How Does the Hungarian Restructuring Act Implement Directive (EU) 2019/1023?

Introduction

In 2019, the European Union adopted Directive (EU) 2019/1023 on preventive restructuring frameworks, second chance, and measures to increase the efficiency of restructuring, insolvency and discharge procedures. In line with this directive, Hungary adopted Act LXIV of 2023 on Restructuring, which entered into force on 1 July 2024. The aim of the legislation is to create a legal framework that enables early restructuring of viable enterprises and provides an opportunity for financial recovery before formal insolvency.

Objectives of the Directive

Directive (EU) 2019/1023 is based on three main pillars:

1. Enabling early restructuring of viable enterprises in financial distress.

2. Ensuring a second chance for honest debtors.

3. Enhancing the efficiency and effectiveness of national restructuring and insolvency frameworks.

Main Elements of the Hungarian Implementation

1. Introduction of a Preventive Restructuring Procedure

The Act introduces a new procedure allowing companies to initiate negotiations with creditors in a pre-insolvency situation, while retaining control over their assets and operations.

* The debtor prepares a restructuring plan.

* The court may grant a stay of individual enforcement actions (moratorium).

* Creditors may be grouped into classes, and different offers can be made to each class.

This complies with Articles 4–11 of the Directive.

2. Proportionate Court Involvement

The Hungarian legislation ensures that court involvement is flexible and proportionate, aiming to preserve the efficiency of the procedure:

* Judicial approval is required for key stages (e.g. granting of moratorium, confirmation of the plan).

* Cross-class cram-down is possible, allowing a restructuring plan to be imposed on dissenting creditor classes under certain conditions.

This corresponds to Articles 10 and 11 of the Directive.

3. Role of the Restructuring Practitioner

The Act introduces the figure of the restructuring expert, who may be appointed by the court to assist the parties and support the procedure:

* Facilitates negotiations between the debtor and creditors.

* Monitors implementation of the restructuring plan.

* Ensures transparency and impartiality.

This reflects Article 5 of the Directive.

4. Second Chance – Future Outlook

Although the current legislation does not include debt discharge for individual debtors, the Hungarian legislator has signaled its intention to adopt separate provisions addressing the second chance mechanism in the near future.

This partially complies with Articles 20–21 of the Directive.

5. Digitalisation, Speed, and Transparency

The Act encourages the use of electronic communication, sets clear procedural timelines, and requires effective exchange of information between the debtor and the creditors.

These provisions reflect Articles 24–27 of the Directive.

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Conclusion

Act LXIV of 2023 on Restructuring effectively transposes the key elements of Directive (EU) 2019/1023 into Hungarian law, particularly in relation to preventive restructuring frameworks, judicial confirmation mechanisms, and the role of restructuring practitioners. The new framework lays the foundation for a modern restructuring culture in Hungary and enhances legal certainty and economic resilience.

Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)

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Katona és Társai Ügyvédi Társulás

(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)

H-106 Budapest, Tündérfürt utca 4.

Tel.: +36 1 225 25 30

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