Hungary Grants the State Broad Pre-emption Rights in Foreign Company Acquisitions

By Katona & Partners Law Firm

Effective as of 24 June 2025, a newly issued government decree (Government Decree No. 163/2025. (VI.23.)) has significantly amended the Hungarian foreign direct investment (FDI) screening regime. This amendment introduces a general right of pre-emption for the Hungarian state in all notifiable foreign corporate acquisitions and applies retroactively to ongoing transactions. The change, adopted without public consultation, marks a significant shift in the country’s approach to regulating foreign ownership in domestic businesses.

1. Background and Legal Basis

The Hungarian government originally introduced FDI screening measures during the COVID-19 pandemic via Government Decree No. 163/2020. (IV.30.), later reinforced by Act LVII of 2018. These rules aimed to protect companies operating in sectors deemed strategic to national interests. Notably, the screening mechanism applied to investments from non-EU countries and, in some cases, to EU-based investors as well.

Government Decree No. 163/2025. (VI.23.) now substantially broadens the state’s role in the acquisition process by introducing automatic pre-emption rights and enhancing the government’s discretion in reviewing transactions.

2. Scope of the New Pre-emption Regime

The new regulation grants the Hungarian state a statutory right to purchase, on identical terms, any Hungarian company that is subject to a notifiable foreign acquisition if the Minister of National Economy issues a decision prohibiting the transaction. Key features include:

Universal application: The state’s pre-emption right now applies to all notifiable transactions, not just those involving certain sectors like solar energy (as was the case since early 2024).
Retroactive effect: Transactions already in progress as of the date of entry into force are also subject to the new rules.
Extended timelines: The Ministry’s review deadline has been extended from 30 to 45 working days, with the possibility of three 30-day extensions.
Pre-emption timeline: Once a prohibitive decision is issued, the state has 90 days to exercise its pre-emption right.

3. What Constitutes a Notifiable Transaction?

A foreign acquisition is subject to notification under the Hungarian FDI regime if it involves:

The acquisition of at least 10% ownership in a Hungarian company active in a strategic sector;
The attainment of controlling influence (e.g., over 25%, 50%, or majority ownership);
Any shareholding increase that crosses defined thresholds;
The acquisition of infrastructure, technology, or key assets in sectors affecting national security or public interest.

Strategic sectors include:

Energy and utilities
Transport and logistics
Defence and military products
Food and agriculture
Finance and insurance
Information and communications technology
Public health and pharmaceuticals
Construction and critical infrastructure

The broad scope of these sectors effectively captures a wide range of commercial activity, significantly increasing the number of transactions subject to review.

4. Legal and Practical Implications

The government’s expanded authority has major implications:

Increased legal uncertainty: The retroactive application of the new rules raises due process concerns and could disrupt pending M&A transactions.
Transaction delays: Longer review timelines and the potential for state intervention may deter foreign investment or complicate deal structuring.
State intervention risk: Even in transactions involving EU investors, the state may intervene based on indirect ownership or national interest grounds.

Given the sweeping nature of the changes and the lack of transitional provisions, legal advisors recommend early risk assessment and close cooperation with local counsel.

5. Key Takeaways for Foreign Investors

Foreign investors contemplating acquisitions in Hungary should:

Conduct thorough due diligence on sector classification and FDI applicability;
Prepare for prolonged transaction timelines due to expanded ministerial review;
Consider structuring alternatives to mitigate potential state intervention;
Engage Hungarian legal counsel early in the transaction lifecycle.

Contact Katona & Partners

Our firm regularly advises on foreign investment control, cross-border M&A transactions, and regulatory compliance in Hungary. For more information on how the new FDI rules may impact your business, please contact:

Katona & Partners Law Firm
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)

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