Hungary makes changes to ministries overseeing FDI control matters

Hungary

Following the election and formation of a new government in Hungary on 24 May 2022, the government has adopted Government Decree No. 182/2022 (V. 24.) on the competences and powers of the members of Government. This Government Decree entered into force on 25 May 2022.

The Government Decree reflects the new structure of the Hungarian government with new ministries established and the competences of former ministries redistributed. As a result of this redistribution, the ministries authorised to decide on foreign investment control-related notifications required under Act LVII of 2018 on controlling foreign investments violating Hungary’s security interests (2018 FDI Regime) and Act LVIII of 2020 on the transitional rules related to the termination of the state of danger and on the epidemiological preparedness (2020 FDI Regime) have changed as follows:

  • the notifications under the 2018 FDI Regime are now to be submitted to the Cabinet Office of the Prime Minister instead of the Ministry of Internal Affairs; and

  • the notifications under the 2020 FDI Regime are now to be submitted to the Ministry of Industry and Technology, being a legal successor to the Ministry of Innovation and Technology.

The 2018 FDI Regime is effective in Hungary since 1 January 2019. A ministerial acknowledgement for a transaction is required under the 2018 FDI Regime if a foreign investor intends to acquire – either directly or indirectly – at least 25% of the ownership of a company (or 10% of a public company) falling under the scope of applicability of the relevant FDI regulation. Due to the COVID-19 situation, the definition of foreign investor under the 2018 FDI regime has been extended to all foreign entities (i.e. EU, EEA and Swiss companies as well). This extension is scheduled to remain effective for one year after the termination of the state of emergency (i.e. until 1 June 2023).

The 2020 FDI Regime was originally introduced as a temporary FDI screening mechanism during the COVID-19 crisis. However, its applicability has been recently prolonged for an indefinite period. A ministerial acknowledgement for certain transactions is required under the 2020 FDI Regime if the transaction affects a strategic company (i.e. a company pursuing strategic activities, the list of which is enumerated in the relevant FDI regulation), if the transaction is initiated by a foreign entity (i.e. any entity being outside of Hungary) and, in certain cases, if the transaction value reaches HUF 350 million (EUR 1 million).

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This article is co-authored by Zsolt Zsurzsa.