Foreign (non-EU) investments related to certain activities will be subject to the supervision and consent of the Ministry of the Interior according to a recently passed law.
The act foresees a prior reporting obligation when foreign investors wish to invest in companies doing certain activities. These activities include financial services; producing firearms and ammunition; activities related to providing electricity, natural gas and water; and telecommunication services. Foreign investors are defined as natural persons or legal entities who are citizens of or registered in any country outside the European Union and Switzerland, and those legal entities that are registered in Hungary but citizens or legal entities outside the EU or Switzerland have major influence in them.
The investor may only gain the right for operation of facilities and assets necessary to carry out the above activities after the submission of the report. The report shall be made in writing, and the foreign investor shall present its past activities and documents regarding his ownership structure. Several data of the foreign investor shall be specified in the report and the underlying documents shall be attached to the report in original or a certified copy and with authentic Hungarian translation.
The Minister of Interior will have 60 days to decide – which could be extended by another 60 days. The Minister may either reinforce that there are no circumstances regarding the activity which would harm Hungary’s interest or if such circumstances persist, the Minister prohibits the activity. The negative decision could be challenged at the Metropolitan Court in an administrative court procedure.
The submission of the report to the Minister must precede any other ownership registration procedure, which means that without the Minister’s permission, change of ownership cannot be registered in the book of shareholders, moreover, the new owner cannot exercise their rights against the company. A transaction closed without the Minister’s permission shall be void.
The compliance with the above obligation will be controlled by the Constitution Protection Office (Alkotmányvédelmi Hivatal). If during such a controlling procedure it is established that the foreign investor did not comply with the required obligations, the Minister may impose a fine but if the investment does not represent a threat to Hungary’s security, the Minister shall give their consent. Otherwise, the Minister may prohibit the transaction and set a 3 three-month deadline for the investor to sell their ownership. The Hungarian State has the right of pre-emption. The act maximizes the fine in 1 million HUF in case of natural persons and in 10 million HUF in case of legal entities. The act takes into consideration the protection of legitimately acquired rights. The controlling procedure cannot be carried out if 6 months have passed since the Constitution Protection Office gained knowledgeof the transaction and neither if 5 years have passed since the change of ownership or since the authorisation of the activity.