How to become a shareholder in a well-run company?
If we are entrepreneurial, it is advisable to turn our ideas into reality in the form of an appropriate business company, or if our goal is simply to invest and we do not necessarily want to be actively involved in the life of the company, investing in a well-structured company can be a great way to do this. In this article, we deal with investing in a private limited company and thereby acquiring shareholder rights, the legal background for which is the increase in share capital through the issue of new shares. Let’s see what we need to know step by step. The content of this article is based on the relevant provisions of the Civil Code and the Civil Code, but each case is different, so please note that the following provisions are general and not necessarily applicable to specific, individual situations. Let’s clarify the most important basic concepts first! 1. WHAT IS SHARE CAPITAL? For public limited companies, share capital is the specific legal equivalent of subscribed capital, which is the sum of the nominal value of all shares. In the case of joint-stock companies – and it should be noted here that a joint-stock company (abbreviated to „rt.”) can be formed primarily in the form of a private limited company – the minimum amount of share capital is HUF 5 million. 2. WHAT IS A SHARE? A share is a security issued by the company, the most important characteristics of which are that it represents membership rights, is registered, has a nominal value and is negotiable. Shares can be produced either by printing or electronically in dematerialised form. In the latter case, the key details of the share are contained in a separate securities account. The only central securities depository in Hungary, KELER Zrt., is responsible for the creation of shares by electronic means. 3. WHO IS THE SHAREHOLDER? A member, i.e. an owner, of a limited liability company, who is entitled to a certain number of shares of the company’s issued stock. Hence the name shareholder, which is a term used only for a limited liability company and is often wrongly applied to a limited liability company. Depending on whether the shares constituting the share capital of the limited liability company are held by one or more persons, it may be a single or a multiple company. 4. HOW CAN WE BECOME SHAREHOLDERS? In short, we either set up a limited company ourselves or join an existing one. In this article we look at what legal steps are required to become a shareholder of the limited liability company, even if you are only an investor. Here is the timetable we have developed in our own practice: 0. STEP: Let’s look into the company you want to join, and you will need to obtain the following documents from the company: the articles of association in force (in the case of a limited liability company, this is called the articles of association) – you can get them here using the online company overview last published report – here you can find published reports Why do we even need these? Isn’t it enough to know that the company has a good turnover, a lot of customers, surely it’s worth investing in? Of course, this is a good thing, but it is important to be aware of what is on the books of the company you want to join with a lot of money and what the legal basis of their whole operation is. This step zero is nothing less than a legal due diligence with the simultaneous involvement of an accountant and/or a tax adviser, so that the prospective shareholder does not find out something unexpectedly „turpisslichkeit”. In addition to this, it is also a good idea to request a current company statement, which will tell you whether your favourite company has been seized by a body or authority, had its tax number cancelled, is in liquidation or has been the subject of other proceedings that are not favourable to your investment. If everything is clean and in order, the first step is to take the next step. STEP 1: After successful negotiations with the shareholders of the limited liability company, we should set out the amount of the financial contribution we wish to make to the company. After that, the legal steps should be taken. STEP 2: If a new shareholder wishes to join the company, the general meeting of the company’s highest decision-making body must decide on the increase of the company’s share capital. Although there are several ways of increasing the share capital, and each of them can even be carried out simultaneously, let us see what rules apply if the increase is carried out by placing new shares. Precondition: the share capital of a public limited liability company may be increased by the issue of new shares only if the nominal value or the issue value of all its previously issued shares has been paid up and the non-cash contribution has been fully paid up to the company. The increase of the share capital by the issue of new shares must be decided by a general meeting of shareholders, which must include: the way the share capital is raised; the amount of the increase in share capital or the minimum planned amount; the draft amendment to the articles of association relating to the increase in the share capital, including the number and series of new shares to be issued, the rights attaching to the type, class or series of shares, the method of creation, nominal value or issue value of the shares and the conditions for payment of the nominal value or issue value of the shares; the subject matter, value, number and other characteristics of the non-cash contribution, the name (company), domicile and registered office of the contributor and the name, domicile (registered office) of the auditor who performed the preliminary valuation, the date of the contribution; the period or subscription deadline for
Do I need to contact a foreign specialist to get a European Union trademark?
We take a look at five of the most common issues that need to be clarified for business owners who want to support their company’s international market entry with an EU trademark. Keeping up with change in the fast-paced world of consumer society is not easy, so many business leaders can struggle to know whether the idea and the associated logo have already been conceived in the minds of others when developing a product. Uniqueness and distinctiveness is one of the essential concepts in the trademark system, and it is important to draw attention to it before starting the manufacturing process of a product and even before branding. The product that creates the main profile of the company and the name or logo associated with it can be highly distinctive not only in the domestic market but also in the European Union market, but in order to be sure of the specific product, it is recommended to register the logo, the graphic or possibly the name. Another important aspect is that a registered trademark represents value, so we can increase the value of our business or company by having a registered trademark. When applying for a trademark, you can choose between national or EU trademarks, and this article will focus on the European trademark procedure first, but it is important to point out that both national and EU trademarks have a number of advantages and disadvantages, some of which we would like to highlight. The national trademark process will be covered in a separate article. What is the difference between a national and an EU trade mark? The national trademark registration procedure is before the National Intellectual Property Office, whereby, upon payment of a form and a fee, the logo will be protected in Hungary, but it is important to note that this protection is only available in Hungary. By contrast, the EU trademark procedure is before the EUIPO, which allows trademark protection to be obtained for all the Member States of the European Union by means of a single application and a single procedure. The resulting protection is uniform in all Member States and cannot be divided on a territorial basis. If the protection of an EU trade mark ceases, this will also apply uniformly to all Member States. What is the procedure? The procedure and cost of registering an EU trade mark is significantly cheaper than having to apply for protection in each Member State separately. In addition, when it comes to renewing a trademark, the EU trademark is a much simpler and more cost-effective option, as it is not possible to renew the trademark in each Member State, but in a single procedure. In our opinion, if the products to be marketed are to be present on the market throughout Europe, it is worthwhile to seek the protection offered by the EU trade mark rather than the national trade mark. In addition to the advantages, it is also essential to discuss the disadvantages of the EU trade mark, which are closely linked to the research process prior to the application for registration. In the event of any absolute absolute grounds for refusal on the grounds of unitary character, the whole application may be rejected. Such absolute and absolute grounds for refusal may include, inter alia, if the proposed logo is not distinctive or if it does not allow the subject-matter of the protection to be clearly and precisely identified. In such a case, the logo or name is excluded from protection as an absolute mark and may therefore be excluded from protection on the basis of the inherent character of the sign itself. In the case of a relative ground for refusal, the proposed trade mark conflicts with a pre-existing right of another person, usually an earlier trade mark. The above grounds for refusal require a thorough trademark search prior to filing a proposed trademark application, which we will normally carry out while keeping our clients informed. What is trademark research? The first step in a trademark search is to assess which trademarks similar to the proposed figurative or word mark have been registered before, which is assisted by the TMview site available at the following link: https://www.tmdn.org/tmview/#/tmview TMview allows you to insert both the word mark and the proposed figurative mark into the search, which will show you whether a trademark similar to the proposed one has been filed before. Even if a similarity is found during the search, there is no need to redesign the idea already conceived, as in many cases we have already approached the proprietor of the registered trademark to obtain their written consent to file the proposed trademark, which in turn avoids any obstacles to obtaining trademark protection in this area when filing before the EUIPO. In the case of this written consent, it is important to note, however, that the trademark owner may give his consent to the trademark application free of charge or for a fee, which should always be clarified during the negotiation process. However, failure to include written consent with the application may result in a high financial risk in filing a trademark registration application. But what are the procedural fees? The fee for the procedure before the EUIPO is €850 for one class, €50 for an additional class and €150 for three or more classes, which is payable at the time of filing the application and is non-refundable if the procedure does not result in registration. The proprietor of a similar earlier trade mark, if consent has not been sought, will have the right to a so-called opposition during the registration procedure, which in the case of an EU trade mark means that uniformity across all Member States will be broken and an application will have to be filed in each Member State individually, which may involve higher procedural and legal costs. Can I trademark anything in any service or product area? In parallel to the trademark search, it is necessary to continue the identification
How to avoid an invalid will?
8 factors to consider in order to avoid drafting an invalid will It is fair to say that the most memorable events in a person’s life are the unexpected twists and turns of fate, which, when they occur, provide a sense of security in knowing that the material and moral assets built up over a lifetime are safe. The best way to ensure that the unpredictability of the future becomes a certainty is to write a will, as this is the best way to reflect the testator’s wishes. However, it is essential that the will is written in the right way, otherwise the will, which is the basis of security, can easily become the starting point for conflict between relatives and thus a source of damage to relationships. In this article we will look at eight points that can guide you through the maze of writing and drafting a valid will. In order to draft a valid will, it is important to be aware of the different types of wills, as the way in which they can be made and the way in which they are made vary according to the type. Public service regulations Written private will Holograph, so-called handwritten will Allograph, a will written by someone else Will deposited with a notary This is a will drawn up by a notary. It is important to note that only a person who is blind, illiterate or unable to read or sign his or her name can make a valid will of this type. Handwritten in the testator’s own hand, handwritten from beginning to end and signed by the testator himself, and, if there are several pages, numbered individually. A will written on a computer or typewriter, or a will drawn up by a solicitor. It must be signed by a witness and by the testator, and the pages must be numbered consecutively if there are several. In the case of allographic and holographic wills, the testator has the option of depositing the will with the notary in person. One of the first things that the notary will check when the testator dies, i.e. when the estate is opened, is whether the testator had a will, because the succession begins with a testamentary succession in the first instance. If the testator did not make a will or if the existing will has been successfully contested by a person who would have inherited if the will had been invalid, the legal succession takes the place of the will and the succession goes first to the descendants and the spouse or, in their absence, to the ascendants. The will must show that the testator made it personally and that it contains a declaration in the event of his death, all of which are grounds for the document to have testamentary status. In the absence of these elements, the will cannot exist. The existence of these conditions is mandatory in the probate procedure and must therefore be verified by the competent authority, since the question of the validity and effectiveness of the will can only be raised afterwards. On the basis of the wills drawn up by our office and the wills we have seen in various probate proceedings, we have compiled the most important points to be taken into account when drawing up a will. It is important to note, however, that even if these rules are followed, it is still worth consulting a lawyer with experience in inheritance law to ensure that, in addition to the correct formalities, the content of the will fully reflects the testator’s wishes and complies with the relevant legislation. The 8 factors can be broken down into 4 to 4 parts to ensure that the best possible will is drafted, both in terms of form and content. Formal aspects Content aspects Externally by the testator, signature of the testator Date or time of issue can be deduced Signature of witnesses if not in own handwriting Page numbering in the case of a multi-page will. Allowance for witnesses Issue of disqualification or exclusion Imposition of a mandatory contribution Unethical, incomprehensible, impossible and contradictory conditions How can from a legal point of view a will be formally correct? When the idea arises that someone wants to leave their assets to their own will rather than to the standard regulations under the law of succession, the first thing to consider is exactly what assets should be settled. In the case of handwritten wills, it is more likely that no one knows about the existence of the will and that the notary is not notified of it during the probate procedure, or that even if the notary is aware of its existence, the formal elements do not comply with the rules of validity, which means that the will cannot be taken into account. This lack of formality may relate to the signature of the testator or of the witnesses (if the will is not written in the testator’s own handwriting) or to the continuous numbering of the pages, possibly with an indication of the date. For all these reasons, it is advisable to seek the advice of an expert when drafting a will, who will be able to advise on the formalities and also on the content, since the will may fail the test of validity on the basis of its adequacy. Another important point is that, in the case of a simple will that has been legally verified, the notary is entitled to state in the probate proceedings that, in the absence of the will, the estate will be transferred in accordance with the legal succession procedure. However, it should be stressed that only the court has the power to declare the content of a will invalid in its judgment in an action for the invalidity of a will. What should be done if the testator wishes to leave his assets to a person of his
How to advertise legally?
3 factors to consider to ensure your advertising is deemed proper in a legal point of view One of the most useful tools for starting and running a business is marketing, which can help a company’s product or service reach the masses and raise awareness of its brand in line with market needs. There is a wide range of marketing tools available in different sectors, but in order to ensure that the values that the company wishes to convey and the ethos that its managers represent are conveyed in advertising, it is necessary to respect the legal, ethical and tasteful boundaries through which the marketing tool can achieve the best possible impact. It can be said that in today’s world, the primary platform through which a large percentage of consumers come into contact with specific products and services is the internet and various social networking sites. In order for businesses to compete and deliver value to consumers in the fastest possible way, it is essential to use these platforms, but behind this lies a whole body of legislation that must be complied with to ensure smooth operation. In this article, we outline 3 aspects that will help you to get the advertising law right. 1) Correct regulation of the contract, including advertising law 2) Proper definition of roles in advertising law 3) Other necessary additions to advertising regulations Based on the details of the 3-Point Test Guide, the following will clearly set out the cornerstones that are essential for the proper regulation of the legal relationship behind an advertisement. Adequate regulation of the contract also in the field of advertising law Recently, our firm assisted a company that had a clear vision for advertising and marketing its products and services, but needed to regulate the legal framework for doing so. In the course of the consultation, we carried out a comprehensive assessment of the client’s intentions and plans with regard to the service in question, which showed that, in addition to the general civil law contractual provisions, it was essential to include in the contract rules and provisions in line with the provisions of the Advertising Act in order to clarify the legal relationship and roles. The most important provisions in the case of advertising law contracts are the precise definition of liability and the obligation to comply with the mandatory advertising law rules recommended for such transactions. It is also an essential clause that, when advertising another company’s product, the company that produces the product must guarantee the quality control and conformity certification of that product. 2.) Proper definition of roles in advertising law It is important to emphasise that in contracts where advertising is included in the service, or where the service itself is intended to promote another company’s product, it is essential to define the roles, as imprecise definitions can have not only legal but also tax implications. The figure above illustrates the chain of interlocking roles in advertising law. In defining all these roles, it is important to note that at each step there is not only a division of responsibilities but also a division of obligations between the actors. A simple example to understand the advertising intermediary is that of a website operator who provides a website to another company to promote its product, and the company that operates its own website is therefore the advertising intermediary. A media platform advertiser is any platform that displays different ads from different companies. In such cases, we usually recommend the conclusion of a type of contract for the sale or purchase of advertising space, whereby media space owners can enter into an agreement with an advertiser or agency for the publication of advertising. An advertising intermediary is a company that engages another company to buy impressions for that company, i.e. it brokers the content, products or services of the engaging company to another site. It is important to note that the advertising intermediary is entitled to a 15% fee from the advertiser, based on the publication fee for the advertisement, and cannot accept any other free payment from the advertiser. A fundamentally different contract must be drawn up in the case of advertising mediation. If the service provider is acting as an agency and it is an advertising intermediary, the following is a brief outline of what you need to know: According to the provisions of the Advertising Act, advertising intermediation means the activity of facilitating the conclusion of a contract for the publication of an advertisement on the basis of an intermediation contract with an advertiser, excluding the activity of providing advertising services. Pursuant to the Advertising Act, an advertising intermediary may not, in the course of or in connection with its advertising intermediation activities, directly or indirectly, accept from the advertiser or from a media advertising space sales agent acting on behalf of the advertiser, any gift, other than a discount, or any other benefit, other than a pecuniary or other advantage, from the advertiser or from any other person, in addition to the fee for its advertising intermediation activities. The advertiser or the media advertising space sales agent acting on his behalf may not grant the advertising intermediary any material or other advantage other than a discount. In accordance with the Advertising Act, the advertising intermediary shall fully enforce any discount received on behalf of the advertiser. Essentially, there are two types of advertising mediation: AGENCY TYPE MEDIATOR TYPE In the case of agency-type advertising intermediation, the advertising intermediary acts as an agent on behalf of and for the benefit of the advertiser. The provider of the advertising-publication service, the advertiser, provides the service directly to the advertiser in whose name and on whose behalf the advertising intermediary agent acts. The advertising intermediary also provides a so-called „agency” service for the advertiser. The contract for advertising communication is therefore concluded between the advertising intermediary and the
The Home office policy and what’s behind it
By considering and taking into account the following five points, HR or the company manager can be more transparent in developing the necessary employer policies for general employment and the home office. In the context of the Covid campaign, the state of emergency was lifted as of 1 June 2022, as a result of which the provisions in the government regulations were also abolished or restructured and have become part of the legal system. During the pandemic, teleworking or, more colloquially, home office, became not just an option but a common practice in many places, which the evolution of the epidemic situation has forced it into this situation. However, the negative aspects of the pandemic have also brought with them a number of positive developments and opportunities for innovation, which have led employers and managers to reflect on the restructuring of work in the workplace. In our previous article, we discussed the relationship and regulation of the home office and the telework contract, and this article deals with the related home working and other internal policies of the employer. Some general points to think about when considering home office regulations The range of internal rules can be wide, as the more general an employment contract is, the more emphasis is placed on the employer’s rules, which may include the values and rules that the employer has agreed upon. In the first place, it is important to emphasise that the employer’s internal rules should be mentioned among the other provisions of the employment contract, at least to the extent that they have been communicated to the employee by the employer at the time of the conclusion of the employment contract and that they should be provided to the employee. In the opinion of the Curia, such notification is sufficient if it is published in a manner customary and generally known at the employer’s place of business. In the context of the home office, the employer’s home office arrangements are fully appropriate and, because of the possibility of different agreements under the Labour Code, can be properly designed by internal rules and regulations, which can be flexible to the needs of the employer and the employee. The design of the internal rules is entirely open to the areas that the employer wishes to regulate, so it is worth considering in this context the issues of working hours, data protection, confidentiality, accident prevention, the possibility of teleworking from abroad, the provision of work equipment and the costs of working from home. What should be the starting point then? to what extent can the Employer be controlled? Our firm has previously been commissioned to develop internal policies for companies in various fields around a home office culture and a code of ethics that conveys the values the company stands for. Following our methodology, after an audit of existing materials, we asked our client what were the key cornerstones that he, as an employer, would like to see consistently laid down in an internal code of conduct, which led him to the conclusion that he wanted to develop a set of codes of conduct, or codes of ethics, if you like, for employees. In the home-working policy, it is important to take into account what kind of working groups have been formed at the employer and what kind of work is carried out by the employers, as teleworking is possible not only for computer-based work, but it is recommended that the details of this, the rules on health and safety and the cost of the work are set out in the policy. The issue of employer inspections has changed compared to the emergency legislation, as the employer had to inform the employee of the rules of employer inspections before the emergency, and in the absence of any agreement to the contrary, the employer determined the method of inspection and, in the case of inspections on the premises where the work is carried out, the shortest period between the notification and the start of the inspection. As of 1 June 2022, the Labour Code will finalise the transitional provision governing the right of the employer to exercise the right of inspection at a distance by means of a computerised device during an emergency, unless otherwise agreed. Simplified occupational safety and health requirements have entered into force compared to the transitional rules applicable during the emergency, according to which the employer is responsible for implementing the requirements of safe and healthy working conditions. In the case of the home office, the more practical side is that if the employee works from home using only a computer device, the only obligation on the employer is to inform the employee in writing of the requirements for safe and healthy working conditions, so that the employee can choose where to work, which the employer can check by computer. In view of the above, it is therefore also worthwhile to address and detail the general health and safety rules in the home-working regulations, which is what we did for our client, by preparing a general information leaflet for employees on the rules of the home-working regulations. Of course, it should also be remembered that teleworking can also include work that is not carried out using a computer, but this is subject to stricter health and safety rules. Written information on health and safety can therefore be provided in the internal regulations, but it is important to note that the seemingly lenient health and safety requirements do not exclude the possibility of an accident at work during home office work, which does not, therefore, have a direct proportional effect on the employer’s exemption from liability in the event of an accident at work. So, from an occupational safety and health perspective, the framework within which the employer determines the inspection of the place of work chosen by the worker may raise very interesting questions, because if the employer does not organise the inspection properly or fails to do so,
The telework contract or the home office option in employment contracts
In the context of the Covid campaign, the state of emergency was lifted as of 1 June 2022, as a result of which the provisions in the government regulations were also abolished or restructured and have now become part of the legal system. During the pandemic, teleworking – or, more commonly known as home office – was not just an option, but became a common practice, which the evolution of the pandemic situation forced it into. However, the negative aspects of the pandemic have also brought with them a number of positive developments and opportunities for innovation, which have led employers and managers to reflect on the restructuring of work in the workplace. In the recent past, many of our clients have decided to make the home office a mainstream option, and employees have been open to it, especially for jobs that are not made more burdensome by working from home. Of course, home working is not limited to specific jobs, but can also be used in a variety of jobs if agreed between the employee and the employer. It is important to note, however, that following the end of the emergency situation on 1 June 2022, the rules on teleworking will have changed, making it necessary to reconsider the employment contracts and regulations currently in force at each employer. In providing this type of advice to our clients, we provide a complex service that includes a review of the employment contracts currently in force with the employer, as well as the drafting of employment contracts for new employees that incorporate the legal provisions already in force. In addition, it is recommended that other frameworks for teleworking are set out in a single set of employer internal rules, details of which will be covered in our next article on this subject. What are the options for concluding a telework contract? According to the rules of the Labour Code, the home office, as a so-called hybrid form of work, allows employees to work partly at the employer’s headquarters and partly at a place away from the employer, even at home. However, it is important to underline that this requires the employer and the employee to conclude an explicit telework contract, which implies that the employment contracts of employees currently in force but who continue to work from home must be amended individually and that an explicit telework contract must be drawn up for new employees who join and plan to telework. A similar assignment was recently carried out by our office for a client, whereby the employer’s employment contract and its terms and conditions were revised and the current employer and employee requirements were updated. In principle, the Labour Code contains rules that allow for derogation, so if the parties wish to deviate from its provisions, they are free to do so, but careful consideration is needed in drafting. A similar situation exists in relation to teleworking, where the provisions of the former government decrees under the emergency situation have been added to the Labour Code. Thus, if the parties agree that the employer’s right to give instructions is limited to the scope of the tasks to be performed, that the employer exercises his right of control by means of a computer device, and that he is present at the employer’s premises for one third of the working days, it is sufficient to stipulate in the employment contract that the provisions of the Labour Code on teleworking apply. However, in the majority of cases the situation is not so simple, as the employer wants to impose higher requirements than those provided for in the collective agreement in the context of its right to control and instruct. Home office = holiday, or what are the limits of teleworking in terms of working hours? Another important rule is that, under the current rules, the fact that a worker works remotely does not make his or her working hours any less flexible. The difference between a fixed and an informal working time was a central issue in the context of our employment contract screening exercise mentioned above. In our client’s company, employees are employed in a variety of jobs in different work groups, which means that a customer-oriented job requires availability from 9:00 a.m. to 5:00 p.m., while other jobs allow for more flexible working hours. In jobs where availability for clients is not required, an informal working schedule may be an option, while in client-facing groups, working hours are more fixed and a fixed schedule is recommended. It is therefore advised that this issue should be considered in the context of job functions or work groups, as it may not be the case that a fixed working schedule is the solution if the employer wishes to give employees more time off. It may also be necessary to work out which working arrangements are preferable in which working groups, for reasons of some kind of uniform record-keeping and right of control. In principle, in an informal work schedule, the employee can organise his or her work autonomously, and is entitled to decide when to work and when not to work. However, the informal nature of the work schedule is not affected if the employee can only carry out certain tasks at predetermined times: for example, he or she must attend client meetings organised by the employer at a specific time or must complete specific tasks by a deadline. It is important to underline that, according to the Labour Code, only informal working hours may be stipulated in the employment contract of managerial staff. Generally speaking, an informal work schedule can only be imposed if it is genuinely possible in view of the specific nature of the job and the independent organisation of work. If, for example, working hours have to be adapted to the employer’s opening hours or if the technology used requires constraints, as in client-based teams, there is no question of an informal working pattern. A further condition is
Real estate article series part 10: Am I allowed to buy a Real Property in Hungary as a foreigner?
What to do if a foreign buyer is interested in buying a Real property that is for sale? Is it burdensome to enter into such Sale & Purchase agreement with him? Are there any other restrictions or additional procedures that may cause time or other administrative difficulties for foreigners buying property? In part 10 of our real estate article series, we will look at the possibilities for foreigners to acquire real estate in Hungary. Which foreigners can acquire Real Estate in Hungary? Both natural persons (such as foreign citizens) and legal persons (such as companies established abroad) or unincorporated organisations can buy property in Hungary if they meet the legal requirements of Hungarian law. A further condition is that there must be no public interest risk – i.e. the foreign person must not have a criminal record or be subject to a restriction of activities measure, so obtaining an official certificate of good repute is essential. It should already be noted that foreign persons who are resident or established in, for example, EU Member States or EEA countries are treated differently for licensing purposes (they are not even considered foreigners in legal terms). What type of Real property can be bought? Only real estate that is not classified as agricultural or forestry land (thus excluding e.g. the acquisition of vines, ploughs, orchards, forests, pastures, etc.) can be acquired by foreigners – thus excluding all real estate that is subject to Act CXXII of 2013 on the Turnover of Agricultural and Forestry Land. Conversely, foreigners can thus mostly buy property that is included in the domestic property register (e.g. flats, houses, garages, business premises, etc.). Do you need any permission? In principle, according to the applicable legislation, yes. If a foreign person (please check below) wishes to purchase real estate in Hungary, a permit must be obtained from the competent government office of the capital city or county where the real estate is located, but foreign persons may be exempted from obtaining a permit if they meet certain conditions. In which cases is no authorisation required? We have indicated above that some foreign persons can acquire real estate in Hungary without a permit. A permit from the government office is not required in the following cases: a) a national or resident of a European Union (EU) member state (e.g. Germany, Spain) (note: the UK’s withdrawal from the EU means that UK persons are no longer exempt from the requirement to obtain a permit!) b) a national or resident in a European Economic Area (EEA) Agreement country (Iceland, Norway, Lichtenstein) c) a national or resident in Switzerland d) Dual citizens (if one of the citizens is a Hungarian citizen or a citizen of an EU member state or a Hungarian citizen living abroad) e) In case of inheritance of real estate f) In the case of acquisition of real estate by refugees and protected persons In such cases, it is a simple matter to conclude a contract of sale with the foreign buyer, since from a legal point of view, the foreign buyer is considered to be the same person as the domestic acquirer (not a foreign person). What is the authorisation procedure? What must be enclosed? The application for authorisation must be submitted to the competent government office where the real estate is located by post or electronically using the e-service, using the form provided by the government office. In general, it must be accompanied by: a) a (pre)contract of Sale & Purchase for the acquisition of the property (1 original copy) b) personal documents (passport) or foreign company certificate c) an e-certified title deed of the property, not older than 21 days (in the absence of which, the government office will request it) d) if the foreign applicant is not acting in person, a power of attorney covering procedural representation (this can be included in the contract of sale and does not necessarily have to be drawn up in a separate document) (e) official certificate of good character to prove a clean criminal record (to be obtained by the government office upon special request at the time of authorisation) In exceptional cases, other documents must also be attached, e.g. if the contract of Sale & Purchase was signed by the parties’ proxies instead of the parties, in which case the relevant power of attorney must be attached. It is important to note that the contract for the acquisition of the real estate must comply with the requirements of the domestic legislation, so the use of a lawyer is not indispensable. For an overview of the content of the contract of sale, we recommend Part 7 of our article series. Is the authorisation procedure free of charge? Unfortunately not. You have to pay an administrative service fee for the authorisation procedure. This is normally HUF 50.000,- per Real Property. The fee can only be paid by bank transfer (e.g. no stamp duty). How is the authorisation procedure carried out? What should we expect? The Government Office will examine the application within 45 days and will contact other authorities (e.g. the municipality where the property is located or the ORFK) to grant the licence. It will then decide whether to reject or accept the application. Should I do it myself or should I involve a professional in the process? In our experience, the permit procedure is an additional burden for applicants (especially if they do not understand or speak Hungarian), so it is advisable to seek the help of a professional from the outset to facilitate this extra administration and procedure. In addition to drafting the purchase contract – even bilingually (English-Hungarian, German-Hungarian, Spanish-Hungarian) – our law firm also provides legal assistance in the licensing procedure and communication between the parties in the case of foreign citizens and legal entities acquiring real estate in Hungary. *
Real estate article series part 9: „Pending status of transaction” or „retention of title” what, when and why?
Real estate article series part 9: „Pending status of transaction” or „retention of title” what, when and why? In real estate sales contracts, it is often the case that the agreed purchase price is not paid in one lump sum but in instalments at a later date(s). A typical example of this is when the buyer wishes to pay the purchase price partly out of his own resources and partly out of a loan from a bank. But why is it advisable or (in some cases) expected to sell with a reservation of title? In Part 9 of our series of articles on real estate, we will guide you through the maze of so-called „pending” and „reservation of title” types of transactions. Let’s see why they might be necessary and whether there is a legal difference between them other than the name or whether they are the same concept. What is a deed of permit of transfer of title? First of all, we need to be clear about the conditions under which a buyer can acquire ownership of the property. This requires two things: the conclusion of a contract for the sale of the property, either in a notarial deed or a private deed countersigned by a lawyer registration of the transfer of ownership in the Land Register For an overview of the rules governing the Sale & Puchase agreement, we recommend Part 7 of our series of articles. If, for example, the buyer pays the purchase price of the property in one lump sum when signing the contract and the seller receives the money immediately, the buyer’s ownership can be registered with the Land Registry within 30 days of the date of the contract. The application for registration is contained in the contract itself: the seller must give his irrevocable and unconditional consent to the cancellation of his title and the registration of the buyer’s title in the Land Register. This consent is called the authorisation for registration of ownership. But there are also cases where the seller deposits the registration authorisation with the deed lawyer in case the full purchase price of the property is not paid until a later date, in order to „maintain” his title until the full purchase price is paid. Once full payment has been made, the registration permit is only submitted, and the buyer becomes the owner of the property. This can be achieved by the pending sale method or by the retention of title method. Is “Pending status of transaction” or „retention of title” the same or not? When if so and why it is of isn’t? In the case of a pending registration, the contracting parties (seller and buyer) jointly request the land registry to suspend the buyer’s application for registration of the title until the seller has submitted his/her registration permit (but not later than 6 months), in accordance with the applicable rules. In this case, the buyer’s application for registration of ownership will be submitted to the land registry and the application for registration will be entered on the title deed of the property. In practice, this means that until the seller’s registration permit has been submitted or the 6-month period has expired, the land registry will not consider the application („pending” is the term), so the seller does not have to fear that the buyer will prematurely deprive him of his title to the property. In fact, if a new application for registration of a right of enforcement is received afterwards, e.g. because of possible unpaid debts of the seller, it cannot be processed (settled), as it is preceded in sequence by the application for registration of ownership. If the registration is granted, the buyer can acquire ownership of the property without any burden, since the subsequent application for registration of the right of enforcement will be rejected, as the property will no longer be the property of the seller but of the buyer. If the registration is not submitted within 6 months, the procedure for registration of the title will be terminated ex officio by the Land Registry and the title will be automatically deleted from the land register. It is therefore essential to respect the 6-month period, as a sale and purchase contract concluded earlier cannot be resubmitted and a pending registration cannot be requested (nor can it be extended). In the case of retention of title, the seller expressly states in the contract that he retains title until full payment of the purchase price and requests the land registry to record this fact in the title deed (also Part III) of the property in favour of the buyer. This is called a deed of sale with retention of title. In this case, there is no legal time limit on how long the registration of the sale can be submitted, it will be encumbered by the property until then. Moreover, in such a case, this also entails a prohibition on alienation and encumbrance, which means that the property cannot be sold or donated to another person, nor can it be subject to a beneficial interest, for example, as long as it is registered. One thing it cannot prevent, however, is the registration of a right of enforcement on the property. For more information on the title deeds, we recommend Part 1 of our series of articles. Both methods therefore protects the seller’s interests from the buyer acquiring ownership of the Real Property before the purchase price has been fully paid, but we think it is important to illustrate the basic differences in the table below: Pending reservation Reservation of title Until when it can be requested ? Up to 6 months No time limit Where does it appear? as a request in the margin of the title deed as a request in Part III of the title deed as a burden Why is it advantageous? it guarantees the purchaser’s acquisition of the
Real estate article series Part 8: When can I be exempted from paying duty and VAT?
Before you buy a property, it is important to clarify what other costs you will have to bear as a buyer in addition to paying the purchase price. As sellers, we should also remember that the proceeds from the sale of the property will normally be taxable. In Part 8 of our series of articles on real estate, we will look at the rules on the payment of fees and taxes on the sale of real estate, the exemptions from paying them and other likely cost implications. What costs incur in the course of a Sale & Purchase transaction of a Real Property? Costs payable by the seller: – the cost of obtaining an energy certificate (the energy certificate is valid for 10 years from the date of issue) – personal income tax on the amount of the purchase price received Costs payable by the buyer: – e-certified title deed fee (from 01 January 2023, HUF 3.000,- per property) – our article on the content of the title deed is available here – fee for administrative services of the land registry for registration of ownership (HUF 6.600,- per property) – transfer duty payable on the purchase price of the property – lawyer’s fees (in compliance with the contract with a lawyer) Do I always have to pay the duty with regards to purchase of a Real Property as a buyer? Generally when buying real estate (whether a house, land, garage or flat), the buyer is liable to pay a reversionary transfer tax (or property acquisition tax) of 4% (the rate of the tax) on the purchase price of the property (in this case the taxable amount). The competent body of the NAV will notify the buyer of the imposition of the duty to be paid and the method of payment by issuing a payment order. The obligation to pay the duty arises on the day the contract is concluded. The maximum amount of duty payable per property is HUF 200 million. However, there may be circumstances in which no or only partial levies are payable. According to the applicable legislation, there are legal conditions under which the buyer is exempt from paying the transfer duty on the transfer of property in rem – i.e. is entitled to exemption from the duty – or is only partially liable to pay the duty – i.e. is entitled to a reduction of the duty. As the law on duty may provide for a number of cases, the most common ones are described here without claiming to be exhaustive. Examples when the Buyer is exempt from paying duty: a) a transaction concluded applying the Family Home Building Allowance (CSOK) b) in the case of a so-called replacement purchase: in such case a purchase of a residential property we require the following if the buyer has sold another residential property within a maximum of 3 years prior to the purchase or undertakes to sell it within the next 1 year of the purchase and the purchase price of the residential property sold is higher than the purchase price of the purchased residential property c) transaction between direct relatives (e.g. between parent and child, but also including adopted children) d) transaction between spouses e) the purchase of a plot of land suitable for building a dwelling, if the buyer undertakes to build on it within 4 years of acquisition f) transaction between connected enterprises (see Section 4, point 23 of the Tao Act), if the main activity of the acquiring enterprise is the rental or operation of rented property owned by the enterprise itself or the sale of property owned by the enterprise itself Cases of entitlement to a reduction of duty (partial levying): a) in the case of a so-called replacement purchase: in such case of a purchase of residential property, if the purchaser has sold another residential property within a maximum of 3 years prior to the purchase or undertakes to sell it within the next 1 year of the purchase and the purchase price of the residential property sold is lower than the purchase price of the purchased residential property, in which case the 4% duty payable is payable on the difference between the purchase price of the residential property purchased and the purchase price of the residential property sold. b) In the case of the acquisition of the first residential property by a buyer under 35 years of age, the buyer is exempt from paying 50% of the duty payable if the purchase price (market value) of the entire residential property (1/1 share of ownership) does not exceed HUF 15 million c) in case of acquisition of a first residential property, an instalment rebate – for a maximum of 12 months, an equal monthly instalment rebate can be applied for Please keep in mind that either a duty rebate or a duty exemption is not automatically granted but should be deliberately applied by the buyer via a separate B400 form provided by the tax authority. In most cases, the lawyer acting for the buyer in the sale and purchase transaction will already prepare this form and submit it to the competent authority together with the application for registration of ownership, so the buyer will no longer need to do this separately. When should and when shouldn’t pay personal income tax on the sale of the Real Property? As a general rule, the seller is liable to pay 15% personal income tax on the proceeds from the sale of the property on his taxable income, provided that the property sold was acquired within 5 years. If the seller acquired the property at least 5 years ago, he is no longer liable to pay personal income tax on the sale of the property. The date of acquisition is deemed to be the date of submission of the contract of sale to the Land Registry. How should
Real estate article series Part 7: Misconceptions – how to have a proper Sale & Purchase Agreement
Whatever the type of Real Property you are buying, it is essential that the parties have a contract in place to settle the transfer of ownership. In order to do this, it is essential that both the seller and the buyer are aware of the most basic requirements, i.e. the essential contents of a contract for the sale of real estate. In part 7 of our series on Hungarian Real Estates, we will fill you in on the key requirements for a Sale & Purchase contract and clear up some common misconceptions! In general, the following must be included in a contract for the Sale & Purchase of a Real Estate: – personal details of the seller(s) and buyer(s) (name, maiden name, mother’s name, date and place of birth, address, personal identification number, nationality) – the exact identification of the real estate which is the subject of the contract according to the land register (municipality, parcel number, cultivation branch/designation, floor area, title in kind, we recommend part 1 of our article series for the interpretation of the title deeds) – the percentage of ownership the buyer wishes to purchase (e.g. 1/1 or 1/2, etc.) – the exact title of the transfer of the Real Property (in the case of a sale, this is a purchase, but in the case of other transfers of property it may be a gift, exchange, etc.) – the mutually agreed purchase price of the Real Property (specifying the amount and currency) – the time and method of taking possession of the Real Property – a declaration of the seller’s unconditional and irrevocable consent to the buyer’s registration of the title – the place and date of the conclusion of the contract – signature of the contracting parties What other details, facts or clauses can/should be included in the Sale and Purchase Contract? – any encumbrances on the Real Property at the time of the conclusion of the contract (e.g. usufruct, mortgage, execution, prohibition of alienation and encumbrance, etc., see Part I of the deed of title ) – in case of encumbrances, how the encumbrance is to be discharged (if the buyer wishes to obtain an unencumbered property, this is a basic requirement) – the seller’s information (warranty) on the condition of the property and any defects – an undertaking by the seller (warranty of title) that the property is free from any legal claims, encumbrances or encumbrances and that no third party has any rights to it which would restrict or prevent the buyer from acquiring ownership (e.g. there is no owner of the property other than the owner of the property [not listed in the title deeds] – this could be the spouse, due to the special nature of a community of property) – the time limit for payment of the purchase price (or the payment schedule for each instalment) – in the case of financing partly financed by a bank loan, the lending financial institution may impose special requirements (see Part 5 of our real estate articles) – in the case of a proxy procedure, the inclusion of the proxy in the contract – the amount of the deposit and/or penalty – in the case of the purchase of a residential building or apartment, the number of the certificate certifying the energy performance of the building in accordance with the applicable regulations – a statement of the exemption or reduction of fees (for details, see Part 8 of this series of articles) Do I need a lawyer to sign the contract for the sale of a property or is it enough to write it yourself and have it certified by two witnesses? A contract for the Sale and Purchase of a Real Property must be drafted in a notarial deed or countersigned by a lawyer. Therefore, in order to obtain ownership and to be registered in the Land Registry, it is essential to have a lawyer, since a contract without a lawyer’s countersignature is not suitable for registration of ownership. It should be noted that even in the case of a seemingly simple sale, there may be pitfalls (e.g. obtaining waivers of pre-emption rights, waiving usufruct rights, etc.) which recommends to engage a lawyer with specific experience in real estate law. I am unable to be present at the signing of the contract, so I have verbally authorised my friend to sign the Sale and Purchase contract on my behalf, could this be valid? Will he be the owner instead of me or will he registered on the deed of title? Is it possible for either the seller or the buyer to have a proxy to act on their behalf when signing the contract. In such a case, a written power of attorney must be granted, which must indicate exactly what the agent is authorised to do (e.g. sign the contract) or what other acts (e.g. transfer of possession). It is therefore recommended to specify as precisely as possible the specific activities that the authorised representative may perform in the place of and on behalf of the principal. In this case, the agent will be designated in the contract, but not as a contracting party, but as the agent of the party he represents. A further requirement for the power of attorney is that it must at least be in the form of a document countersigned by a lawyer, so a power of attorney certified by two witnesses is not sufficient. The proxy acts only on behalf of and makes any declarations for the benefit of the proxy, therefore the proxy cannot acquire ownership of the property on behalf of the buyer and will not be recorded in the Land Registry. Usufruct burdens the Real Property. Do I need the holder of the usufruct consent to sell the Real Property? Does the sale of the Real Property automatically terminate the beneficial interest? If there is a right of usufruct