In a share deal, the subject of the sale is not an individual machine, contract or bank account but the bundle of membership rights and obligations in a Hungarian limited liability company. The company remains the same legal entity, retaining its contracts, debts, employees and regulatory history.
For the seller, secure payment and controlled post-closing liability are central. For the buyer, due diligence and contractual protection are essential.
1. What does the buyer acquire?
A business share represents the member’s rights and obligations in the company. The buyer replaces the member, while the company continues to own its assets. This differs fundamentally from an asset or business transfer.
The parties should first decide whether a full company acquisition, a majority or minority share, or selected assets better serves their commercial objective.
2. Start with the articles of association
The articles may contain transfer restrictions, a company-consent requirement, rules on priority acquisition rights, supplementary-payment obligations or ancillary services. These directly affect when and how the transaction may close.
A share may generally be transferred to an outsider only if the underlying capital contribution has been fully paid. Transfers between existing members may be more flexible, but the articles must still be reviewed.
3. Priority acquisition rights and company consent
For a sale to an outsider for consideration, other members, the company and a person designated by the company may have priority acquisition rights under the Civil Code and the articles. The complete third-party offer must be properly communicated.
The statutory response period is 15 days for a member and 30 days for the company or its designated person. Where the articles require company consent, the members’ meeting decides; silence for 30 days is deemed consent.
Important: bypassing these rights can leave the deal uncertain. Proceedings to establish ineffectiveness may be brought within a one-year forfeiture period from conclusion of the agreement.
4. Legal and financial due diligence
Reviewing only the company extract and latest annual accounts is rarely sufficient. The scope should reflect the company’s activity, size and risk profile.
- corporate documents, members’ resolutions and member register;
- accounts, ledgers, tax position and significant liabilities;
- loans, security, guarantees and shareholder loans;
- material customer, supplier, lease and finance agreements;
- employment and management arrangements and pending disputes;
- licences, regulatory matters, litigation and enforcement;
- real estate, equipment, inventory and intellectual property;
- data protection, environmental and sector-specific compliance.
Findings may affect price, payment terms, warranties, indemnities and security.
5. Determining the purchase price
The nominal value of the capital contribution is not the market value of the share. Price may reflect assets, debt, earnings, contracts and future prospects.
The parties may agree a fixed price, closing-account adjustment, retention, escrow or future performance-based earn-out. The formula, source data and dispute mechanism must be clear.
6. What should the agreement contain?
The Civil Code requires a written transfer agreement. It should identify the company and share, price and payment schedule, transfer date, conditions, handover obligations, warranties and liability.
The buyer may require warranties on title, liabilities, tax, contracts and disputes. The seller should define the subject-matter, time and monetary limits of those warranties and address matters disclosed to the buyer.
7. Signing and closing may be separate
In a simple transaction signing, payment and transfer may occur together. A complex deal may be signed first and close only after conditions have been satisfied.
Conditions may include expiry or waiver of priority rights, company consent, bank or regulatory approval, third-party consent under key contracts, or repayment of specified liabilities.
8. Notice to the company and member register
The buyer must notify the company of the acquisition within eight days. Notice must be made in a public instrument or a private document with full evidentiary force, enclose the transfer agreement, and confirm acceptance of the articles as binding.
The member change is effective against the company from notification, independently of registration. The managing director updates the member register and submits it to the court of registration. The company-registration filing is electronic and handled by legal counsel.
9. Management, banking and beneficial ownership
A share sale does not necessarily replace the managing director. A management change requires separate resolutions, acceptance documents and filings. The parties should organise handover of corporate and accounting records, credentials, banking authority, seals and contracts.
The change may also affect beneficial-ownership information, bank records, licences and contractual change-of-control clauses. Failure to address these can disrupt operations despite a valid transfer.
10. Tax and financing
Tax consequences depend on whether the seller is an individual or company, domestic or foreign, the acquisition value and documented costs. Buyer financing and use of company resources may require separate company-law, tax and accounting review.
The structure should be discussed with an accountant or tax adviser before finalising price and documentation.
11. Common mistakes
- Treating nominal capital value as market value.
- Ignoring transfer restrictions in the articles.
- Improperly communicating the buyer’s offer to right holders.
- Reviewing accounts but not contracts and contingent liabilities.
- Omitting retention, warranty and indemnity mechanisms.
- Failing to distinguish signing, closing and effective transfer.
- Missing the eight-day company notification or management handover.
Summary
A safe share deal requires more than a short agreement and registration filing. Due diligence, transfer restrictions, required declarations, price mechanics, warranties and closing conditions together determine whether the seller receives the price and the buyer acquires the company expected.
Are you planning to sell or acquire a business share and want the terms reviewed before making an offer?
This article provides general information and is not individual legal, tax or investment advice. A specific transaction requires corporate, financial and tax due diligence.