Setup a company in HUNGARY

1) Denomination of the company
The denomination of the company must express the real activity object and the legal form of the company and can not be contrary to them.
The denomination can not express unreal situations and the main activity object must be obvious. Because generally companies have several activity objects, sometimes very different from one another, it is enough but also compulsory that the denomination should contain at least one or two main activity objects.

The denomination contains one main word (guidance word). This main word is an expression or a puzzle-word, which starts the denomination of the company. This makes the identification of the company easier and also differentiates it from other companies with the same object of activity or a related one.

The main word is the first word in the denomination of the company. Its role is to underline the identity and to facilitate the differentiation from other companies of the kind, by using an expression which sounds well and can be easily remembered.

The short denomination of the company is made up of the main word followed by the legal form of the company.

The main word may contain the name of the owner or partners.

In case of branches and representation offices in Hungary of the foreign trading companies the denomination of the companies must be contained in the denomination of the branches/representation offices from Hungary.

There is the possibility that in giving name to the company the name of the founder, owner or partner should be taken as the main word. It is not compulsory to write the full name. Special norms are in force - see Law CXXXII/1997 regarding the branches and representation offices from Hungary of some companies with the headquarters abroad. In such cases, is is not an option, but an obligation that the denomination of the branches or representation offices should contain the denomination " mother company".

Beside the main word, the denomination of the company may contain only Hungarian words according to the Hungarian orthography. The judicial practice will probably take into consideration as well the fact that there are many foreign words whose use is accepted both in written and spoken language so that they may be considered, due to their extensive use, as belonging to the Hungarian language.
In what form is concerned, this means the observance of the grammar and orthography rules. Of course, this regulation does not refer to the main word, if this is a word or a foreign expression. It does not refer either to the situation in which the denomination of the company contains the name of the owner of the foreign company or the foreign company that has established branches or representation offices in Hungary because in this case the orthographic rules of that language are observed. That is the reason why one can not use in the denomination of a company the phonemic transcription of some foreign words, no matter how difficult that word would be in use, according to the orthographic rules of that language. Exceptions are the languages that do not use the Latin alphabet. In such cases words are written according to the expression in the Hungarian language.
Short forms in the denomination may be given only to the min word and the form of company. In what the form of the company is concerned only the short form provided by the law is acceptable.

The use of names of important historical personalities in the denomination of company is possible only with the approval of the Hungarian Academy of Sciences and for denominations related to the juridical interest of some persons they can be used only with the approval of the person in question.

During the registration procedure the applicant has the obligation to add to the denomination of the company the short form of "bejegyzes allatt" - in process of registration, "b. a."; during the liquidatio procedure, the duration of patrimony division, respectively, the denomination of the company will be followed by "f. a." - "felszamolas alatt" - in process of bankruptcy, "v. a." - vegelszamolas alatt - in process of liquidation, respectively.

The denomination of the company (and its short form) must be different as to all the other company denominations in the country and as to the other companies that contain in the denomination the same object of activity.

From among two or more companies with the same denomination, the denomination right belongs to the company that forwarded the registration form first. This rule does not prejudice the rights of the founders or partners to inscribe their name as the main word in the denomination of the company. By request, the applicant is given, before he starts the registration procedure, information with regard to the denomination of the company and by the date of registration the denomination differs from the names of other already registered companies.

2) Headquarters of the company

The headquarters of the company is the place where the main problems of the company are solved and must be marked on the company's plate. Locations other than the headquarters are operation units and branches if situated in other towns or communes in other countries or Hungary. These regulations also apply for the branches in Hungary of some trading companies from abroad and for the direct representation offices of some foreign companies.

For the registration of the overseas branch of a trading company in Hungary, it is necessary to bring as a proof the excerpt of the registration certificate in the country of residence and other documents as well as their authenticated translations in the Hungarian language.

3) Partners

Except for the limited liability company with a sole partner, at least two natural or legal persons are necessary to set-up a trading company.

4) Object of activity

The objects of activity of the trading company must be translated into codes made up of four figures, according to TEAOR 98 and accompanied by the names in the denomination list. Also, the main activity must be clearly marked. The main activity is the one that will bring (according to the expectations) most of the incomes and stands as the main company profile.

5) Subscribed capital

The subscribed capital (the patrimony attribution of the partners), the modality and term for the payment of the contribution.

6) Name of the administrators, their residence, signature specimen

The engagement of the company, the representation rights in writs, the right to sign on behalf of the company;
The engagement of the company is individual or joint. If two or more persons have the right to engage the company, measures can be taken that the company should be engaged individually by some persons and others jointly or one of the signatories should always be a determined person. The same person, in one way only, individually or together with another person may engage the trading company.

Both the individual right and the joint right of engaging the company may be limited; this limitation does not produce effects as to third persons. Those who have the right to engage the company must sign under the modality and form comprised in the authentic declaration of signing in name of the company (the original copy of the document).

The authentic original copy of the document, signed by the notary and identical to the one contained in the setting-up document should contain de denomination of the trading company, the full name of the person who has the right to engage the company, his domicile, his mother's maiden name, the position held within the company, how he engages the company and the signature specimen.

7) Duration of the company, if it has been set up for a determined period of time.

The company contract should mention, besides what has been stated before, the following:
a) the registered capital and the contribution to the capital of each member;
b) modality and deadline for the payment of the unpaid capital share;
c) proportion of the voting right;
d) the first administrator, and if there are several administrators, the representation modality;
e) modality of company engagement;
f) in case of auditors' commission, competence of the first auditors' commission;
g) in case of chartered accountants, name of the first chartered accountant, agenda of the repeated general assembly.

Depending on necessities, the company contract will include:
a) about the contribution in kind and its value;
b) about other patrimony tasks of the company (additional tasks), conditions, delay penalties for unaccomplishment or incorrect accomplishment;
c) powers of the general assembly with regard to additional payments and payment conditions;
d) about the social share conferring differentiated rights;
e) exclusion of the share transmission or its limitation, conditioning of transmission by the company's approval, respectively;
f) in case of lawful succession, about the exclusion of transmission and division of the share;
g) approval of the share inclusion;
h) the share of the workers related to the preferential rights;
i) regulation of the decision capacity and modality of effective decision;
j) regulation on the convocation of the general assembly somewhere else than the company's headquarters;
k) establishment of the value limits from which on the decision belongs exclusively to the general assembly;
l) about the division of taxed outcomes and the patrimony rights of the members in case the company's activity ceases, if the computation method is other than that proportional to the capital contribution;
m) entitlement of all members to administrate and represent the company;
n) limitation of the representation right of the administrators;
o) in case of establishment of the auditors' commission, the members of the first auditors' commission;
p) for the chartered accountant, the first chartered accountant;
q) exercise of the preemption right for the increase of capital.

B. Authentic declaration of the company's representative (original copy), acceptance declaration and Trade Registry (Member Register)
The representative in front of the notary who presents his ID signs the original copy.

C. Payment of the registered capital and proof issued by a financial institution.
The registered capital of a KFT can not be less than 3 million HUF. The quantum of the set-up deposits will be less than 30% of the minimum capital, respectively 1 mill. HUF.

The company will be registered if:
a) the contribution in kind is made entirely available to the company
b) at least half of the subscribed capital and at least 1 mill. HUF is paid into the account of the company.

D. Making available to the company the contribution in kind and the statement of the administrator to ascertain this state of fact.

The members of the company have the obligation to make available to the company their contribution in kind and about this, the administrator must draw and hand in the statement. If the company selected the chartered accountant, the latter must append his statement about the value of the contribution in kind.

E. The mandate for a foreign citizen of a mandatory for the communication of documents in Hungary.

Foreign citizens must have a mandatory for the communication of the documents in Hungary and the document ascertaining this state of fact must be handed in together with the registration request.

F. In case of participation of a foreign company, a copy of the registration certificate and the authenticated translation into Hungarian are needed and must point out that according to the law the company is registered at the Trade Registry in the country of origin.

G. If the contribution in kind is a real estate, the ownership documents must prove it; they should be no older than 3 months and they must prove the ownership with no doubt;

H. Prove that it is member of the Chamber of Commerce;

I. Mandate of the lawful representative namely proofs of the representation right;

J. Proof of the payment of publicity fees according to the legal regulations. (payment of the stamp fee (and courts fees);

K. Form recommended in the appendix at Norms 8/1998 (V. 23) IM, which stands as the registration form too.

2. Registration procedure

The company contract and the other above stated documents must be registered at the Courthouse which keeps the Trade Registry within 30 days from the conclusion of the company contract - in view of registration and performance of the publicity procedure.

At the same time with the registration request the registration number, tax number, social insurance number and the statistic number are issued. Also, the forms that must be filled in and recorded at the Division for Taxation and Public Finance and the Statistics National Institute are issued.