Under Hungarian law, companies closing their business year on December 31 must publish their annual financial report – approved by the shareholders of the company and (if necessary) audited – on or before the following May 31.

If a company delays performing this obligation, the tax authority will impose a default penalty and request it to publish its annual financial report within 30 days. If the company fails to comply with this request, the tax authority will impose a second default penalty and request it to publish the annual financial report within 60 days. If the company fails to comply with this second request, the tax authority will immediately withdraw the company's tax number and inform the competent registration court accordingly.

The registration court will declare the company terminated after 20 days of receipt of notice from the tax authority and initiate the forced deletion procedure.

This procedure can be halted only if the tax authority notifies the registration court that the company has performed its publication obligation, provided that this notification arrives from the tax authority:

  • within the 20-day period following notification; and
  • before the resolution of the registration court regarding the termination of the company becomes final and enforceable.

The problem with this procedure is that once the forced deletion procedure is initiated, it cannot be stopped: either the company will be deleted or the procedure will become a liquidation. It may be possible to prove that the company is solvent in liquidation proceedings; however, that process takes approximately one year to finalise and the company cannot perform normal activities in the meantime.

Companies need to be aware that if they cannot publish their annual financial reports on time because of some administrative or other reason (eg, the managing director cannot be reached), a situation can quickly be reached where there is no option of keeping the company alive, or the chances of doing so are slim and require submission to a time-consuming process.

For further information on this topic please contact Viktória Szilágyi at Nagy és Trócsányi by telephone (+36 1 487 8700) or email (szilagyi.viktoria@nt.hu). The Nagy és Trócsányi website can be accessed at www.nt.hu.

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