Hungary

Currently, there are two different sets of foreign direct investment control (“FDI”) screening mechanisms in effect in Hungary: 

1. the “General FDI Regime,” centred around Act no. LVII of 2018 and applicable from the beginning of 2019; and
2. the “Special FDI Regime,” which is currently centred around Act L of 2025. This regime was originally introduced in 2020 with a view to the emergency situations caused by the COVID-19 pandemic and the Russo-Ukrainian war. But by now, the regime has become applicable without an expiration date, regardless of whether an emergency situation exists.

These two FDI regimes apply in parallel, with different scope, rules, sanctions and authorities enforcing them.

Who is a Foreign Investor?

The General FDI Regime does not apply to EEA and Swiss investors unless they are controlled by a third-country investor.

The Special FDI Regime differentiates between various categories of foreign investors, but acquisitions of majority influence over a Hungarian strategic company are notifiable even if they are undertaken by investors from the EEA or the Swiss Confederation, provided that the value of the investment is over HUF 350 million (circa EUR 897,000). 

What Type of Transactions must be Notified?

The filing triggers under both regimes are complex. Essentially, a filing is required if one of the following types of transactions is undertaken by a foreign investor with regards to a Hungarian-registered company that is active in a strategic sector:

1. the acquisition of a certain stake in (or otherwise control over) the company, the degree of which differs by investor and company type;
2. in some cases other corporate transactions such as capital increases, mergers, bond issues or the creation of a beneficial interest over shares;
3. new strategic activity of an already existing company;
4. the acquisition of rights over assets, infrastructure or equipment which are essential for the activities of a strategic company.

Under the General FDI Regime, the scope of strategic sectors is fairly limited. It includes, amongst others, the manufacture of arms and ammunition, dual-use items, the provision of financial and insurance services, certain critical energy-related and electronic communication services and certain IT services provided to certain types of clients.

By contrast, under the Special FDI Regime, the list of “strategic” sectors is broad: amongst others, it includes most manufacturing, retail and wholesale activities, as well as some services.

However, under the Special FDI Regime, a foreign-to-foreign exemption exists: this means that the transaction is not notifiable if the direct shareholders of the Hungarian company do not change, even if there is a change of control higher up in the ownership chain.

The Notification Process

The General FDI Regime provides a 10-day deadline for notification to the competent minister (currently the minister leading the Cabinet Office of the Prime Minister), counted from signing the contract or potentially a pre-contract. In addition to supplying information about the transaction, the foreign investor and its ownership structure must be described in the filing, and the transaction documents must be filed with a Hungarian translation attached. 

As a rule, the deadline for the minister’s proceedings is 60 days, but it may be extended by another 60 days, and the transaction is not automatically considered cleared even if the minister misses the extended deadline. 

The investor may request the judicial review of a prohibition decision from Hungarian courts.

Fines up to HUF 10 million (circa EUR 25,640) may be imposed for failure to notify, and notifiable transactions are not considered valid without a clearance decision. Thus, for instance, the change in ownership will not be entered into the Hungarian company registry without the necessary approval.

The process under the Special FDI regime is similar, but the notification must be filed with a different minister (currently the minister for economy) and the deadline for the process is only 30 business days, with a 15-day extension possible. Again, there is no presumption of approval if the minister fails to adopt a decision within the deadline. The fines which may be imposed for failure to notify can reach up to twice the transaction value.

There are additional regulations in place where the target company’s activities concern solar plants. In such cases, the Hungarian State has a pre-emption right that must be exercised within 90 working days, counted from the day the minister notifies the foreign investor of the existence of the pre-emption right.

If the minister for energy recommends the exercise of the State’s pre-emption right, the FDI proceedings are terminated. Otherwise, the proceedings continue as normal.

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