For owners of Hungarian-registered companies (including foreigners), an exit often takes the form of selling the company to a foreign investor. However, the Hungarian State has introduced a foreign direct investment (FDI) screening and approval requirement that goes far beyond the scope typically applied in other countries—even in sectors deemed critical elsewhere, such as defense manufacturing, utilities, and financial services. This significantly expands the range of transactions subject to approval and creates a substantial administrative barrier to company sales involving foreign investors.
The latest amendment to the regulation further extends the process—potentially by several months—and in some cases may even render the transaction unfeasible.
It is important to note that such regulatory frameworks are not unknown within the European Union. However, investors generally do not expect similarly strict and potentially lengthy restrictions to apply so broadly.
Beyond raising concerns among EU-based investors regarding the compatibility of such wide-ranging screening procedures with EU law, the lack of predictability may ultimately reduce investor appetite. This, in turn, could make Hungarian companies harder to sell and may negatively impact their valuation.
Previous regulations on FDI notification obligations
During the COVID-19 pandemic, the Hungarian government introduced what was initially described as a "temporary" regulation, placing a broad range of company sales to foreign investors under state scrutiny. Later, invoking the state of emergency declared due to the conflict in Ukraine, the government maintained these rules through a decree aimed at the “protection of Hungarian companies for economic purposes.”
Under the currently effective Government Decree No. 561/2022 (XII.23.), most M&A transactions involving foreign investors—such as share purchases, capital increases, corporate transformations, or even the transfer of usage rights for certain assets—require a mandatory notification procedure, which in practice functions as a ministerial-level approval process.
The scope of target companies subject to FDI screening has been defined extremely broadly, extending far beyond sectors of genuinely strategic importance. The definition of "foreign investor" is also broad in scope. In addition to entities and individuals registered in or controlled (directly or indirectly) by persons from non-EU third countries, the regulation also applies to acquirers based in EEA countries and Switzerland, if the transaction exceeds HUF 350 million (currently ~EUR 875,000) and results in majority control.
In such cases, the approval procedure must be conducted, during which the Hungarian authorities assess whether the transaction could pose a risk to the national interest, public security, or public order of Hungary—or whether there is a possibility of such risks materialising.
As the ministerial approval procedure typically took 1,5 to 2 months, parties already had to plan for a significant time gap between signing and closing. Although outright prohibitions were relatively rare and judicial review remained available, the possibility of the transaction being blocked continued to loom over the parties throughout the process.
In addition, in the case of strategic companies engaged in solar power generation activities, the Hungarian National Asset Management Inc. (MNV Zrt.) held a statutory pre-emption right.
Additional restrictions from June 2025: Extended deadlines and expanded pre-emption rights
Under Government Decree No. 163/2025 (VI. 23.), effective from 23 June 2025, parties to a transaction must prepare for an even more prolonged approval process. Importantly, these changes also apply retroactively to ongoing procedures.
The amendment extends the statutory deadlines for ministerial feedback, citing that the previously applicable time limits were often insufficient for a thorough assessment of the facts. Accordingly, the ministry now has 45 working days to examine a notification from the date of receipt. This period may be extended—initially by 15 working days, and then up to three additional times, each by up to 30 working days.
In practical terms, this means that a notification submitted in early January could still be under review during the summer—with no certainty for the parties as to whether their transaction can ultimately be completed as negotiated.
Potential solutions
For Hungarian company owners considering the sale of their business to a foreign investor, it is strongly recommended to gain a detailed understanding of the FDI screening framework already at the preparation stage. It is essential to assess both the available options and the associated risks early on. Both sellers and buyers should begin transaction negotiations only with a clear understanding of the complex and often ambiguously worded regulations, and should even approach the indicative offer stage with these legal risks in mind. Involving a qualified expert from the very first step is advisable—not only to interpret the legal framework correctly, but also because certain exemptions may apply in specific cases.
Given that the notification to the ministry can only be submitted once the fully negotiated and signed agreement is in place, the parties must face the inherent risk that months of preparation—including indicative negotiations, due diligence, drafting of transaction documents, and fulfillment of closing conditions—may ultimately prove futile. In such cases, the significant transaction costs incurred are often difficult to allocate or recover. However, if the parties are aware of this risk in advance, they may enter into a preliminary agreement early in the process to determine how such costs will be shared in the event of a failed transaction.
In summary, whether you are a foreign investor planning to acquire a Hungarian company, or a Hungarian or foreign owner considering the sale of a Hungarian business, the very first step should be to consult with an expert. Only through case-specific legal and commercial analysis can the potential implications of the FDI screening framework be assessed and appropriate risk mitigation strategies be developed.
