What to do when your Hungarian business operation has reached its end? You can sell your company if you find the right buyer, but normally, it is best to liquidate it. If it has no issues, that can simply be done by your accountant, although it takes some time. You could also simply abandon it, but that poses several risks.
What to do with an unwanted company?
When you no longer need your Hungarian company, you have three choices before you:
- Sell it – If you find a buyer for a good price, this is the easiest option. However, company setup is very simple in Hungary as it takes only 4-5 days, so in most cases, it is easier and less risky to set up a new company that to buy an existing one.
- Liquidate it – Liquidation is the official process of closing a company. It may take at least 6-12 months, and during this time you are expected to maintain the company (pay for accountancy and registered seat as a bare minimum). At the same time, you will be allowed to start another business already during the procedure, if that is what you want to do.
- Abandon it – If you do not liquidate your company yourself, eventually it will be liquidated by the Hungarian Registry Court. That way, however, you might be banned from starting another business for up to 5 years.
Liquidation is the proper way to go
Liquidation is the official process of removing your company from the Company Registry. If all is in right order with your company (meaning that it has no debts and it does not require an auditor), you can get your accountant to start a simplified procedure (“egyszerűsített végelszámolás”), which takes 6-12 months. You will still need to maintain your corporate bank account as well as accountancy and a registered seat during this time, though.
If you do not qualify for simplified liquidation, the regular procedure (“végelszámolás”) will apply. In this case, you will need a lawyer as well as an accountant to submit your documents to the Court of Registry, and your company must appoint a liquidator to notify each Hungarian authority (this can be your lawyer). The regular procedure takes a bit longer, typically 12-18 months (although it may take up to 3 years).
Liquidation is not always voluntary
If you do not take good care of your Hungarian company or if you abandon it, it will be liquidated by the Court of Registry. If that happens, you might lose the share capital when it is distributed among creditors of the company, and you might get banned from starting or managing another company for up to 5 years, depending on how much debt you leave behind.
There are several types of involuntary liquidation:
Forced or mandatory liquidation (“kényszertörlés”)
If your Hungarian company does not comply with regulation for a prolonged time and despite repeated notices, the Court of Registry will initiate its liquidation. Once the process starts, it might still be possible to reverse it depending on the causes and the current status of the company, but it is much safer to prevent it. Mandatory liquidation may also be a last step of a windup (see below), bankruptcy proceedings, or regular liquidation if it was not completed within 3 years.
Windup (“felszámolás”)
If your Hungarian company is not paying its debts, any of its creditors may initiate a windup. Alternatively, if liquidation is started voluntarily, but during the process it is discovered that the company has outstanding debts, the procedure may be changed into a windup. In a windup procedure, a liquidator is appointed to assess debts and sell assets to compensate creditors. This might take up to 2 years. If there remain any unpaid debts in the end, executives might be banned from company setup and management for up to 5 years. When the windup is completed, mandatory liquidation can be finished too.
Choose liquidation when you are done
When you no longer want to continue your Hungarian business operation, liquidating your company is the safest way to end things. If you have a small business that is also debt free, simplified liquidation is easy and cost-effective, while you will not risk losing your share capital or getting banned from further business activities. Throughout the process, you will need to maintain:
- Your corporate bank account
- Your accountancy contract
- Your registered seat
Helpers from business setup to liquidation
The Helpers Team offers administrative assistance throughout the entire life cycle of your Hungarian company. Whether you need help with company setup, registered seat services, accountancy, payroll – or even liquidation, you can trust our 20 years of experience.
FREQUENTLY ASKED QUESTIONS
In the context of business operation, liquidation is the process of stopping the activities of a company and getting it deleted from the Company Registry.
Yes, you can, but then you risk losing the share capital and you might get banned from managing another Hungarian company for up to 5 years.
You will need to cover liquidation fees with the accountant and/or lawyer taking care of the process, while you will also have to maintain the corporate bank account, ongoing accountancy, and the registered seat of the company.
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