Bankruptcy Act amendments to take effect July 1

Issues

Changes made last year to Hungary's Bankruptcy Act will come into effect on July 1. The amendments will make it harder for companies to escape their debtors, but it will also give troubled companies more time to pay off their debts. The amendments give Hungary's courts authority over indebted companies in cases where Hungarian creditors or suppliers have brought a bankruptcy case to court even if the company's headquarters is not in Hungary. All that is required is for the company's main business operations to be inside the EU. The measure also prevents the management of companies on the brink of bankruptcy from setting up another headquarters in order to escape the power of the Hungarian court. Companies against whom a bankruptcy suit has been filed will have 15 days after the receipt of the case from its creditors to argue the case. Debts repaid during this period in order to avoid liquidation do not mean, however, that the debtor is acknowledging these debts, and they may even be reclaimed in court at a later date. The changes place more responsibility on managers of bankrupt companies who demonstrate incompetence. (Vg)

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