What is a Liquidation?
Every business' life cycle comes to an end sooner or later, for a variety of reasons. The owner might wish to shift his or her business to different, more lucrative projects, or even to retirement, or a market modification might cause the business to become less profitable or even to lose money.
At some time, it will be necessary to eliminate losses, tidy up loose ends, and liquidate the firm. Budapest Consulting is available for the liquidation service and we can help you to manage the whole process.
Types of Business Liquidation
The most important procedures in Hungary when a company reaches the end of its life cycle are as follows:
Bankruptcy procedure
We talk about bankruptcy procedures when the company cannot pay its bills and seeks bankruptcy protection. During this grace period, the company may attempt to pay off its debts and revive itself.
An organization must protect the interests of all parties as well as pay its creditors as long as possible if it begins to lose money. If the firm cannot pay its debts, it might ask for bankruptcy and receive a moratorium of 120 days, during which time it may negotiate with creditors to settle its debts.
When the bankruptcy procedure begins, the company must notify its partners within five days. All claims and assets are to be reviewed by an administrator after 30 days, and the debtor and creditors will be asked to negotiate a settlement. The bankruptcy procedure cannot be longer than 365 days, and the company will be marked in the Company Registry.
If the firm becomes profitable again, or if an agreement is reached between the debtor and the creditors, the firm may continue operating.
Mandatory liquidation
Mandatory liquidation means that the company is unable to continue functioning because of outstanding debts that cannot be settled, or for other reasons. This type of company liquidation may follow a bankruptcy procedure or be initiated for other reasons including if the company fails to pay taxes or penalties, and its tax number is removed
When there are no agreements between the debtor and creditors during the bankruptcy procedure the next step is the mandatory liquidation.
When a company is in liquidation, a liquidator reviews the firm's debts and assets. The liquidation is announced in the Official Gazette of the Company Registry, and partners have 40 days to file a claim. The company is marked in the Company Registry during the mandatory liquidation
The company's liquidator must compile a final report, inventory, and tax declaration within 30 days. All available assets will be sold, and the creditors will be paid in the order of priority.
If there are too many unresolved debts, the executives may be barred from establishing or managing another corporation for up to two years. The procedure may take up to two years.
Voluntary liquidation
Voluntary liquidation is the simplest way of business liquidation. In this case there are no debts to be paid and the firm can be wound up without complications.
The voluntary liquidation is usually completed through a legal professional, who notifies the company registry. The company's liquidator may be an external service provider or the company's manager, who oversees the process.
During the voluntary liquidation process the company is marked in the Company Registry. Simplified winding-up may be used by non-audited firms that are able to complete the procedure within 150 days of the starting date of the process.
The taxpayer does not have to choose a liquidator when making a simplified liquidation. The tasks of the liquidator are performed by the managing director of the company. It follows that the powers of attorney granted by the Chief Executive Officer are also valid during the liquidation.
The commencement of the simplified liquidation does not have to be notified to the court of registration or published in the Company Gazette.
During the procedure, the taxpayer may decide to terminate the simplified liquidation and continue to operate the company.
The transition from simplified liquidation to general liquidation should be made:
- in the event of a disputed creditor's claim or if a lawsuit is filed against the company as a result,
- in the event of a liquidation objection, or
- if the simplified winding-up has not been completed within 150 days. If the company nevertheless fails to switch to the general rules under the above conditions, a compulsory cancellation will be ordered.
How long does it take to liquidate a company?
The liquidation process of a Hungarian company can take from a few months to several years, depending on its size, whether claims are disputed or not, or whether other issues arise. In the simplest way of business liquidation the process takes only 150 days.
Budapest Consulting may assist you with this process. Please contact us for legal representation. Our Hungarian law firm may also assist investors with registering a new business, residence permit, work permit and taxation things.
Liquidation Fee: 1500 Euro
FAQ for Liquidation Services