Liquidation: What to do if you no longer need your Hungarian company

Disposing of an unwanted company

When you no longer need your Hungarian company and want to be relieved of the responsibility of its maintenance, you have the following options:

• Sell it – This can be ideal if you find a willing buyer for a good price, but company setup is pretty quick and convenient in Hungary, which reduces interest in existing companies.
• Liquidate it – Liquidation is the official process of closing your company. It may take 6-18 months, during which you should maintain the company. However, you are free to start another business after the liquidation is completed, or even already during the procedure.
• Abandon it – If you do not liquidate your company on your own, it will eventually be liquidated by the Court of Registry. In that case, you might be banned for starting another business in Hungary for up to 5 years.

What is liquidation?

Liquidation is the process through which the company ceases its operation and is removed from the Company Registry. There are various types of liquidation, which may be applied depending on your company status. The liquidation can be either voluntary or involuntary. In most cases, voluntary liquidation can also be simplified. In all of these cases, you are officially required to maintain a registered seat and a bank account, and submit reports via an accountant until the procedure is completed.

Voluntary liquidation (“végelszámolás”)

Voluntary liquidation is possible when the company has no debt. You just need to make a formal decision that you want the company liquidated (if they are more owners, you need a decision by the general meeting of the shareholders), and decide on a starting date, preferably with the help of your accountant.

In this case you have two options: regular or simplified liquidation.

Simplified liquidation (“egyszerűsített végelszámolás”)

For simplified liquidation, only an accountant is required, which in most cases will be the company’s regular accountant, although you can opt to work with a specialist. Simplified liquidation is available to companies that do not have a debt and do not require an auditor (which is necessary for bigger companies). Another important requirement is for the accountant to estimate that the procedure will not take longer than 150 days. However, simplified liquidation typically takes 6-12 months.

Regular liquidation (“végelszámolás”)

Companies who do not qualify for simplified liquidation can go with the regular liquidation procedure. This requires a lawyer as well as the accountant (and the auditor, if it has one). In this case, it will be the lawyer who files the liquidation with the Court of Registry. The company must also appoint a liquidator who will notify each Hungarian authority that liquidation was initiated, but this person can be the lawyer. Regular liquidation typically takes 12-18 months, although in some cases it may take up to 3 years.

Involuntary liquidation

If you do not properly maintain your Hungarian company, you do not comply with regulations, or you allow debts to accumulate, your company will be liquidated by the Court of Registry. This will be the case if you just abandon it and stop taking care of it. As a result, you will lose the share capital when it is distributed among your creditors, and you might be banned from starting or managing another company for up to 5 years.

Forced or mandatory liquidation (“kényszertörlés”)

Forced liquidation is initiated by the Court of Registry when the company has been non-compliant with various requirements for some time. You will receive several warnings before this happens, so you need to listen to your accountant and keep an eye on your Cégkapu to avoid it. Forced liquidation can be the final step of a windup (see below), the conclusion of a bankruptcy procedure, or a result of the deletion of the company’s tax number by the Tax Authority (which can happen for various reasons, mainly for missing tax payments). It may also be ordered if the voluntary liquidation is not completed in 3 years (which is always a result of non-compliance).

Windup (“felszámolás”)

A windup is initiated when a company has outstanding debt. It can be initiated any time by one of your creditors if you fail to pay incoming invoices for a prolonged time, or during voluntary or forced liquidation if it is discovered that the company has debt. Liquidation can be finalized only after the windup is completed, during which a liquidator is appointed to assess the assets and debts of the company, and then sell the assets in order to pay creditors in an order of priority. Windup may take up to 2 years. If too many unsettled debts remain, the executives of the company might be banned for a few years from setting up or managing another company.

Choose liquidation when you are done

When you decide that you no longer want to do business in Hungary, it might be best to initiate voluntary liquidation. If your business is small and debt-free, simplified liquidation is relatively easy and cost-effective, even though you are required to maintain your registered seat, your Hungarian corporate bank account, and your accounting contract throughout the procedure. By simply abandoning the company, you risk losing your share capital and being banned from further business activities.

Liquidation with the Helpers Team

Naturally, liquidation is among the services we provide to all our clients upon request, while occasionally we also take on separate cases. Whether you need simplified or regular liquidation, we will be here to assist you and make sure you can cease your Hungarian activity as efficiently as possible. Feel free to contact us and tell us about your former activity and current situation, and we will help you explore your options.

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