Doing Business in Hungary – Part three – Let’s establish a Branch Office in Hungary

In Hungary, it is Act CXXXII of 1997 on Branch Offices and Commercial Representative Offices that contains the detailed regulations in relation to branch offices.

It is advised to establish a branch office if no commercial activity will be carried out, but the aim is to be present on the Hungarian market.

The branch office does not have a legal personality, meaning that they cannot acquire rights or obligations in their own name, but only in the name of their founder.

Branch offices are considered as a unit of the foreign company, but they can determine their own economic activity. The foreign company has unlimited liability for the debts of the branch office. When determining the assets of the branch office, all assets of the foreign company used by the branch office must be counted to the assets of the branch office. It is the duty of the foreign company to continuously provide the assets needed by the branch office for its functions. The branch office may not pursue representational activities in the name of the founder. The founder may not dispose of the assets, rights and duties of the branch office which were acquired in the name of the branch office, only if the branch office is terminated, or it is unable to pay its debts, or when a process has been initiated against the branch office abroad in relation to its rights, duties and payment capacity.

In case of a branch office, there is no requirement for a minimum registered capital. The Company Court requests however that the capital of the branch office which the Founder has placed to its disposal, be indicated and cover the first necessary costs of operation. As a consequence, it is advisable to transfer at least 1,000 EUR to the branch’s bank account.