Hungary: Recent modification of the Companies' Act allows cash contribution to be paid to third persons in a capital increase

Effective from 23 June 2017, Act no. LXI of 2017 on the Amendment of Certain Acts to Increase the Legal Competitiveness of the Business Environment (the “Amending Act”) amended Act no. V of 2006 on Public Company Information, Company Registration and Winding-Up Proceedings (the “Companies Act”) to, among other things, regulate the procedures and documentation when applying for registration of a capital increase.

Prior to the adoption of the Amending Act, the effective provisions of Act no. V of 2013 on the Civil Code (the “Civil Code”) and the Companies Act were not clear, and it was not easy to interpret whether the cash contribution must be performed directly to the company in the course of a capital increase, or whether it could be provided to a third person based on the resolution of the company’s supreme body. Such uncertainty arose from the fact that the terminology in the Civil Code and Companies’ Act was inconsistent. On one hand, it stated that in some cases members were required to pay the cash contribution to the company while in other cases it was acceptable to simply perform the contribution. On the other hand, the supreme body of the company could freely determine the conditions of the cash contribution payment, and could nominate a third person as addressee of such payment.

To settle the above inconsistency, the Amending Act has inserted a new provision to the Companies Act that now enables limited liability companies and private companies limited by shares to resolve on capital increase in such a way that the member/shareholder responsible for the performance of the cash contribution shall pay the amount directly to a third person instead of the company. This third person as an addressee of the cash contribution shall be indicated in the supreme body’s resolution, and is not required to have a claim against the company.

For registration purposes, the executive officer of the company shall issue a declaration stating that the provision of the cash contribution to the third person was performed, forming an attachment of the registration application of the capital increase. Such a declaration shall be countersigned by an attorney-at-law or issued by a public notary in a form of a notarial deed.

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