If you are interested in registering a company in Hungary, then it is worth considering some of the features of the legislative regulation of business in the state. Hungary is one of the EU member states. This country is characterized by a stable market economy, political situation, and the presence of a large number of incentives for starting a business.
Benefits of registering a company in Hungary
Setting up a company in Hungary has many advantages:
- stable market economy;
- transparent and loyal taxation;
- 70 DTA agreements;
- favorable environment for investment activities, as well as the creation and development of SMEs;
- free movement within the Schengen area (26 countries);
- developed industrial and banking sector;
- formed transport infrastructure;
- 100% foreign ownership is allowed;
- there are no residency requirements for shareholders;
- low tax rates;
- remote registration of a company in Hungary is available;
- established trade relations with Germany, the Czech Republic, the Netherlands, Slovakia, Austria, Poland, and other European countries.
Organizational and legal forms of companies in Hungary
In Hungary, a foreigner can open the following forms of companies:
- Limited Liability Company (Kft.)
- Private Limited Company (Zrt.)
- Joint-stock Company (Nyrt.)
- Limited Liability Partnership (Bt.)
- Unlimited Partnership (Kkt.)
- Branch, Representative Office.
Limited Liability Company (korlátolt felelősségű társaság, Kft.)
A limited liability company is established with a predetermined initial capital amount of HUF 3,000,000 (~8,310 euros) provided by its founders.
The liability of its members is limited to the provision of the initial capital of the company. The members do not bear any other responsibility for the obligations of the Hungarian company. It means that the private property of the members cannot be affected by the obligations of the company, except in a few cases.
Company Limited by Shares (Részvénytársaság, Rt.)
It is the most highly regulated corporate form and shows similarities to German AG or English Plc. There are two types of joint-stock companies:
● Private limited company (Zártkörűen működő részvénytársaság; Zrt.).
A private limited company in Hungary must be established with a start-up capital of a predetermined amount. The minimum share capital of a private limited company can be HUF 5,000,000 (~13,850 euros) and in the case of a limited liability company, HUF 20,000,000 (~55,400 euros).
● Joint-stock Company (Nyilvánosan működő részvénytársaság, Nyrt.).
The joint-stock company is especially suitable for large business entities with several investors. It is possible to establish such an enterprise as a sole proprietor.
When founding a company limited by shares, it is necessary to establish a private limited liability company. Later, the company can be transformed into a joint-stock limited liability company.
Shares can be:
- ordinary shares;
- employee shares;
- interest-bearing shares;
- redeemable shares;
- preference shares.
Limited Liability Partnership (betéti társaság, Bt.)
When registering a Hungarian limited liability partnership, the minimum number of participants in the structure is two. Only general partners can manage and represent the partnership with third parties. The distribution of profits is usually proportional to the capital contributed, but the parties may agree otherwise. However, it is prohibited to exclude any partner from the distribution of profits.
Unlimited partnership (közkereseti társaság | Kkt.)
In this partnership, the obligations of its members are joint and unlimited. The minimum initial capital requirement is not set by law. By law, each member has the right to represent the partnership unless otherwise specified in its charter.
The partnership must have at least two members. Individuals can also become members of the Unlimited Partnership, but minors and individuals who are already jointly and severally liable in another company are excluded.
The active participation of partners in the running of the partner business is legally binding.
Representative office, branch
There are two other forms that foreign investors can choose in Hungary to establish their presence. Typically, companies are free to engage in activities; however, certain activities require a license in Hungary from a competent authority. Companies can be established by both individuals and legal entities, both Hungarians and foreign citizens.
Requirements for registering a Hungarian company
There are the following requirements to register a company in Hungary:
- The name of the company;
- registered office;
- a list of company members with their respective addresses, date of birth, personal tax number;
- business activities of the company (some activities require special administrative permits);
- the amount of equity capital, the method, and date of its availability;
- representation of the company, the way of signing in the name of the company;
- names, addresses, dates of birth, personal tax numbers of company employees, and the maiden names of their mothers.
The list of required documents depends on the form of the Hungarian company but when established by a foreign person or organization, it is necessary to provide an extract from the register of the company’s founders not older than 3 months and its certified translation into Hungarian.
In the case of an Unlimited Partnership, the supreme body is the Meeting of Participants, in which all participants are of equal value.
In the case of an LLC, the supreme body is the Meeting of the Participants, and the participants are entitled to receive dividends in proportion to their quotas (business shares). Not just members, anyone can be the managing director of a limited liability company.
In the case of JSCs, the supreme body is the General Assembly, and the executive body is the Board of Directors.
Foreign and Hungarian persons can also be a member (shareholder) and executive director (managing director) in a company. But there are some general restrictions on these people that must be respected regardless of the person’s citizenship.
