A significant change took place in the second half of 2025 in the lives of foreign companies intending to invest in Hungary — and consequently in the lives of the Hungarian or foreign owners of Hungarian companies seeking to sell to them. The legislator repealed Government Decree No. 561/2022 (XII. 23.), previously applied to foreign direct investments (Foreign Direct Investment – FDI), and replaced it with Act L of 2025. The new Act elevated the previous emergency decrees to statutory level, including certain provisions necessary for the economic protection of business associations operating in Hungary. This summary by RSM Legal helps assess which regulatory requirements must be met by those intending to invest in Hungary as foreign investors and which considerations should be taken into account in the case of foreign involvement, whether as seller or buyer, during the preparation of a planned transaction.
When a foreign investor knocks on the door of a Hungarian company’s seller — but it is the Ministry that opens it
Although the legislator formally enacted a new piece of legislation in the field of foreign direct investments (Foreign Direct Investment – FDI), in practice this does not mean the removal of restrictions. On the contrary, it signals the lasting nature of an exceptionally broad state control regime over foreign investments.
In recent years, the regulatory framework governing the procedure applicable to foreign investors acquiring shareholdings (“FDI”) has already created significant administrative burdens and transaction risks. These must be taken into account already at the stage of making the investment decision by investors intending to acquire an interest in Hungarian companies.
Preparation of M&A transactions – sell-side and buy-side support
FDI regulation applicable to the sale of Hungarian companies
Who qualifies as a strategic company?
FDI regulation defines in an exceptionally broad manner the range of strategic companies in respect of which the acquisition of ownership or influence by foreign persons has become subject to notification. In this context, “strategic companies” are business associations having their registered seat in Hungary and operating as limited liability companies or companies limited by shares, provided that they carry out activities in sectors defined in very broad terms (including, in particular but not limited to, transport, communications, information technology – IT, financial services, trade, manufacturing, tourism, construction, and education).
It is important to note that the regulatory framework is dual in nature. Accordingly, in the case of companies operating in traditionally strategic sectors — such as energy, public utility services and the defence industry — Act LVII of 2018 shall apply accordingly, which falls under a separate regime.
FDI – which transactions are affected?
It is not only the acquisition of a shareholding exceeding 5% (or 3% in the case of publicly listed companies) that requires an assessment of whether a notification must be submitted to the competent ministry. Any legal transaction through which the foreign investor acquires an interest falls within this scope, including becoming an owner through a capital increase, entering the company by way of a transformation, the issuance of convertible bonds or bonds granting subscription rights, or even asset sales. Moreover, the transfer of certain infrastructures, equipment and assets, the granting of rights to use or operate them, or the provision of such assets as security (for example, encumbering them with a pledge not created in favour of a credit institution) is also subject to notification.
Who is considered a foreign person?
Although a legal entity registered in an EU Member State or a citizen of such a country, acting as buyer, might reasonably expect that its acquisition of ownership would not be restricted on the basis of the EU principle of free movement of capital, the situation is more complex than that.
If, based on its ownership structure, a buyer is under the majority control (whether directly or indirectly, through majority voting rights or the right to appoint executive officers) of an organisation, legal entity or private individual registered outside the European Economic Area and Switzerland, the buyer will in all cases qualify as a foreign person. Accordingly, if, for example, an American, Chinese, Korean, Japanese, Russian or Indian legal entity appears in the buyer’s ownership structure, there is a strong likelihood that the FDI procedure will have to be completed.
However, European investors cannot sit back either, because where the investment exceeds HUF 350,000,000 (approximately EUR 900,000–950,000) and the European investor acquires majority control, the FDI rules also apply.
FDI rules – what are the exceptions?
The FDI rules do not apply where the legal transaction takes place directly at the level of the foreign parent company and results in a change of ownership with respect to its controlled or affiliated Hungarian undertaking.
Impact of the FDI notification obligation on transaction preparation
The above shows that a complex set of criteria must be examined in order to determine whether a given investment is subject to notification.
In addition, beyond the FDI procedure, merger control clearance may also be required, and further special sectoral permits or transfer restrictions may also apply. In practice, each such procedure may only be initiated after the signing of the sale and purchase agreement (i.e. after conclusion of the legal transaction), and this results in the closing of the transaction — that is, the transfer of ownership — being possible only many months after the agreement has been signed. Consequently, a well-prepared investor must assess the necessity of these procedures already at the LOI stage, or at the latest during the due diligence process.
Foreign direct investments (FDI) – the procedure
Accordingly, if a person qualifying as a foreign investor carries out any of the above-mentioned legal transactions in relation to a strategic company, the approval of the minister responsible for domestic economy is required in order for the transaction to become legally valid.
Legal representation is mandatory in the procedure, and the notification may be submitted electronically, addressed to the minister. It is also important to note that this FDI notification does not replace any other authorisation or notification obligations prescribed by other legislation in connection with the acquisition of ownership or operation.
The minister examines whether the notification is compliant and whether the legal transaction endangers the interests of the state, public security or public order. In the course of this review, the minister may request the submission of missing information or documents, and as a general rule acknowledges or prohibits the notification within 30 working days, which may be extended by a further 15 days in justified cases (although in practice the procedure may last up to 3 months). A prohibiting decision may only be challenged by way of administrative litigation before the Budapest-Capital Regional Court.
Pre-emption right in the case of solar power plants
In the case of solar power plants, the Hungarian state is also vested with a right of pre-emption, and the opinion of the minister responsible for energy policy plays an important role in the decision. Within a forfeiture deadline of 90 working days from the date on which the information is sent to the notifying party, the state may exercise its right of pre-emption through the Hungarian National Asset Management Inc.
Failure to submit the FDI notification – fines, invalidity and company law consequences
A breach of the FDI notification obligation may result in a substantial fine, calculated on the basis of the transaction value or the company’s turnover. Registration of the acquired shareholding is conditional upon the acknowledgement of the notification; if the transaction is prohibited, such registration is not possible, and any transaction implemented despite the prohibition is null and void (which also raises difficulties in restoring the original status).
In summary, whether the objective is the acquisition of a Hungarian company as a foreign investor or the sale of a Hungarian company as an owner, following the entry into force of Act L of 2025, the impact of FDI regulation arises already at the earliest stage of the transaction. In order to ensure legal compliance, assess the existence of notification obligations and manage the related risks, it is essential to involve the appropriate expert from the very beginning of the planning phase, who, based on the specific circumstances of the transaction, is capable of identifying the effects of the regulation and proposing how the transaction can be implemented safely and, within the permitted legal framework, in the most optimal manner.
