HUNGARY Trends and Developments Contributed by: Zoltán Tenk, Andreász Topalidisz and Anna Horvát, TENK Law Office
ment notice, but the liquidation has not yet started. However, this is only possible under certain condi - tions. • The claim originates from before the dispatch of the respective payment notice. • The claim becomes due after expiry of the dead - line open for disputing the claim (to be substanti - ated by a public or private deed with full probative force). • The debtor becomes aware of the existence or the due date of the claim only after the dispatch of the creditor’s payment notice (to be substantiated by a public or private deed with full probative force). • The creditor acknowledges the debtor’s claim. (ii) After the start of the liquidation After the publication of the liquidation decision, the claims may be set-off against the debtor’s claims: • which have been acknowledged by the liquidator; • which have not been assigned after the court received the liquidation request; or • which do not qualify as assumed liabilities – ie, if the assumption of the liability occurred within two years prior to the submission of the liquidation request or after the submission of the liquidation request, set-off is excluded. Creditors may also enforce their claims by set-off in litigation initiated originally by the debtor. Settlement in liquidation proceedings With certain exceptions, creditors are free to negoti - ate a settlement agreement with the debtor from the 41st day of the liquidation decision’s publication until the submission to the court of the final liquidation bal - ance sheet. Similarly to bankruptcy proceedings, the debtor must prepare a plan suitable for restoring its solvency and a proposal for a composition (settlement agreement). At the debtor’s request, the court holds a settlement hearing, but the court may also decide to invite the creditors in writing to respond to the settlement pro - posal even if the debtor does not exercise such right.
Composition is reached if: • at least half of the creditors with voting rights in each creditor class support the conclusion of the composition; • the claims of these creditors constitute at least half of the total claims of the creditors entitled to conclude the composition; and • at least three-quarters of the creditors with secured claims (eg, those secured by a lien) support the composition. The composition between the debtor and the creditors must be approved by the court. As a general rule, the effect of the settlement extends to all creditors. If the debtor fulfils the terms of the settlement, the company continues to operate and the court will terminate the liquidation proceedings. Special rules apply to certain regulated activities and the entities operating within them. Institutions on the financial market may not file for bankruptcy, reorgani - sation or restructuring themselves; only the regulator has such competence. Furthermore, the order of satisfying creditors’ claims also deviates from the general rules. In addition, a special recovery and resolution process applies on the basis of the EU Bank Recovery and Resolution Direc - tive (Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014). Case study of an exceptional liquidation For a better understanding and as a preliminary note, it is important to point out that the Hungarian gov - ernment governs under a state of emergency. This was first put in place because of the pandemic and then extended because of the war in Ukraine. Conse - quently, laws are regularly amended by government decrees which is a swifter and more efficient manner of legislating because it does not require the participa - tion of the National Assembly. Special Regimes Credit institutions A string of such government decrees amended the Bankruptcy Act albeit so far, the beneficiaries of such amendment were a mammoth steel plant and its sub -
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