Pursuant to new regulations on the control of investments in certain industries, prior approval from the relevant minister will be required for the acquisition of foreign ownership (including acquisition of operating rights of infrastructure and establishment of domestic branch) in Hungarian companies active in sectors considered sensitive to Hungary’s national security. The ownership restrictions are respectively 25% or bigger stake in non-public companies, 10% or bigger stake in public companies, joint ownership of foreign investors that exceeds 25% (except for public companies) or any influencing stake as defined by the Civil Code of Hungary.
The following industries are considered sensitive:
- Manufacturing of weapons, ammunition and licensed military technologies
- Manufacturing of dual-use (both military and civil use) products
- Production of secret service equipment
- Financial services and operation of payment systems
- Services under the law on electric energy
- Services under the law on natural gas supply
- Services under the law on water utilities
- Services under the law on electronic communications
- Certain activities as defined in the Government decree on setup, development and operation of electronic information systems
Within the scope of the new regulation are legal entities registered outside the European Union, the European Economic Area and the Swiss Confederation, as well as legal entities registered in Hungary, the European Union, the European Economic Area and the Swiss Confederation having as majority stakeholder legal entity or citizen outside the European Union, the European Economic Area and the Swiss Confederation.
Under the new law, the relevant acquisition is considered valid only if the prior ministerial approval is received. Upon notification, the relevant minister approves or refuses to approve the acquisition within 60 days of receiving the necessary documentation. Further detailed regulations are expected in the coming weeks.
Impact on investors: The Hungarian Parliament passed a bill on the control of foreign investments in the country, effective as of 1 January 2019. Acquisition of ownership in companies operating in sectors considered sensitive to Hungary’s national security will require prior approval from the Government. Investors must be prepared to meet these requirements when investing in such sectors. Further details are expected to be announced in the following weeks.