the 2021 Reorganisation Proceed - ings, the relevant creditors may not trigger certain clauses in contracts concluded with the debtor. Trading of Claims Trading of claims against the debtor is generally per - missible under Hungarian law. Rights of Set-Off Creditors can exercise set-off and netting rights with certain limitations. In particular, set-off is generally not permissible during the period of a moratorium. 5. Statutory Insolvency and Liquidation Procedures 5.1 The Different Types of Liquidation Procedure The aim of an insolvent liquidation proceeding is the winding up of a company by way of collecting its receivables, disposing of its assets and distributing
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