HUNGARY Trends and Developments Contributed by: Zoltán Tenk, Andreász Topalidisz and Anna Horvát, TENK Law Office
Preventive Restructuring Framework and Reorganisation as Prevention The preventive restructuring framework
decrease in new company incorporations compared to the previous year. A special regime The Hungarian government introduced several piec - es of legislation amending the Insolvency Act, which allows companies under liquidation to continue their business activities if “the safeguarding of the debt - or’s assets will foreseeably present more advantages than ceasing the business activity in full” even “if such business activity generates losses”. The liquidator may initiate such exemption by lodging a request with the competent courts which may then in turn approve the request within 30 days for a period of 90 days (which may be extended). The companies may also acquire loans where the creditor may ensure its claim by a pledge established on the assets of the company. The purpose of this special regime is ensuring the seamless continuity of the economic activity of a com - pany under liquidation (or by its viable business units) by establishing special purpose vehicles. This regime was originally created for a specific pur - pose, that is the safeguarding of what was left of a failing mammoth steel plant. The steel production industry in Europe is struggling, and the various states endeavour to find different solutions to the same prob - lem: how to save the jobs of thousands of workers employed. Hungary opted to enable business continu - ity by tendering the newly created SPVs, but not much later, these new entities also entered into liquidation under the same special regime. Emergency regulations During the COVID-19 pandemic, the Hungarian gov - ernment introduced several emergency decrees ini - tially on a temporary basis. To ensure a smooth regu - latory transition, the General Assembly incorporated particular provisions of these emergency rules into Act XCIX of 2021, allowing some elements to remain in force. In addition, the Hungarian government also adopted emergency decrees in response to the war in Ukraine, some of which remain in force to this day.
Restructuring can be initiated if the debtor is not yet insolvent, but it is foreseeable that they may face financial difficulties. Restructuring can be resolved by the debtor’s general meeting authorising the manage - ment to file a request to the court if they deem that the debtor’s insolvency is probable. However, credi - tors may contest the probability of insolvency thereby
delaying the court procedure. The debtor will benefit from:
• a moratorium of a maximum of 12 months (if requested), restricting creditors to exercise their rights of enforcement of claims that arise before the moratorium; and • a grace period extending payment deadlines and due dates for payment. These protective meas - ures also mean that the creditors included in the restructuring cannot start a liquidation procedure against the debtor. However, this does not mean that other creditors not involved will not do so. Upon initiating the restructuring, the debtor is not obliged to file the restructuring plan nor is it obliged to appoint an expert. A restructuring plan is required to be adopted (to be filed within 365 days) which – in principle – must be supported by the majority of all affected creditors holding admitted or undisputed claims within each class of creditors, as well as a majority of the voting rights cast in proportion to the total number of votes that may be exercised by the affected creditors within that class. If the debtor quali - fies as an SME, the restructuring plan will be deemed adopted even if it is supported by at least one-third of the creditors, provided that such support corresponds to at least the majority of the votes. The creditors cast - ing a no vote have the possibility of recourse. Third parties (other than the debtor) may be included in the restructuring plan and their position is fortified by the new legislation by affording them privileged ranking in the order of the satisfaction of claims in an eventual liquidation (if lodged within 180 days).
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