HUNGARY Law and Practice Contributed by: Attila Ungár and Júlia Várkonyi, Lakatos, Köves & Partners
reintroduced as a response to the war in Ukraine. Under this regime, certain restrictions were imposed on a lender’s ability to foreclose or realise on collateral in real estate lending, including the following: • if the lender is considered a “foreign investor” (see 2.11 Legal Restrictions on Foreign Investors ) at the time of a potential future enforcement scenario involving the sale/acquisition of property-holding entities considered “strategic” within the meaning of applicable Hungarian FDI regulations, the sale/ acquisition is required to be notified and acknowl - edged by the competent minister; and • generally, private real estate may not be repos - sessed between November 15th and April 30th. 3.7 Subordinating Existing Debt to Newly Created Debt Generally, existing debt can be subordinated to newly created debt by way of an agreement between the rel - evant creditors and the obligor. In the case of secured debts, the relevant security register must reflect the subordination, which usually requires the co-operation of the lenders and the obligors. 3.8 Lenders’ Liability Under Environmental Laws Generally, the polluter is liable for contamination. If the polluter cannot be identified, there is a residual liability for the owner of the real estate. Secured creditors holding or enforcing security over real estate cannot be held liable under environmental laws solely owing to their position as beneficiary of the security. In the unlikely event that the secured creditor caused the pollution or acquires the real estate itself in the course of enforcement proceedings, said creditor may incur liability. 3.9 Effects of a Borrower Becoming Insolvent The creditor and liquidator of an insolvent company can challenge transactions concluded during “sus - pect periods” leading to the insolvency on the basis that they are: • fraudulent transactions concluded less than five years before the start of insolvency proceedings;
• transactions at an undervalue concluded less than three years before the start of insolvency proceed - ings; • transactions preferential to a specific creditor (or group of creditors) concluded less than 90 days before the start of insolvency proceedings; or • transactions benefiting a creditor concluded less than three years before the start of insolvency proceedings where that creditor has failed to adequately account for any surplus of proceeds received from collateral provided to that creditor. The liquidator is entitled to terminate contracts con - cluded by the insolvent company. In this case, the counterparty has 40 days from the date of such ter - mination to register with the liquidator any claim it has against the insolvent company arising out of the termination. Obligors can seek time-limited protection from the enforcement of security under Hungarian corporate bankruptcy laws. With limited exceptions, secured assets remain part of the estate of the Hungarian obligor. Upon the insol - vency of the Hungarian obligor, such assets will be liquidated by the liquidator as part of the liquidation proceedings (rather than by the secured creditor pur - suant to the security) and the proceeds of such liqui - dation (minus the liquidator’s costs) will be distributed to the secured creditors by the liquidator. Any surplus proceeds will then be distributed to the unsecured creditors of the insolvent company in accordance with statutory rules. 3.10 Taxes on Loans Hungary has implemented the interest limitation rules introduced by the Anti-Tax Avoidance Directive. Notarial fees and registration charges are payable in connection with the notarisation and registration of security documents. Fees and taxes are also payable in connection with enforcement procedures.
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