If owners decide to wind up a company’s activity in Hungary, they must entrust a liquidator with the process of dissolving it. In the first article of our series we looked at the process and procedure of voluntary liquidations, now we focus on the actual liquidator.
Who can be a liquidator?
In principle, the supreme body of the company may appoint anyone as a liquidator who undertakes to do so and meets the requirements of the Hungarian Civil Code for senior executives. A legal entity may also be appointed to fulfil the responsibilities of a liquidator. When appointing the liquidator, the company deciding to terminate without a legal successor shall also decide on the liquidator’s fee.
Who should be appointed as a liquidator?
The question often arises in the case of those providing accounting and tax advisory services as to whether they are willing to take on the role of liquidator for their clients. There are no professional or qualification criteria or requirements for a liquidator in Hungary. Many years of experience, however, show that it is much more advisable to appoint a person who knows the company’s activity and the given industry well. This knowledge can be useful when selling machines, real estate, and negotiating with partners. So in general, we recommend appointing a former employee or managing director of the company as the liquidator. (In the event of a simplified voluntary liquidation the senior executive of the company automatically performs this role.)
Role and responsibilities of the liquidator
The managing director’s assignment is terminated from the start date of the voluntary liquidation, and the liquidator represents the company from this date onwards.
The liquidator prepares a register of the creditor claims submitted within 40 days of the announcement on the start of the voluntary liquidation, and sends this register to the Hungarian Court of Registration. Taking into account the creditor claims listed under the reported claims, the liquidator prepares an adjusted opening balance sheet for the voluntary liquidation as of the start date of the voluntary liquidation. If it transpires from the opening balance sheet that the company’s assets will presumably not cover the creditor claims, and the owners will not provide the missing amount within 30 days, the liquidator has to initiate the liquidation procedure at the competent court without delay.
The liquidator is responsible for collecting receivables, satisfying creditor claims, terminating existing contracts, terminating the employment of the employees, selling the assets if necessary, and distributing the remaining assets among the owners. They must perform all of these tasks with due care and diligence, aiming for the highest possible income for the assets they sell.
During the period of the voluntary liquidation the liquidator in Hungary is responsible for preparing and publishing financial statements for each 12-month period, and the period closing the voluntary liquidation, as a financial year, and submitting annual tax returns.
Voluntary liquidations must be completed by the liquidator within three years of the start date. During and upon completing voluntary liquidations you can expect to have a tax authority inspection, so it is advisable to consider involving a consultant.
Anyone can be appointed as a liquidator in Hungary, but experience shows that it is best to appoint a person who knows the company’s activity, internal processes, policies and partners. Since voluntary liquidation involves many special taxation and accounting tasks, it is advisable to consider involving an expert. Feel free to contact the professionals at WTS Klient Hungary, who, as consultants, will be happy to support you with the special taxation and accounting issues that may arise in Hungary during the voluntary liquidation.