Establishing a business company from abroad
One of the most frequently asked questions from my foreign clients is whether it is possible to establish a company in Hungary without the foreign participants having to appear in Hungary to sign the documents.
In short, the answer is yes, but as this is not the general way of establishing a company, there are conditions attached to doing so.
First of all, it is important to know that the company is established in accordance with the rules of Act V of 2006 on company registration, court proceedings and winding-up (Companies Act). According to this Companies Act, legal representation is mandatory in company registration (and change registration) proceedings (Companies Act 32 (4)).
The representative of the company must submit the application for registration of the company (or change registration) through a legal representative (Companies Act 33 (2)).
The application for registration of a company (change of registration) can be submitted electronically. The court of registration then communicates electronically with the lawyer or chamber counsel acting as legal representative. In this closed authenticated electronic system, both qualified electronic signatures and time stamps are used by the participants.
All forms of companies that can be registered in the Hungarian Companies Register are legal persons and the deeds (articles of association, memorandum of association, articles of association) of these forms of companies are valid and can only be filed with the Companies Court if they are notarised or countersigned by a lawyer or a chamber counsel.
The countersignature is a specific form of authentication that can be used by lawyers (or by a registered counsel that has already established an employment relationship with the company).
It appears in the form of a small clause and the lawyer’s dry stamp imprints and signature on the document in the case of paper documents.
In electronic form, the electronic data indicating the countersignature placed on the digitised document by the electronic authentication service provider, together with the electronic signature of the lawyer.
In relation to its substance, this is a procedure which, pursuant to Section 44 (1) of Act LXXVIII of 2017 on the Activities of Lawyers (Lawyers Act), includes the following:
- 44 (1) By countersigning, the lawyer certifies that
- a) the deed complies with the law,
(b) the parties have declared that the contents of the document are in accordance with their will,
- c) the parties indicated in the document or their representatives have been identified, and
(d) the document has been signed by the parties before him/her or before him/her they have acknowledged the signature on the document as their own.
It is therefore part of the countersigning process that the countersigning lawyer must first identify the parties and their acting representatives.
Pursuant to Article 32 of the Lawyers Act, in the case of a countersignature, the lawyer is required to make the following identification:
The lawyer shall identify a natural person whom he does not know by virtue of a previous engagement by inspecting his identity document. The lawyer shall identify the legal person or other entity on the basis of the records of the authority registering the legal person or other entity or an extract therefrom.
In order to check the validity of the documents presented to him, the lawyer is entitled to request additional data electronically from the register of identity and address, the register of driving licences, the register of travel documents and the central register of aliens.
(Such additional data are the natural person’s identification data, nationality, stateless person, refugee, immigrant, settled or EEA citizen’s legal status, address, facial image, signature, facts pursuant to Article 18 (5) of Act LXVI of 1992 on the Registration of Personal Data and Address of Citizens, data pursuant to Article 24(1)(f) of Act XII of 1998 on Travel Abroad and the period of validity of the document, certain data pursuant to Act LXXXIV of 1999 on the Road Traffic Register, certain data under Act I of 2007 on the entry and residence of persons with the right of free movement and residence.
The lawyer must keep a record of the data collected during the identification process and present it on request to the Bar Chamber or, in the case of money laundering, to the competent authorities.
However, the law does not require the person identified to appear before the lawyer and make a statement and present his documents and certificates.
Regulation 10/2019 (VI. 24.) of the Hungarian Bar Association allows for the identification to be made by sending a copy of the documents to the lawyer or by means of a pre-audited electronic communication device. It also allows identification on the basis of electronic documents, including copies of documents and statements, which are capable of recalling the information contained therein in an unaltered form, and which are capable of identifying the declarant and the date on which the statement was made, and which are made available to the lawyer by the client.
In its Resolution 1/2019 (VII. 31.), the President of the Hungarian Bar Association defined certain electronic communication devices that can be used for remote identification, by means of which the recorded identification is considered to be equivalent to the identification made in person.
Once the lawyer has duly identified the person involved in the establishment of the company by any of the means referred to above, there is no longer any obstacle to that person not appearing in person at the lawyer’s office when signing the company documents.
Moreover, Section 44(2) of the Lawyers Act expressly allows a party previously identified by the countersigning lawyer to act in the course of signing a document (or recognising the signature on the document as his own) by using an electronic device that transmits and records simultaneously a moving image and sound to the countersigning lawyer via an electronic communications network.
Thus, it is sufficient to send the documents signed by the participant(s) in the company establishment (with the prior reference to the remote signature) by post to the lawyer, who can submit them to the court of registration with his/her signature and countersignature in the company registration procedure.
It should be noted, however, that in order to open a bank account in Hungary, Hungarian banks normally require that the person authorised to represent the company (managing director, board member, etc.) must be present in person at the bank when the account is opened.
Further simplifications are applicable from 01 August 2022 to citizens of the European Union and companies and legal entities registered in the EU, who are entitled to set up a company online, if they meet other conditions.
