Can your accountant liquidate your Hungarian company?

What is liquidation?

Liquidation is the official process of closing down your Hungarian business. At the end of it, your company will be removed from the Hungarian Company Registry, which is accessible online at https://www.e-cegjegyzek.hu/. There are various types of liquidation, depending on the status of your company. Liquidation can be voluntary or involuntary, and voluntary liquidation can be simplified (more on these below).

Simplified liquidation can be done by your Hungarian accountant if your company has no debts and if it doesn’t have an auditor. This is the best option for liquidation, but it still takes time (anywhere between 6-12 months), during which you have to maintain your monthly accountancy and your registered seat.

What to do if you just want to get rid of your Hungarian business?

Liquidation is the lawful and technically correct way to close down your Hungarian operation.

If you just want to be relieved of the responsibilities of the company, but otherwise it is still a functional business, you can try selling it. This can be an easy solution if you find a willing buyer for a good price. However, since company setup in Hungary is so simple (it takes just a few days), entrepreneurs often prefer setting up their own business instead of buying an existing one and risk buying existing burdens with it.

Of course, simply abandoning your Hungarian company is also a choice you can make. The Court of Registry will eventually liquidate it, but you might be banned from starting another business in Hungary for up to 5 years.

As a result, liquidating your Hungarian business is the safest and often the fastest as well as most cost-effective option even though it might take up to a year and it is not cheap. Liquidation has a separate fee, and you will be required to maintain your registered seat throughout the procedure, as well as your accountancy.

Types of company liquidation in Hungary

A. Voluntary liquidation (“végelszámolás”)

If your Hungarian company has no debt, you may initiate the liquidation by an official decision of the shareholders. If you are the sole shareholder, you will still need this decision properly documented. Ask your accountant to help you select the official starting date of the liquidation.

You will have two options:

1. Simplified liquidation (“egyszerűsített végelszámolás”)

This is the best possible option, since it requires only an accountant. This can be your regular accountant who has been providing accounting services to your company so far, or a new provider. Simplified liquidation is available to you if your company has no debt AND it does not require an auditor (which is something bigger companies normally need). Moreover, it is crucial that the accountant starting the procedure makes a statement that the liquidation should not take more than 150 days. Nevertheless, the procedure might take up to 6-12 months.

2. Regular liquidation (“végelszámolás”)

If your Hungarian company does not qualify for simplified liquidation, you can still opt for the regular liquidation procedure. In this case, you will need to hire a lawyer as well as an accountant (and the existing auditor, if the company has one). The company will need to appoint an official liquidator, who can be the same lawyer handling the case; this liquidator will notify each Hungarian authority that liquidation was initiated. Regular liquidation normally takes 12-18 months, although it may take up to 3 years.

B. Involuntary liquidation

Involuntary liquidation happens if you do not take good care of your Hungarian company, meaning that you do not comply with regulations, let debt accumulate, or simply abandon it. In this case, the Court of Registry will liquidate it as part of its regular responsibilities, but you will inevitably lose the share capital, and you might be banned from starting or managing another company in Hungary for up to 5 years.

There are two main types of involuntary liquidation:

1. Forced or mandatory liquidation (“kényszertörlés”)

Mandatory liquidation is initiated by the Court of Registry if your Hungarian company has been non-compliant for a prolonged time. You will receive several warnings before it, so if you want to avoid it, keep in touch with your accountant and listen to what they say. You will also receive notifications to the Company Gate (Cégkapu). Mandatory liquidation can be the conclusion of a bankruptcy procedure, the result of getting the company’s VAT number deleted by the Tax Authority, or the final step of a windup (see below). It may also be ordered if the voluntary liquidation cannot be completed within 3 years (which is always the result of non-compliance).

2. Windup (“felszámolás”)

A windup is done if a company has outstanding debt. It can be initiated at any time by any of your creditors – in fact, threatening with initiating a windup is a tactic for making a business pay up, this way preventing the inconvenience of getting a windup procedure cancelled. Windup may also be started at any point during voluntary or involuntary liquidation if debts are discovered, and the liquidation can be finished only after the windup is completed. During the windup, a liquidator will assess all the assets and debts of the company, and then sell the assets to satisfy creditors. If too many unsettled debts remain, the executives may be banned from setting up or managing another company in Hungary for a few years. The procedure itself may take up to 2 years.

Choose liquidation for a clean break

If you have a small business in Hungary which has no outstanding debts, the voluntary initiation of simplified liquidation might be the best way to close your operation neatly. You will need only the help of your accountant, and the only additional costs will made up of maintaining your seat address and your regular accountancy. Compared to other options, this procedure is the fastest, the most risk-free, and the most cost-effective.

Helpers Finance provides services to small and medium-sized businesses operating in Hungary, focusing on supporting foreign business owners. Should you need any guidance, you can always count on our commitment and expertise.