Hungary: Companies in imminent insolvency can start reorganization proceedings at the Metropolitan Court of Justice until 22 May 2021
From 17 April 2021, a new procedural possibility has been opened on a temporary basis until 22 May 2021 to help businesses in financial difficulty to continue operating. The purpose of reorganization is to enable a debtor to reach an agreement with creditors involved in the procedure within the framework of a reorganization plan.
The decision to initiate the procedure, and which creditors to involve in the procedure, can be taken by the decision-making body of the company. However, if the debt is overdue, the creditor(s) must be involved. The Metropolitan Court of Justice will decide on initiation of proceedings within 10 working days from filing an application.
The assistance of a reorganization expert is mandatory. On the basis of the expert’s preliminary opinion, the court will impose a moratorium of 90 days (which may be extended by 60 days) during which the company’s executive officer may only make legal declarations or commitments relating to the assets of the company or its economic activities that go beyond the scope of day-to-day management with the expert’s prior written approval.
As a result of reorganization, contracting parties with whom the undertaking has a long-standing civil-law relationship ensuring its production and operation may not suspend performance of an outstanding contract, terminate it or unilaterally modify it in any way on terms less favourable to the undertaking solely on the grounds that reorganization has been decided, ordered or a moratorium has been imposed.
As a rule, the procedure and the data relating to it are not public, as they only concern the creditors involved, and the order granting reorganization need not be published. The decision-making body may, however, decide to open the procedure to the public, in which case the order will be published. In a public procedure, the reorganization plan is deemed to be approved by the creditors if 60% of votes are in favour of the reorganisation plan in proportion to the total number of votes of all creditors with voting rights, with the condition that that no creditor may receive less than 60% of its capital claim.
A successful reorganization concludes with approval of the reorganization plan by creditors and then by the court, with a maximum of two years for implementation. However, an unsuccessful reorganisation does not automatically lead to liquidation.
Source: Government Decree 179/2021 (IV. 16.) on the reorganization of enterprises in an emergency situation