{"id":2510,"date":"2020-05-28T13:17:38","date_gmt":"2020-05-28T11:17:38","guid":{"rendered":"https:\/\/blogs.dlapiper.com\/advocatus\/?p=2510"},"modified":"2022-03-03T15:40:13","modified_gmt":"2022-03-03T14:40:13","slug":"new-approval-requirements-for-foreign-investments-in-strategic-sectors-in-hungary","status":"publish","type":"post","link":"https:\/\/blogs.dlapiper.com\/advocatus\/2020\/05\/new-approval-requirements-for-foreign-investments-in-strategic-sectors-in-hungary\/","title":{"rendered":"New approval requirements for foreign investments in strategic sectors in Hungary"},"content":{"rendered":"\t\t
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From 26 May 2020, new rules are applicable for foreign investments in relation to strategic companies in Hungary. Similar rules have been also introduced last year regarding foreign investments in companies operating in the \u201ctraditional strategic sectors\u201d (e.g. ammunition, arms and military equipment manufacturing, production of dual-use items and intelligence service equipment, electricity services etc.). However,  according to the Government Decree (Government Decree No 227\/2020 (V 25), until the end of 2020, a wider notification and acknowledgment regime (to be exercised by the Minister for innovation and technology) is applicable to foreign investors intending to invest in strategic companies in Hungary.<\/p>\n

Who is a foreign investor?<\/em><\/strong><\/p>\n

Pursuant to the Government Decree, individuals, companies and other entities domiciled in countries outside the EU, EEA and Switzerland qualify as foreign investors. Furthermore, entities seated in any EU, EEA member state or Switzerland are also considered as foreign investor if an entity outside of these locations holds a majority influence in such entities.<\/p>\n

Nevertheless, the wording of the Government Decree might be interpreted in a way that it also applicable to \u201ctrue\u201d EU investors (i.e. those companies or other entities located in an EU, EEA member state other than Hungary or in Switzerland) in certain transactions regardless whether such entity outside the EU, EEA or Switzerland holds a majority influence in them.<\/p>\n

What is a strategic company?<\/em><\/strong><\/p>\n

Strategic company is defined as a company registered in Hungary and operating in any of the following forms: a limited liability company (in Hungarian: \u201ckorl\u00e1tolt felel\u0151ss\u00e9g\u0171 t\u00e1rsas\u00e1g<\/em>\u201d), a private company limited by shares (in Hungarian: \u201cz\u00e1rtk\u00f6r\u0171en m\u0171k\u00f6d\u0151 r\u00e9szv\u00e9nyt\u00e1rsas\u00e1g<\/em>\u201d) or a public company limited by shares (Hungarian: \u201cnyilv\u00e1nosan m\u0171k\u00f6d\u0151 r\u00e9szv\u00e9nyt\u00e1rsas\u00e1g<\/em>\u201d) provided that such company pursues activities in certain strategic sectors listed in the annex of the Government Decree.<\/p>\n

Due to the incoherent use of its terms, the Government Decree\u2019s definition on strategic company definition might be interpreted very broadly. Strategic sectors seems to include not only \u201ctraditional strategic sectors\u201d such as energy, transportation, communication, defence, nuclear sector, but somewhat unconventional and new strategic sectors as well, such as tourism, finance, pharma, construction, food industry etc.<\/p>\n

What transactions fall within the scope of the Government Decree?<\/em><\/strong><\/p>\n

Relevant transactions including the (i) transfer of shareholdings (entirely or partly), (ii) capital increase, (iii) transformation, merger or demerger, (iv) issuance of certain type of bonds or (v) establishment of usufruct right over shares need to be notified to the Minister (similar like in respect of the anti-trust approval), if such transactions result in that a foreign investor in relation to a strategic company:<\/p>\n