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The amendments to the EU Consolidated Company Law Directive and Digitalisation Directive will help companies to move across borders
With effect from 1 August 2022 , Hungary implemented the Directive (EU) 2019/2121 of 27 November 2019 amending Directive (EU) 2017/1132 (“Consolidated Company Law Directive ”) as regards cross-border conversions, mergers and divisions.
By the same Hungarian Act, Directive (EU) 2019/1151 of 20 June 2019 amending Directive (EU) 2017/1132 as regards the use of digital tools and processes in company law (so-called “Digitalisation Directive ”) has also been transposed into national law.
The amendments to the Consolidated Company Law Directive enable EU companies to change their legal form and transfer their registered offices to another EU country without being dissolved, while retaining their legal personality. For example, in Hungary there were previously only two options for companies wishing to transfer their registered office to another Member State:
- To wind up the company without succession in Hungary and then set up a new company in the host Member State, or
- To merge two companies by means of a cross-border merger. In such case, it was also necessary to set up a new company in the host country to merge into.
Therefore, the lack of a reliable EU legal framework for cross-border company reorganisations and divisions, and the inadequate EU legislation on cross-border mergers, led to difficulties for companies to access markets in other Member States; often they had to find costly alternatives to direct procedures. This has prevented them – especially SMEs – from doing business across borders. Relevant stakeholders (employees, creditors, minority shareholders and third parties) faced uncertainty as to their rights in cross-border situations. Diverging national rules also contributed to this situation.
From 1 September 2022, Hungary will also follow the simplified and unified EU rules for cross-border mergers, reorganisations and divisions. The procedure will become less burdensome, based on the certificate issued by the Member State of departure.
Further, by virtue of the implemented Digitalisation Directive, from 1 August 2022, it will become possible for EU citizens and EU-registered companies to found a Hungarian limited liability company (“Kft. ”) or a Hungarian branch office electronically, without the need of personal presence. Certain pre-requisites exist: electronic signature and share capital consisting exclusively of cash contributions.
The EU and Hungarian companies planning to expand their international presence should consult with their legal and tax advisers about the new opportunities provided by the EU law.
For more information, please contact:
Marina Lisznyanszkaja
Tax Advisory Supervisor
VGD Hungary Kft., Hungary
T: +36 1 225 7575
E: marina.lisznyanszkaja@vgd.hu
W: www.vgd.hu
