Hungarian company created for the purpose of a cross-border merger

According to the Hungarian Act CXL of 2007 on Cross-border Mergers of Limited Liability Companies, it is possible to set up a special limited liability company with its registered office in Hungary specifically for the purpose of cross-border mergers. Below is a summary of the main provisions applicable to the company to be established under these specific rules.

When setting up such a company, it must be declared in the application for registration that it is being set up for the purpose of participating as a receiving company in a cross-border merger. Already for this application, you must attach a joint draft of the merger agreement and the merger report.

An interesting arrangement is that no manager is appointed, no supervisory board is set up and no auditor is elected when this company is formed. Until the date of the merger with the foreign company, the founder or the designated founding member also performs the management and representation functions within the scope of his membership or may grant a general power of attorney to a third party to perform these functions. Such general authorisation must also be attached to the application for registration. The founder, the designated founder member or the owner representative shall be the registered representative of the acquiring company to whom the disqualification and liability rules applicable to the chief executive officer shall apply.

It is also specific that the acquiring company does not open a cash account. A declaration by the representative, countersigned by a lawyer, certifying the payment of the financial contribution must be attached to the application for registration.

During the registration procedure of the acquiring company, the tax authority will examine the conditions for issuing a tax number during the tax registration procedure, but will not issue a tax number to the company. Furthermore, the company will not be given a statistical number.

The court registers the name of the company with the suffix “incorporated for the purpose of merger”.

Until the date of the cross-border merger, the company thus formed may not enter into any civil law relationship with third parties, may not assume any obligations or acquire any rights and the acquiring company or the person representing it may only take decisions or act in the interests of the merger.

From the date of registration, the only changes that may be made to the business particulars of the merging company are those relating to the company name, the registered office, the representative and the member. The company has no tax liability other than tax registration until the date of the merger.

If the merger is not registered within one year of the date of the registration of the Hungarian company in the commercial register, the merger will normally be automatically struck off the commercial register without succession.

If the transformation is a merger, the continuing Hungarian company is the transferee, and if it is a merger, the resulting (third) legal successor company operates from the date of registration of the transformation. During the change registration procedure for the registration of a cross-border merger, the successor company will receive a tax number and a statistical number. The business year of the succesor company starts on the date of the merger.

The author of the article is Dr György Zalavári LL.M, partner and lawyer Ecovis Hungary Legal.