HUNGARY Trends and Developments Contributed by: Zoltán Tenk, Andreász Topalidisz and Anna Horvát, TENK Law Office
The number of negotiation rounds is not limited by law. However, the creditors may announce at any time that they do not wish to enter into a composition with the debtor, in which case, if the debtor does not undertake to revise the settlement agreement, the bankruptcy proceedings will be considered unsuccessful. Every creditor who notified its claim in time and has paid the registration fee has one full vote for each acknowledged or non-disputed claim of HUF50,000 (with the exception of creditors, whose claims arise from debt assumption or suretyship or who have majority control in the debtor having one-quarter vote). At the end of the settlement negotiations, the credi - tors with voting rights cast a ballot on the acceptance of the composition by a simple majority of the votes from both secured and unsecured creditors. The com - position agreement is then submitted to the court for approval. If such approval is granted, the bankruptcy proceedings are declared completed, in which case the debtor may continue to pursue its business activ - ity. If the debtor and the creditors do not reach an agree - ment, or if the agreement is non-compliant with the laws, the court terminates the bankruptcy procedure and orders the liquidation of the debtor ex officio. Liquidation proceedings are aimed at the dissolution of the insolvent debtor, while the debtor’s creditors receive satisfaction of their claims to the extent pos - sible. Who can initiate the proceedings Liquidation proceedings are generally initiated by the debtor and its creditors, but in certain cases, the court may order the debtor’s liquidation ex officio. Conditions to initiate proceedings The court orders the debtor’s liquidation if it is deter - mined that the debtor is insolvent based solely on the legislative criteria (detailed below). Therefore, if one of the insolvency conditions set out by the Bankruptcy Act is met, the court is obliged to order the liquidation of the debtor, even if the debtor is de facto solvent. Liquidation proceedings Aim of the proceedings
(i) The most common way: payment notices One of the most common ways to trigger the debtor’s liquidation is to send a payment notice to the debtor drafted to meet the strict conditions specified by the Bankruptcy Act. The Bankruptcy Act stipulates: “The court will estab - lish the debtor’s insolvency and orders the liquidation upon the debtor’s failure to settle or dispute its pre - viously uncontested and acknowledged contractual debts within twenty days of the due date, and upon failure to satisfy such debt upon receipt of the credi - tor’s written payment notice.” In other words, the creditor’s claim must be based on a contractual relationship which implicitly means that a liquidation procedure cannot be initiated by a payment notice on any legal grounds outside of a contractual relationship (eg, tort-type legal relations). Based on the prevailing practice, claims arising from non-performance of the contract or from the termina - tion of the contract are also considered claims stem - ming from a contractual relationship. It should be noted that there is currently no uniformly developed legal practice on the issue of contracts concluded verbally or through implied conduct per - haps because of the evidential difficulties. Legal practice also requires at least two consecutive payment demands to be addressed to the debtor before initiating the liquidation proceedings which may be disputed by the debtor until the day before the second payment notice is received. Failure to chal - lenge the creditor claim narrows down the options for the debtor to one, which is to settle the debt. If, however, the debtor challenges the creditor’s claim (in substance, existence, due date, and rate or amount) within the deadline, the liquidation can no longer be launched by a payment notice regarding the same claim. (ii) Other insolvency conditions
189 CHAMBERS.COM
Powered by FlippingBook