Non-EEA investors need prior ministerial permission in some sectors - UPDATE

Act LVII of 2018 on the Supervision of foreign investments violating the national security interests of Hungary has been adopted by parliament, and will enter into force on 1 January 2019. The Act stipulates that people, companies, and legal entities from countries outside the European Economic Area must obtain permission from a relevant minister before making investments in Hungary. The Act applies to direct or indirect investments of over 25% (10% for public limited companies) in companies seated in Hungary with business activities deemed sensitive to national security.

The relevant business activities include:

• those considered sensitive (e.g. production of arms and ammunition and dual-use products; and governmental, municipal or national IT registers);
• financial services and financial auxiliary services as defined in Act CCXXXVII of 2013 on Credit Institutions and Financial Enterprises;
• those providing electricity, gas, water, and telecommunications services.

Permission is to be requested prior to investing in the relevant Hungarian company, and the minister will have 60 days to decide on granting permission. This deadline may be extended once by another 60 days. If permission is not granted, the investor cannot be registered as a member of the company, and cannot exercise company rights.

In the case of a rejection, the investor can appeal to the Hungarian Metropolitan Court. In practice, this process will take time, which must be taken into account when structuring deals.

For more information, please contact Anikó Kircsi or Dóra Czeglédi.