Hungary: New regulation on the control of foreign investments
Investors from outside of the EU, Switzerland and EEA shall obtain the Hungarian Minister of Interior’s prior approval in case of acquisitions on sectors deemed sensitive to national security, pursuant to the new Act LVII of 2018 on The control of foreign investments violating the national security interests of Hungary (the “Act”), applicable as of 1 January 2019.
Sectors that qualify as sensitive to national security include e.g. the operation of payment systems, certain operations in the field of electricity, natural gas, electronic communication services.
Notification and prior approval is required in the event of
- acquisitions conveying either direct or indirect control over 25% (in case of public limited companies 10%) or qualifying holding as defined by the Hungarian Civil Code in companies seated in Hungary with certain business activities;
- acquisitions whereby the overall ownership stake of the foreign investors in the company exceeds 25%;
- acquisition of the right to operate and use the infrastructure, equipment and tools necessary for the provisions of services in the sensitive sectors;
- establishing branch office in Hungary;
- commencing activities in the sensitive sectors by the company in which foreign investors acquired the above mentioned ownership or in which foreign investors hold a qualifying holding.
If the acquisition is prohibited by the Minister, the foreign investor is obliged to sell its shares or eliminate its qualifying holding in the company or the company has to modify its activity within 3 months. During the sale procedure the Hungarian State has pre-emption rights.
Furthermore, in the event the foreign investor fails to comply with the notification obligation, the Minister may impose a fine of a maximum HUF 1,000,000 for natural persons and HUF 10,000,000 for legal entities.
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