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Important reminder about capital rules- last call!

23 February 2017

The final deadline of the subscribed capital is coming. The original deadline to adopt the rules of the new Civil Code was 15.03.2016, however, on 1 March 2016, the Parliament passed Act I of 2016 and granted one additional year to the foundations, associations and limited liability companies to comply with the rules of the new Civil Code, so the final deadline of the subscribed capital increase is 15.03.2017.

The final deadline of the subscribed capital is coming. The original deadline to adopt the rules of the new Civil Code was 15.03.2016, however, on 1 March 2016, the Parliament passed Act I of 2016 and granted one additional year to the foundations, associations and limited liability companies to comply with the rules of the new Civil Code, so the final deadline of the subscribed capital increase is 15.03.2017. Please note that the amount is not needed to be provided by this deadline and it can be a future date as well, however, in such case the company may not distribute dividends.

We would like to draw the attention to the following:

-           the deed of foundation, memorandum of association cannot have conflict with a provision of the New Civil Code that prohibits derogation,

-           and if the registered capital is lower than the obligatory minimum, the company shall take care of the capital increase (or change company form). In case of limited liability company the mandatory minimum of the subscribed capital is 3 million HUF.

The methods of capital increase include the conversion of other equity elements such as capital reserve, profit reserve as well as payment of cash contribution or contribution in kind. The capital increase cannot be performed by a technical transfer from the own petty cash of the company, bank or any other existing asset. Please note if a company that will not take care of the capital increase to meet the new rules- or will not transform into another type of business association, that does not have minimum capital requirement- shall be terminated.

If a Company’s founding document has to be amended for the sole purpose of complying with the new Civil Code, the registration of the changes can be submitted to the Court of Registry without being obliged to pay duty. If any other change - such as seat change - is adopted, duty has to be paid.