In Hungary, quota pledges encumbering the quotas of limited liability companies must be registered with the competent court of registration so that they become part of the company register. Registration is done by way of a special electronic registration form in which the pledgee must be identified.
For a syndicate loan, it is usual practice for the security agent to be appointed in the facilities agreement, which may be governed either by Hungarian or foreign law. The appointed security agent then concludes as pledgee the quota pledge agreement with the pledgor. In these cases, it is relatively easy to register the security agent as the only pledgee.
If the security agent is not appointed before the conclusion of the quota pledge agreement, but the quota pledge agreement is signed by several pledgees, these pledgees are still entitled to appoint a security agent. Irrespective of such an appointment, all pledgees must be registered with the competent court of registration.
The problem with the second scenario is that according to the Civil Code, the appointment of the security agent becomes effective for third parties only when the pledgee has been registered as a security agent in the relevant register.
Since the electronic registration form does not include a specific section to register the security agent, the only option to indicate such a position is to include it after the name of the pledgee acting as security agent.
Although this is a technical solution, court judges are generally willing to accept it. While there is presently no optimal solution, the Civil Code is intended to be amended shortly, which may resolve the issue. Alternatively, as an easier solution, the electronic registration form will be amended to provide a special section for registering the security agent.
For further information on this topic please contact Viktória Szilágyi at Nagy és Trócsányi by telephone (+36 1 487 8700) or email (firstname.lastname@example.org). The Nagy és Trócsányi website can be accessed at www.nt.hu.
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