2022. Dec. 22. | miscellaneous, news
A new possibility for the termination of common ownership is the so-called “incorporation“. Although, the rules of the related Act LXXI of 2020 on the liquidation of undivided common ownership of land and on the settlement of data in the land register of the holders of immovable property constituting land (“Incorporation Act “) have been in force since January 2021, there is little experience with the functioning of the procedure. Below is a summary of the most important information on annexation.
Incorporation is when the dissolution of undivided joint ownership is achieved by a single owner acquiring the property.
The Incorporation Act aims to promote the development of competitively sized estates. The new property created by the division must be suitable for agricultural and forestry use. This will be determined by the size of the land for each type of cultivation:
– vineyard, garden, orchard, reeds cultivation type: 3,000 m2
– arable land, grassland, pasture, woodland and wooded land, cultivation type: 10,000 m2
– property zoned as garden: 1,500 m2
So, these are the minimum area sizes that must be created as result of the division.
In the case of real estate classified as forest, the additional provisions of Act XXXVII of 2009 on Forest, Forest Protection and Forest Management governing the division of forest shall also be taken into account. In the case of a property with mixed cultivation, the rate for the cultivation with the lower minimum area shall apply.
In principle, undivided common property can be divided by agreement between the co-owners. However, it may not be possible to create at least two parcels of land that meet the minimum size requirements. In such cases, the undivided common property can only be divided if the property is wholly owned by one owner. This will ensure the creation of estates of arable land of a suitable size.
The co-owner who initiates the acquisition must inform in writing all other co-owners who have a share in the property of their intention to acquire it. The content of the notification is laid down in Government Decree No. 647/2020 (XII. 23.) on the detailed rules for the liquidation of undivided common ownership of land. Accordingly, it must contain a declaration by the initiating co-owner that they are entitled to acquire ownership of the property, the value according to the valuation offer and the consideration offered by the initiating co-owner, and a warning that if the notified co-owner does not agree with the consideration offered, they may have a valuation opinion drawn up. The notice must also include that the notified co-owner must provide the initiating co-owner within 30 days with the terms and conditions for the payment of the consideration and, if the property contains an asset that is inseparable from the land and owned by the notified co-owner, the notified co-owner must make a statement regarding the transfer of ownership and compensation for its value or its continued use.
It is important to note that if the co-owner who is the largest user of the land initiates the annexation, they must declare that they are the largest user of the land and therefore no one else is entitled to incorporate the land.
The law also establishes an order of priority in the event if more than one owner claims ownership of a parcel of land. Order of priority is the following:
- The co-owner who uses the land to the greatest extent (also supporting the objective of land tenure policy that ownership of land should be acquired primarily by the person using it).
- The co-owner with the largest share of ownership.
- In case of equal ownership, the younger co-owner.
The notified co-owner may declare within 30 days that they accept the consideration set out in the notification or must prove that they have requested a valuation report. If the initiating co-owner is not the owner with the largest use of the land, the notified co-owner must also indicate that they are entitled to be included before the initiating co-owner in the order of priority, if they wish to exercise this right.
If ownership of the parcel cannot be obtained by the co-owner who initiated the acquisition, they must provide all documents (in particular, the certified notification of the other owners, the feedback from the other owners and, if prepared, the valuation report) to the “new” applicant.
The parties are free to determine the value of the property redeemed under the rules, based on the valuation offer as a minimum price. Even in the case of this method of division, it is possible to have a valuation report drawn up by a forensic expert if the parties disagree on the amount indicated in the valuation offer. If the new valuation report is drawn up, the cost of the new valuation report will be borne by the claimant if they have initiated the preparation of the new valuation report or if the amount of the new valuation report exceeds the amount of the valuation offer by at least 20%.
If the amount stated in the new valuation report exceeds the amount stated in the valuation offer, the initiating co-owner must pay at least the amount stated in the new valuation report as consideration. If the amount in the new valuation report is less than the amount in the valuation offer, the initiating co-owner shall pay at least the amount specified in the new valuation report as consideration.
One may legitimately ask what happens if one of the co-owners does not respond to the request or if the receipt for information is returned with a “not contacted”, “addressee unknown”, “delivery blocked” or “moved” notice. In this case, payment to the unavailable co-owner is made by court deposit. If this amount is not claimed by the beneficiary within 15 years, the State may use it to purchase land. If the State also owns a share of the land to be Incorporated, the National Land Centre is obligated to declare if, for example, a burial plot is located on the land. In this case, only the State is entitled to Incorporate the land in question.
Notification of the incorporation must be given to the holders of other rights and titles registered to the land and, if the transfer of ownership requires the consent of the holder or of a public authority, this must be obtained before the acquisition of ownership.
A contract signed by all the co-owners or, failing that, a unilateral declaration by the owner who has initiated the incorporation is required for the registration of the incorporation in the Land Register. The incorporation does not terminate the use of the land under the land-use contract existing at the time of incorporation, but the incorporating party must inform the third parties using the land according to the land use or forestry register of the change.
2022. Jul. 4. | civil law, commercial, news
Authorities with the appropriate authorization and certain service providers will are able to request data from the registry since 1 February 2022. On top of that third parties will also be able to request data from 1 July on with certain restrictions.
After lengthy preparations, Act XLIII of 2021 on the Creation and Operation of the Data Reporting Background for the Identification Duties of Financial and Other Service Providers (“Afad Act”) entered into force on 21 May 2021.
As per in the preamble of the Act, the stated objective of the legislation is to create a data reporting framework for the identification duties of financial and other service providers, to make the ownership of economic and social actors more transparent and to promote the effectiveness of the fight against money laundering and terrorist financing by establishing and operating a central registry of beneficial ownership, bank accounts and safe deposit services.
One of the reasons for the new ruleset is the, by Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 that also aims to establish a registry for beneficial owners.
Plans for regulation to combat financial money laundering, terrorist financing, tax evasion and corruption has long been on the EU’s agenda. The system, also referred to as the UBO (ultimate beneficial owner) registry, has undergone several conceptual changes before the current regulatory approach was chosen, under which data collection and related services are provided by the Hungarian Tax Authority (NAV). As part of the operation of the registry, the organization concerned is assigned a national registration number and a so-called TT index. This index assesses the registered organization on the basis of their reliability in providing accurate data. The TT index classification rules entered into effect as of 1 February 2022 and the possible sanctions will only follow first from 1 July.
Who are the beneficial owners and to has a duty to report?
A beneficial owner is the person who ultimately benefits from the activity of an enterprise. The Afad Act refers back here to the rules of the Money Laundering Prevention Act (Pmt Act), according to which beneficial owners are natural persons who directly or indirectly hold at least twenty-five percent of the voting rights or ownership interest in the specified company or otherwise exercise effective management or control.
According to the provisions of the Afad Act, the duty to report apply in particular to:
- business entities and legal persons registered in Hungary,
- Hungarian branches of foreign companies registered in Hungary,
- voluntary mutual insurance funds and private pension funds registered in Hungary,
- non-governmental organisations registered in Hungary,
- in the case of trusts, fiduciaries, if the activity is carried out in Hungary or abroad, more precisely outside the EU, but the business relationship is established in Hungary or real estate is acquired in Hungary in accordance with Pmt Act,
- legal entities partly owned by the state or local government with at least 25 percent non-state ownership.
Who provides the information?
According to the provisions of the Afab Act, account-holding banks are the ones obligated to upload data on beneficial owners to the registry based on information previously collected from their customers. Banks are obliged to provide data on their customers on a monthly basis.
What is the subject of the reporting?
According to the law, the data must include the following information on the beneficial owner or owners
- the surname and first name of the beneficial owner;
- the name and surname at birth of the beneficial owner;
- the nationality of the beneficial owner;
- place and date of birth of the beneficial owner;
- the address of the beneficial owner, or, in the absence of an address, the place of residence;
- the nature and extent of their interest in accordance with Article 3, Section 38, points a) and b) and d) to f) of the Pmt Act;
- the TT index of the actual ownership data
TT index and client classification
Based on the registry, those obligated to report are assessed on the basis of a 10-point reliability index. Each data subject is assigned 10 points at the time of the first recording. In the event that any authority detects a material discrepancy between the data known to it and the data entered in the register, it may notify the tax authority.
On the basis of such a notification, the NAV will reduce the TT index of the client concerned. If the client’s TT index is reduced below 8 points, the client’s designation is changed to uncertain and unreliable below 6 points. The tax authority publishes the name, tax number and rating of the entity concerned immediately in the case of an unreliable rating and after 180 days upon receiving an uncertain rating. Service providers must treat clients with an unreliable rating as high-risk as per the PMT Act and refuse to execute transactions above HUF 4.5 million for them.
How long will the data be included in the register?
In order to prevent and combat money laundering and terrorist financing, the registry will keep the data of the data provider in the beneficial ownership registry for 8 years from the date of the data provider’s dissolution without legal succession.
2021. Sep. 8. | civil law, commercial, news
In 2019 the Directive (EU) 2019/1023 of the European Parliament and of the Council (Restructuring Directive) has become effective. The legislation transplanting the directive into Hungarian law was ratified on 1 July 2021, but the practical use of the various proceedings contained in the legislation can only start from 1 July 2022. How exactly can these new laws aid companies?
Let’s take for example the extraordinary circumstances caused by the COVID-19 pandemic since the spring of 2020 that’s effected every aspect of the economy. Usually, it’s very rare for companies with great potential employing numerous people to come under liquidation. A crisis like this can emerge at any moment as we have experience back in 2008 as well as 2020 and can lead to unexpected circumstances. An economic crisis of such magnitude can lead many business owners and employees to face hardships.
The purpose of the new legislation is to introduce a new legal institution that can save otherwise healthy businesses facing financial hardships. The restructuring process can help for example businesses suffering from the protracted financial strain caused by the covid pandemic. As of right now bankruptcy proceedings are the only possible way to handle the unsecured debt accumulated by a business, however the slow and burdensome process, that also includes of the debtors in some the decision-making process of the business can carry a stigmatizing effect as well. The new process is expected to provide a new, efficient legal tool that can be used to save businesses.
One of the main advantages of the restructuring process, is the fact that it’s in essence governed by the parties of interest, and the courts are only present in a limited fashion. Furthermore, it is up to the debtor to chose which creditor they wish to involve in the process as not all creditors are necessary to be involved by law. However, from the creditors the debtor has involved, a delay in payment can be requested in order to carry out their negotiations but regular payments must be made towards the creditors not involved in the restructuring process. The legislation provides flexible tools for debtors in order for them to maintain their business, meanwhile allowing for the company to arrange negotiations with their most important creditors, those most vital to their operations. Should a debtor decide to involve all their creditors the delay in payments is universal, making the process public. Such a public process also means a larger involvement of the courts.
During the process the debtors may be aided by restructuring experts, should the debtor or the creditors involved see a need for such assistance. The experts – as moderators – are also tasked with helping the debtor to create a restructuring plan, assisting, or directing the negotiations with the creditors and are responsible for the proper execution of the restructuring plan. Guidance from such experts can be very influential as it is important for debtors to set up a realistic restructuring plan. Experts can also aid the negotiations by mediating problems as a neutral third party. These negotiations are important for both sides as debtors and creditors need to agree to a restructuring plan resulting in the renewed solvency and operation of the debtor. There is no strict legal parameter established by the new regulation for the possible restructuring process, the parties are free to use and agree to any solution that’s beneficial for both the debtor and the creditors. Of course, some legal conditions are still applicable – as for example the rights of employees can not be infringed due to the restructuring agreement – and these conditions are monitored by the courts.
The main benefit of the restructuring process is that it can be approved by simple majority resulting in a compulsory agreement. Therefore, it’s no longer possible for a situation to arise where a single dissenting creditor can cause the agreement and therefore the continued operation of the debtor to fall through. Furthermore, unsuccessful negotiations will no longer necessarily result in insolvency proceedings for the debtor. In summary the new restructuring process will strengthen the position of businesses and therefore the position of creditors in the Hungarian market, resulting in long term positive effects on the economy as well.
2021. Aug. 27. | copyright law, news
As of July 1, this year maybe the most fundamental amendments of Hungary’s Act LXXVI of 1999 on copyright has finally entered into force. According to the Hungarian Intellectual Property Office the new law will be able to handle questions of intellectual property in a “more equitable manner”. While the answer whether the changes will truly make the landscape of Hungarian copyright laws fairer and more equitable is firmly outside the scope of this article, a brief summary of the changes can prove useful for anyone.
First thing to note is the background of the amendment are the European Union’s CDSM and SatCab II directives. For both directives Hungary is among the first countries to transplant the EU legislations into its domestic law. For SatCab II Hungary was the very first to incorporate the directive and for CDSM the second country to do so. But what do these acronyms actually stand for?
Let’s start with CDSM, (that is the directive on Copyright in the Digital Single Market), because this is the one directive of the two to garner some sort of notoriety. This was the particular EU regulation that was rumored to seriously curtail the free use of copyrighted materials online. Luckily that was never the intention of the directive, but on the contrary it even expanded the fair use cases available under Hungarian law. For the first time in Hungarian copyrighted materials are free to be modified via transformative use or parodied without the original copyright holder’s prior consent.
SatCab II is a directive laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organizations and retransmissions of television and radio programs. The directive aims to facilitate the licensing of copyright and related rights and thereby to improve the cross-border provision and reception of content such as radio and television programs both live and on-demand, through traditional channels, such as satellite or cable, and through online services in the Internal Market. The new rules are stated to make it easier for European broadcasters to make certain programs available on their simulcasting or catch-up services online, and aim simplify the distribution of more radio and TV channels by retransmission operators.
According to the Hungarian Intellectual Property Office the amendments also provide new fair use cases texts and data mining operations, as well as provide the necessary framework for free use in remote learning situations similar to the regulations that already exist for conventional education settings. Furthermore, the new law also intends to make the rules for the monetary compensation of copyright holders more transparent and sets out rules for the liability of online forums for user generated content.
The Hungarian Intellectual Property Office stated that besides the EU directives the amendments also aim to provide solutions for some of the long-standing practical problems of copyright law in Hungary. For example, the rather archaic rules for copying works for personal use were modernized, as it is no longer a strict requirement to only allow handwritten copies of works for personal use.
To sum everything up the new rules seem to provide effective answers the ever-increasing online shift of copyrighted works and to the fact that the line between content creators and consumers continue to blur.
