The Government made a decision on implementation of another of the points in the Széll Kálmán plan: bankruptcy proceedings and rules on winding up proceedings will be simplified, and as a result burdens on Hungarian businesses will be reduced, and the economic environment will be purged of inactive, inoperable companies.

In the Széll Kálmán Plan, by December 31 2011 the Ministry of Public Administration and Justice committed to creating legislation which reduces burdens on businesses by making proceedings and winding-up procedures quicker and more transparent.

The Ministry has prepared the legislative package it will submit to Parliament in the near future. The package contains amendments on:

-        corporations
-        company registration
-        judicial proceedings
-        liquidation
-        sole traders
-        other related corporate laws

The aim of the legislative amendments is to roll back abuses by businesses which are damaging to creditors and the state, and to purge the market of inactive and inoperable companies. Thus the competitiveness of active companies can increase, and administrative burdens will diminish.

In order to uncover and eliminate ’company graveyards’, a new procedure – the so-called compulsory closure procedure – will come into being, which will make it quicker to remove from the market inactive, inoperable companies which are not salvageable and companies with no assets.

Sanctions on company owners and CEOs who have misused or concealed funds will be strengthened; the possibility to sanction company owners and CEOs who act fraudulently or irresponsibly will be further expanded; courts’ remit to impose penalties will be extended to ensure that there has to be a guarantee that company directors and owners are held responsible for any damage sustained by creditors.

The rules on procedures for insolvency (bankruptcy and winding-up procedures) are changing. The tightening of sanctions used by courts and the authorities is expected to increase debt repayment, and so collection of public revenues can improve, and more creditors can be paid. On the other hand the amendment also aims to protect the company assets of debtors undergoing proceedings, to enhance debt management functions, and that by signing bankruptcy agreements the number of winding up procedures should decrease. All these measures can contribute indirectly to preserving the capacity of enterprises to retain jobs.

(Ministry of Public Administration and Justice)