The issue of governing law often arises in cross-border M&A deals or contractual relationships. At such times – either due to the UK domicile of a contracting party, or to the widespread use of the Anglo-Saxon templates – it is often the English law that is chosen. It may turn out to be important to understand the difference it can mean to the parties’ positions if instead of Hungarian law they were to opt for English law – for example, when drawing up the documents for a company acquisition. 

A rule in the bankruptcy act that had been in effect for over 10 years presented an impossible dilemma for the senior officers of companies under threat of insolvency. An amendment of the law that recently took effect, however, resolves the stalemate and opens the possibility for managers to make sound business decisions in crisis situations.

In 2009 the Supreme Court made it clear that the VAT on public-purpose investments related to property developments is deductible if it would not be possible to implement the development without such investment. Recently, however, some alarm was unexpectedly caused by the preliminary opinion of the advocate general of the European Court of Justice (ECJ) in a similar, Bulgarian case, which recommended prohibiting the tax deduction right. Although the ECJ’s judgement published in the middle of last week did not follow the advocate general’s opinion, it did make exercising the deduction right subject to some strict conditions.

New laws taking effect on 1 January next year will transform the tax audit procedure and the way tax lawsuits unfold. While some of the amendments are business-friendly, they also conceal a number of traps that are clearly detrimental to taxpayers’ interests. For example, the rights of taxpayers to defend themselves against the tax authority, and to make use of experts, will be compromised.

The Performance Certification Expert Board (PCEB) is playing an increasingly important role in disputes between construction-industry firms. Nevertheless, a few legal questions relating to the PCEB remain to be clarified, including that of for how long an expert opinion issued by the organisation can prevent the enforcement of contractual security (e.g. a bank guarantee). Until this issue is resolved, a party to the dispute that would otherwise possess legitimate security could be put at a disadvantage.

Although the new Civil Code that took effect in 2014 made it impossible to use a good few commonly used types of loan security, since then the legislature has gradually restored them to their rightful place. Indeed, the amendments to the Bankruptcy Act coming into effect on 1 July will go further than the previous rules, giving security options and security assignments, the same priority status as mortgages. This case is a good example of the effective cooperation between the legislature and the banking industry in Hungary.

A recently revealed ministerial decree could render the operation of domiciliation service providers in Hungary untenable – at least for those who provide this service at a high professional standard. As the new piece of law contains no explanation, the question that springs to mind is: who does the new legislation favour?

Many people could be in for a nasty surprise when trying to set up a company: the company court refuses to register the majority owner or managing director on grounds that the person is subject to a ban. While the banned persons sometimes know that they have “been up to no good”, in other cases they are baffled as to the reasons for the ban. A lot is at stake: a person who is banned could end up on the “black list” for up to 7-8 years.