HUNGARY Law and Practice Contributed by: John Fenemore, Szabolcs Mestyán, Adrienn Mándoki and Nóra Kertai, Lakatos, Köves & Partners
Termination of Business Activity As a general rule, as of the date of the opening of the liquidation, the business activity of the debtor ceas - es. In exceptional cases, the liquidator may decide to continue the business if the continuation of the busi - ness is beneficial for the preservation of the assets of The liquidator must try to collect debts owed to the insolvent company and sell its assets at the highest price possible on the relevant market. The sale of assets is generally organised by the liquidator by way of a public tender or public auction. Creditors have consultation rights and may make observations on certain aspects (eg, the timing on when the liquidator should stop the business of the debtor and start sell - ing its assets, or regarding the accuracy of valuation reports obtained by the liquidator). the company. Sale of Assets Affiliate companies, directors and other related per - sons and entities may not participate in bidding. Cred - itors can submit bids but no set-off may be effected to discharge the purchase price. The proceeds must then be distributed among the creditors in accordance with a specific order set out in the relevant legislation and after the fees and costs of the liquidator are reimbursed from the proceeds. 5.3 The End of the Liquidation Procedure(s) The liquidation will conclude either with or without the striking of the debtor from the company registry. Conclusion Without the Deletion of the Debtor Liquidation may be terminated this way if: • the debtor satisfies all creditors’ claims; or • the debtor manages to conclude a settlement with its creditors. A settlement may be reached if: • approved by at least 50% of the unsecured credi - tors, provided that the claims of these creditors make up more than half of the total claims of those entitled to conclude the settlement; and
the proceeds to satisfy the claims of registered credi - tors in accordance with a statutory order of claims. Insolvent liquidation proceedings may be initiated by: • any creditor (creditors may file a claim requesting the competent court to declare the debtor “insol - vent” in case it failed to pay its debt); • the debtor itself; • a liquidator ( végelszámoló ) who, appointed to a solvent company, is required to file for insolvent liquidation in certain cases (to the extent the assets are less than the liabilities of the company); and • competent courts, which are required to com - mence the insolvent liquidation ex officio in certain cases (eg, in the case of an unsuccessful bank - ruptcy proceeding). If the insolvency proceeding commences upon request (ie, not ex officio), the court examines the solvency of the debtor first. In general, insolvency is defined as the inability or unwillingness to pay debts, for example: • the company fails to comply with its contractual payment obligations within the applicable deadline, and such obligations were not challenged or they were explicitly acknowledged by the company and the company did not pay its debts following the appropriate payment notice of the creditor; • the company fails to pay its debts based on a final and binding court order (or composition concluded in – eg, a bankruptcy proceedings) within the appli - cable deadline; or • a court enforcement procedure against the com - pany was unsuccessful. 5.2 Course of the Liquidation Procedure Registration of Claims A liquidation proceeding is generally commenced when the debtor is declared to be insolvent. After the debtor is found insolvent, the court orders the liquida - tion proceeding, appoints a liquidator and publishes its order in the Company Gazette ( Cégközlöny ). Creditors must register their claims with the liquidator to be eligible to seek recovery and to avoid cessation of their claims (see 5.4 The Position of Shareholders and Creditors in Liquidation ).
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