Setting up a company online
As on-line transactions have become more and more secure, since 01 August 2022 it has become possible to establish a company on-line in Hungary under certain conditions.
The provisions of Act V of 2006 on company registration, court proceedings and winding-up (Companies Act) have been extended to cover companies established online, based on the EU Digital Directive (Directive (EU) 2019/1151 of the European Parliament and of the Council of 20 June 2019 amending Directive (EU) 2017/1132 on the use of digital tools and processes in relation to company law).
For those involved in setting up a company, the biggest advantage of setting up (and subsequently changing) a company online is its speed. Not only is there no need for the participants (members, officers, other stakeholders) to appear before the countersigning lawyer, but there is also no need to mail or hand-deliver the documents they sign to the lawyer.
It is important to underline that, in the case of online company establishment, the word online does not mean the opposite of offline. In other words, it is not required that all the legal acts necessary for the establishment of a company are carried out by the participants at the same time in a common electronic space.
The term “online” is an adaptation of the terminology used in the Digital Directive and means that all operations are carried out electronically, without the need for a personal presence. It is thus not necessary for the parties setting up a company to sign electronically in a common electronic space.
The essence of on-line company establishment is that all documents are created exclusively electronically.
If the participants have accepted the contents of these declarations as binding on them, they may sign the document electronically where and when they wish to make such a declaration.
As can be seen from the foregoing, the electronic establishment (and modification) of a company is only possible if the participants have an electronic signature.
Pursuant to Section 43 (2a) of Act LXXVIII of 2017 on the Activities of Lawyers (Lawyers Act), an electronic document is deemed to have been duly signed by the parties if the signature
- a) placed by the party by means of an advanced electronic signature based on a qualified or qualified certificate, or
- b) authenticated by means of a document authentication service that is traceable to the party’s identity.
Pursuant to Section 43 (2a) of Act LXXVIII of 2017 on the Activities of Lawyers (Lawyers Act), an electronic document is deemed to have been duly signed by the parties if the signature
- a) by the affixing of an enhanced electronic signature of the party based on a qualified or qualified certificate, or
(b) by authentication by means of a document authentication service that is traceable to the party’s identity,
has been performed by the party.
A further condition of the on-line procedure is that the legal representative conducting the procedure must check the parties at the beginning of the procedure in accordance with Act LIII of 2017 on the Prevention and Prevention of Money Laundering and Terrorist Financing, using one of the electronic communication tools approved by the Hungarian Bar Association.
(We have written in detail about the countersignature of the lawyer required when establishing a company, the conditions for the countersignature of the lawyer in case of an absent client, the remote identification and the due diligence in the article of July 3, 2023.)
However, this very favourable company establishment regime is not open to everyone; only a citizen of a Member State of the European Union or a legal person or other entity registered in a Member State of the European Union can set up an online company.
A further restriction is that only two forms of company can be set up online: the limited liability company and the Hungarian branch of a foreign company.
In Hungary, the most common and popular form of company is the limited liability company. In this form, the share capital required to set up a company is only HUF 3 million and the company is liable to creditors only up to the amount of this share capital in general (not with the private assets of the members, except in exceptional cases).
However, a limited liability company is a partnership. Its members can be identified by anyone from the register of companies. Members’ shares are difficult to divest in some cases, and operations often require decisions by the general meeting, amendments to the articles of association and a change registration procedure in the Registry court.
This form of company is likely to become even more popular afterwards, as the amendment of the articles of association and the registration of changes in the Registry Court can be done on-line for online establised companies.
It should be added that, unlike other forms of company, limited liability companies can be incorporated in Hungary without paying duties and publication fees. While the same does not apply to the Hungarian branch of a foreign company.
