Hungarian Restructuring Tools and Their Use in Practice
July 2025
The current Hungarian regime governing bankruptcy, liquidation and restructuring proceedings dates to the late 1990s. It has undergone several amendments aimed at implementing EU legislation regarding restructurings and increasing the efficiency of proceedings. There is a state of emergency that has been in force since 2020, which allows the Hungarian government to amend legislation through governmental decrees, which is also impacting the restructuring regime (the “Emergency Measure”). Recently, new legislation has been proposed which seeks to elevate certain elements of the state of emergency-related decrees made during the Emergency Measure to a statutory level. The proposal also aims to repeal the multitude of decrees relating to bankruptcy, liquidation, and restructuring proceedings. However, this remains a proposal, with no concrete measures having been implemented to date.
According to the Hungarian Bankruptcy Act, there are two types of insolvency-related proceedings under Hungarian law:
- Bankruptcy proceedings, whereby the insolvent debtor initiates a moratorium on payments without liquidation of the debtor to draw up a restructuring plan and reach a bankruptcy settlement; and
- liquidation proceedings, which aim to secure the satisfaction of creditors’ claims while winding up an insolvent debtor without a legal successor.
In line with EU Directive 2019/1023 on restructuring and insolvency, the Hungarian Restructuring Act introduced the option of restructuring proceedings for companies, thereby providing more options for those facing insolvency.
Trends in Reported
Restructuring Proceedings
As of the date of this publication, there have been few reported restructuring proceedings. This may be because these proceedings are not available through public records. However, based on experience and discussions with Hungarian banks, only a limited number of non-public restructuring proceedings have been commenced.
By contrast, the average number of applications for the commencement of liquidation proceedings was approximately 18,110 per year between 2020 and 2024. Since 2022, however, there has been a significant upward trend. In 2023, the number of applications peaked at 27,726, the highest level in recent years, before declining slightly to 23,679 in 2024.
Filed Liquidation Proceedings
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As of the date of this publication, there have been few reported restructuring proceedings. This may be because these proceedings are not available through public records. However, based on experience and discussions with Hungarian banks, only a limited number of non-public restructuring proceedings have been commenced.
By contrast, the average number of applications for the commencement of liquidation proceedings was approximately 18,110 per year between 2020 and 2024. Since 2022, however, there has been a significant upward trend. In 2023, the number of applications peaked at 27,726, the highest level in recent years, before declining slightly to 23,679 in 2024.
Filed Liquidation Proceedings
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The increase compared to previous years is due to the suspension of compulsory dissolution proceedings as part of the Emergency Measure. Consequently, the number of liquidation proceedings initiated following compulsory dissolution declined in 2020–21. Following the resumption of compulsory dissolution proceedings in 2022 and given that many of these continued as liquidation proceedings, the number of liquidation proceedings initiated rose compared to previous years.
By contrast, fewer than one hundred bankruptcy proceedings were recorded annually in previous years, with only sixty cases in 2024 during the same timeframe. On average, only 71 applications for bankruptcy proceedings were made per year. Interestingly, this shows a downward trend.
Filed Bankruptcy Proceedings
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The increase compared to previous years is due to the suspension of compulsory dissolution proceedings as part of the Emergency Measure. Consequently, the number of liquidation proceedings initiated following compulsory dissolution declined in 2020–21. Following the resumption of compulsory dissolution proceedings in 2022 and given that many of these continued as liquidation proceedings, the number of liquidation proceedings initiated rose compared to previous years.
By contrast, fewer than one hundred bankruptcy proceedings were recorded annually in previous years, with only sixty cases in 2024 during the same timeframe. On average, only 71 applications for bankruptcy proceedings were made per year. Interestingly, this shows a downward trend.
Filed Bankruptcy Proceedings
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Basic Rules of Bankruptcy Proceedings
One of the ways that a company can restructure is through bankruptcy proceedings. The aim of the procedure is for the debtor to reach an agreement with its creditors on the satisfaction of claims in a bankruptcy settlement, so the debtor can continue its business operation.
Initiation of Bankruptcy Proceedings
The executive officer(s) of the debtor, with the consent of its shareholders, may initiate bankruptcy proceedings by an application to its court of registration. If the court orders the commencement of bankruptcy proceedings, it will appoint at random via an electronic selection process an asset inspector, whose duty is to monitor the debtor’s business activities. Furthermore, the court will call upon its creditors to register their claims with the asset inspector and the debtor within 30 days.
Moratorium During Bankruptcy Proceedings
During bankruptcy proceedings, a moratorium applies for 180 days (which may be extended to a maximum of 365 days) from the commencement of proceedings. During this period, the debtor is not required to and cannot fulfil payment obligations that arose on or before proceedings commenced, creditors cannot demand payment of their claims, all enforcement of payment obligations is suspended, no new enforcement actions can be ordered against the debtor, and set-off rights cannot be exercised against the debtor. The debtor may only undertake new obligations or make payments with the consent of the asset inspector.
Restructuring Plan and Bankruptcy Settlement
During the moratorium, the debtor will convene a restructuring meeting to confer and agree with its creditors on a restructuring plan and a bankruptcy settlement. A bankruptcy settlement requires the majority votes of the creditors as well as the countersignature of the asset inspector in order to be approved.
The bankruptcy settlement must be submitted to the court. Should it comply with the relevant laws, the court will declare the bankruptcy proceedings complete. However, should it not comply with such laws, or in the absence of any settlement, the court will terminate the bankruptcy proceedings, declare the insolvency of the debtor, and order the liquidation of the company, the procedure for which we discuss briefly below.
Basic Rules of Liquidation Proceedings
In general, the purpose of liquidation proceedings is to wind up the debtor (without succession) and satisfy the creditors. Therefore, this is not the most preferred means of restructuring. However, it is possible to reach a settlement during liquidation proceedings, which can potentially restore the debtor's solvency. If the debtor and the creditors agree on a settlement, and the court approves it, the debtor company will not be dissolved, but will continue to operate as set out in the settlement.
During the settlement negotiation, the discretion of the creditors and the debtor is quite wide. The debtor and the creditors may agree on:
- The order of satisfaction of debts;
- the adjustment of the delivery deadlines;
- the rate and manner of the settlement of the creditors; and
- anything the parties consider necessary to restore the debtor’s solvency or otherwise, in particular, measures to increase revenue.
However, the settlement cannot contain provisions that are manifestly unfavourable or unfair to all creditors or certain categories of creditors.
Basic Rules of Restructuring Proceedings
The restructuring regime provides an option for companies that are at risk of not meeting their current obligations to restructure their debt. Debtors have an opportunity to reach an agreement with their creditors in a way that allows them to continue their business operations and to prevent them from becoming insolvent.
Initiating Bankruptcy Proceedings
If insolvency is probable, a debtor may decide to rely on bankruptcy and will designate the commencement date of the bankruptcy proceedings in its decision. The debtor must request that the court commence the proceedings within five days of making the decision. The debtor can choose whether the proceedings are public or non-public.
Requesting and Legal Effects of a Moratorium
The debtor may also request that the court order a moratorium to facilitate negotiations on a restructuring plan. The moratorium can be in effect for a maximum period of four months, while the total duration of the moratorium (including the time limit for any extension or the duration of a new moratorium ordered after the expiry of the initial moratorium) cannot exceed 12 months.
During the moratorium, creditors subject to the moratorium cannot initiate enforcement proceedings (and enforcement proceedings initiated before the commencement date of the proceedings are suspended), liquidation proceedings or otherwise satisfy its claims with setoffs.
Furthermore, creditors subject to the moratorium cannot suspend the performance of essential agreements (i.e., those which are necessary for the day-to-day running of the business of the debtor); cannot withhold or suspend the performance of other agreements, terminate or amend them on the basis of the debtor’s restructuring or moratorium; and they cannot terminate or amend these agreements if it would be unfavourable to the debtor.
Restructuring Plan
Hungarian bankruptcy proceedings are aimed at the creation and implementation of a restructuring plan, whereby the debtor registers and classifies the known claims of the respective creditors into groups (i.e., secured claims, claims related to economic activity, other claims and claims arising from a transaction in the interest of the debtor).
The restructuring plan must ensure the principle of equal treatment of the respective creditors belonging to the same group, and it cannot be aimed exclusively at the partial or total waiver of the claims of the creditors against the debtor.
During the restructuring, the court may appoint a restructuring expert ex officio or upon the request of the debtor or the majority of creditors, whose primary task is assisting in the preparation and negotiation of the restructuring plan as well as supervising the debtor’s actions and management during the negotiations.
Following negotiations, the restructuring plan is adopted by the majority votes of the creditors and countersigned by the restructuring expert (if applicable). The court must approve the restructuring plan for it to have any legal effect.
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