The proposal “Supervision of foreign investments violating the national security interests of Hungary” (“Proposal”) has been submitted to the Hungarian Parliament, which would require people, companies, or legal entities from countries outside the European Economic Area (EEA) to obtain permission from a relevant minister before making investments in Hungary.
If passed, the Proposal would take effect on 1 November 2018, and would apply 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 in the members' list of the company and cannot not exercise company rights.
In the case of a rejection, the investor can appeal to the Hungarian Metropolitan Court. In practice, this process will cause delays, which must be taken into account when structuring deals.
The Proposal is in its final phase. Parliament is expected to accept the Proposal, which is in its final draft, in September 2018. Once the Proposal is accepted – whether in this or a modified form – a Law-Now update will be issued.
For more information, please contact us.