From 2025, anyone can initiate legal supervision proceedings at the court of registration if a company does not publish its financial statements. Until now, this possibility has only been available to those whose legitimate interests have been harmed by non-publication.

Furthermore, the threshold for mandatory audits will increase. To date, it was obligatory above HUF 300 million (approximately EUR 725,000) in revenue. That will rise to HUF 600 mln and above (about EUR 1.45 mln), reducing the administrative burden on companies. Finally, auditors will also review companies’ environmental, social and governance reports.

Surprisingly, the first two changes could have opposite effects: sanctions for non-publication of accounts may motivate companies to publish their financials on time, with appropriate content and supported by audit, while increasing the threshold for mandatory audits narrows the scope of the obligated. The first step could, therefore, increase transparency, while the second might reduce it.

The increase in the audit threshold means SMEs will not be required to undergo a mandatory audit, effectively eliminating independent external control in this segment. Their business partners will, therefore, have to base their decisions on uncertain data and will be forced to enter into contracts with companies whose financial situation they know less about, generating an increased factor to breach financial commitments.

This increases the importance of well-founded due diligence processes (not only from legal and tax perspectives but also financial) in future M&A and other significant contract transactions.

Those who want to keep their investments in safe hands and react flexibly to rapidly changing challenges should build on the knowledge of the audit profession, even if it is not mandatory.

The third change, the sustainability or ESG report forming part of the company’s annual report, is a hot topic. Without going into the difference between ESG and sustainability reports and their separate obligations here, we would highlight that preparing a sustainability report became mandatory for companies listed on the stock exchange this year, and from 2025, it will also be compulsory for non-listed large companies.

As part of a gradual introduction, it will be expanded to a wide range of businesses from 2028 onwards. Although large companies must prepare a sustainability report on their own activities, according to the regulations, they must also qualify their suppliers. The obligation will also affect those looking to raise green capital from external investmentsor loans.

Therefore, it is important that entrepreneurs, regardless of company size, be aware of the nature of these regulations and take the necessary steps to organize data collection processes within their firms.

In addition to evaluating the veracity of reports, LeitnerLeitner’s ESG-certified auditors can help clients meet the new expectations. During the implementation period, for example, we can help you better understand the system criteria, shaping attitudes and developing processes.

We are convinced that entrepreneurial behavior that maintains a harmonious relationship with the environment and considers stakeholders’ interests is the key to long-term, balanced operations. It is worth looking at this new reporting obligation as creating value, not as a “tick the box” obligation, but making it an intrinsic value of the company and using it to develop future growth.

LeitnerLeitner and LeitnerLaw have a long tradition of offering their clients high-quality full-scope (tax, accounting, payroll audit and legal) consulting in Central Europe. Creating integrated and multi-disciplinary one-stop solutions is the main element of our client-focused approach when approaching the needs of private clients, SMEs and corporate groups on general and specific questions.

This article was first published in the Budapest Business Journal print issue of December 13, 2024.