As an implementation of the EU’s 2019/1023 Directive, Hungarian legislators have passed Act LXIV of 2021 (effective from 1 July 2022) on the restructuring procedure, a brand-new pre-insolvency scheme when compared to the already existing insolvency proceedings (bankruptcy, liquidation).
The main advantages of restructuring can be summarized as follows:
• voluntary basis: the company expecting potential insolvency can decide on the procedure itself (i.e., no mandatory constraints);
• narrower circle of involved creditors: the restructuring plan is adopted on the basis of negotiations with not all creditors (although this is also possible) but with the creditors involved by the unilateral decision of the company;
• can be hidden from the general public: if no general moratorium is introduced, the fact that restructuring is taking place is not publicly available.
The restructuring procedure is aimed at companies experiencing liquidity problems with a realistic chance at recovery. This, among others, is clearly manifested in the condition that restructuring is available only if undisputed or acknowledged debts, due with over 30 days, do not exceed 10% of the total claims against the company.
On the basis of the restructuring plan, approved by the court, enforcement can be requested should the company undertaking such obligations fail to deliver.
As to other participants, the procedure shall be under strict judicial supervision (being a non-contentious court procedure), with occasional restructuring experts on the sidelines (a position available for registered liquidation managers/companies).