Foreigners need ministerial authorisation to acquire shares in Hungarian companies

Until the end of the year, foreign investors can only buy shares in Hungarian strategic companies with the permit of the Hungarian Minister for Innovation and Technology.

The protection of Hungarian-owned businesses from economic decline and foreign buy-outs was already announced within the framework of the economy protection plan at the beginning of April. The government decree connected to this measure was published in the latest issue of the Hungarian Gazette on 25 May, Mfor reported. According to the decree, the approval of László Palkovics, the Minister for Innovation and Technology is necessary for the following legal transactions:

• the transfer of a certain shareholding percentage in a strategic company,
• capital increase,
• transformations, mergers and divisions,
• the issue of bonds with subscription warrant or convertible and subscription bonds,
• the establishment of the right of usufruct over the shares of a strategic company.

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The regulation prescribes the necessity of ministerial approval when a foreign investor acquires at least 10% shares in a strategic company as a result of the acquisition of shareholding, or the right of usufruct and the total value of the investment reaches or exceeds 350 million forints.

The reporting obligation also applies to the cases when a foreign investor acquires a 15%, 20% or 50% ownership in a company, or the total proportion of foreign ownership exceeds 25%.

Based on the submitted information (personal data of the investor, information about the relevant circumstances), the minister has 45 days to make a decision about the acknowledgement or the prohibition of the transaction.

In the latter case, the minister has to justify his decision. If the investor does not agree, he or she can challenge the decision in an administrative non-contentious proceeding before the Metropolitan Court.

The annexe of the government decree lists a total of 21 sectors in which companies can be considered strategic companies:

• tourism,
• construction industry,
• health care,
• nuclear sector,
• governmental facilities,
• financial sector,
• agricultural production and food industry,
• defence industry,
• energy industry,
• communications industry,
• trade facilities,
• chemical industry.

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Source: mfor.hu