Category: Hungary

The Budapest office of Kinstellar has advised SK innovation on its acquisition of land in Ivancsa, Hungary, for its new automotive battery factory.

According to Kinstellar, “SK innovation is the third largest company in South Korea, operator of the largest oil refinery in the country, leader in the domestic petrochemical industry, and a global trader of crude oils and petrochemicals. This will be the company’s largest European factory unit, [consisting of] a new e-battery plant with a capacity of 30GWh and entailing a total investment value of USD 2.29 billion, [making it] the largest greenfield investment in Hungary’s history.”

Kinstellar’s team was led by Partner Anthony O’Connor and Associate Barnabas Sagi.

Kinstellar did not reply to our inquiry on the matter.

Lakatos, Koves & Partners has advised Budapest real estate company Convergence on the doubling of the office space it leases to private healthcare provider Doktor24 in Budapest’s Cityzen office building. 

According to LKT, Doktor24 “now occupies a total of 2,755 square meters in the Cityzen building on the Vaci Business Corridor.” 

LKT’s team consisted of Partner Attila Ungar and Senior Lawyer Agnes Hegyi.

LKT was unaware of any external counsel advising the tenant.

Lakatos, Koves & Partners has assisted the Duna Medical Center with the beginning of the development of a new hospital in Budapest.

According to Lakatos, Koves & Partners, the hospital is being developed under the framework of a sale and leaseback transaction.

The Lakatos, Koves & Partners’ team included Partner Attila Ungar and Senior Associates Tamas Balogh and Zsuzsanna Ilyes.

“The pandemic has overwritten any expectations we had at the end of 2019,” says Schoenherr Budapest Partner Gergely Szaloki. “We were very optimistic, and the market was booming, but the pandemic changed many things.” He underlines the frequent switch to a home-office working environment as being a particular source of change for the real estate market. “Not only the office spaces,” he says, “but I can imagine that flats will also be designed in a way so that it’s possible to establish at least a working corner at home.”

Szaloki says that the past few months have seen the creation of a number of pandemic-related laws affecting Hungary’s economy. “Without trying to be exhaustive, it is worth mentioning the extension of the payment moratorium as well as the introduction of the eviction moratorium until the end of the pandemic situation,” he says. “Also, the Hungarian Parliament introduced a special reorganization procedure related to the Covid measures, and the implementation of the restructuring directive is expected to be adopted any time.”

In the meantime, Szaloki notes that not all markets have suffered equally during the pandemic. “The bond market is growing; the bond program of the Hungarian National Bank is running,” he says. “Sustainable energy is also a hot topic; solar farms are in development throughout the country and the pandemic did not really affect these projects.”

Szaloki reports a good outlook for deals in general, in fact. “Certain bigger M&A transactions are expected in the banking sector as well. Generally, while we saw some caution at the beginning of the pandemic, by now things are getting back to normal when it comes to deals.” He notes, though, that the inflation rate is expected to be higher than forecast, and that the Hungarian National Bank, “after many years, is considering increasing the base interest rate.”

Finally, Szaloki says that there hasn’t been any major news of note in the Hungarian legal market over the past year. “I think these days lawyers are rather conservative and are not moving unless necessary.  So far, I have not heard about any effect of Covid on the players of the legal market: no big movements happened like 12 years ago.” As to the legal business, certain sectors started thriving, for example real estate and labor law issues popped up from the ground that we could not even imagine existing before.”

On 27 April 2021 the Hungarian Parliament adopted a new legislation on the Supervisory Authority for Regulated Services, which will in the future supervise the judicial enforcement body, the liquidators and perform official tasks related to the retail sale of tobacco products and the organization of gambling. The new laws will enter into force on 1 October 2021. The purpose of the law is to strengthen the consumer protection, official control and supervision powers in relation to certain exclusive economic activities of the state.

The Authority will have the power to grant license and exercise official control and supervision over the retail trade of tobacco products, the tobacco retail supply activity and certain activities of tobacco wholesalers. It may, in addition, grant license and exercise official control and supervision over the gambling organizations. It will also have the right to supervise and regulate the independent system of judicial enforcers (bailiffs) and the supervision of the National Order of the Judicial Officers of Hungary. Finally, the Authority will be an independent regulatory body over the maintenance of the register of liquidators and other official registers of liquidator organizations, and it will exercise official supervision and control over the system of liquidator organizations.

The Authority will also perform tasks on behalf of the state relating to concession contracts. Within the Authority a Concession Council will operate in order to establish a uniform state concession law practice, and also to ensure the principles of the Concession Act and the sectoral laws defining the manner and conditions of carrying out economic activities on behalf of the state. The president of the Concession Council will be the president of the Authority, to be appointed by the Prime Minister for a term of nine years, who may be reappointed once at the end of the term.

By Levente Csengery, Partner, KCG Partners Law Firm

Based on a bill submitted on 20 April 2021, the new law establishing the ultimate beneficial owner register (UBO) may enter into force on 15 May 2021. According to the bill, the UBO will be based on data obtained by banks in the course of the customer due diligence under the Hungarian Anti Money Laundering Act (AML Act), which data will be passed on to the body maintaining the UBO (i.e. the Hungarian tax authority). After the system is set up, each organization involved will receive a registration number and a TT index.

The TT index evaluates the organizations based on their reliability, which will be 10 points at the time of the first data recording. However, this value may change (decrease) when the authority maintaining the UBO detects discrepancy from the data at UBO on the basis of the information passed on by another authority or service provider pursuant to AML Act. If the TT index of an organization falls below 8 points, its status becomes “unstable”, and when it falls below 6 points, it becomes “unreliable”. In both cases, it is possible to return to “reliable” status (i.e. regain the 10 points) by changing or confirming the data within the statutory deadline. The “unreliable” status will have certain disadvantages, such as publishing the name of these organizations by the Hungarian Tax Authority, or service providers will consider them as high risk organizations and refuse to carry out transactions over HUF 4.5 million.

The organizations will be entitled to access and reconcile their own data.

By Gabriella Galik, Partner, KCG Partners Law Firm

Latest proposal by the Hungarian Ministry of Finance aims to extend tax measures to help Hungarian SMEs.

Due to the COVID pandemic and in order to facilitate liquidity for SMEs in Hungary, the deadline for VAT reimbursement has been shortened. As a general rule, SMEs should receive reclaimed VAT within 30 days instead of 75 days. Furthermore, the deadline for SMEs qualifying as ‘trusted’ taxpayers is even shorter, 20 days, which is the swiftest in the European Union.

Additionally, COVID-specific tax payment reliefs have also been introduced: companies may apply for payment in instalments, deferred payment and even partial tax reduction for tax debts under HUF 5 million (approximately EUR 14,000). Ministry of Finance now proposed to further extend those measures by the end of 2021 to boost the restart of the economy as well.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

On May 14, 2021, CEE Legal Matters reported that Kinstellar’s Budapest office had advised Bank of China on an approximately USD 75 million loan to China National Machinery Import and Export for the construction and operation of a 100 MW photovoltaic power plant in Hungary. CEEIHM Spoke with Lucy Shen, Deputy Head of Corporate Banking Department at Bank of China (CEE) Limited to learn more about the deal.

CEEIHM: To start, please introduce the Bank of China and its operations in Hungary.

Lucy: Bank of China Hungary was established in 2003 and now serves as the regional center in Central and Eastern Europe with 4 cross-border subsidies in Austria, the Czech Republic, Romania, and Serbia, covering business in the whole CEE region. It has a comprehensive range of services and products: corporate financing, trade services, RMB settlement services, a financial institution business, and a treasury business.

We are one of the largest banks in Hungary by assets and we have a solid customer base in the region with Bank of China having established strong business relationships with top corporates in the CEE region, including local companies and Chinese companies.
We have a strong support and commitment to the Hungarian government: the Hungarian government and Bank of China signed a strategic cooperation agreement in 2017; Bank of China issued the first RMB dim sum bond and a total of 3 billion RMB Panda bonds for the Hungarian government. Bank of China, as the only RMB Clearing Bank in the CEE region, acts as the RMB clearing bank for MNB.

CEEIHM: What was it about this project that initially caught your attention and what were its main selling points as a lender when considering it? What other projects do you envisage in the CEE region – what sectors are you looking at?

Lucy: There were several aspects for us. First, the size of the project – it is currently the largest photovoltaic power plant project in Hungary. In order to reduce greenhouse gas emissions, Hungary has greatly focused on developing clean energy in recent years. In the development of renewable energy, photovoltaic electricity is one of the main focuses. After the completion of the Kaposvar photovoltaic power plant, it will be able to provide stable and affordable electricity within Hungary.

Second, we considered environmental protection. During the construction, environmental-friendly instruments are used for the protection of plants and the soil. On top of that, landscape planning is being carried out for the site. 

Third were considerations linked to resource integration. The Kaposvar photovoltaic power station project is mainly invested and constructed by Chinese companies, with support from regional sub-contractors and local market players. It is one of the key projects for China and Hungary to strengthen exchanges and cooperation in the fields of ecological and environmental protection and green development under the framework of the “Belt and Road Initiative.”

Inspired by this project and encouraged by the climate-related trend, we are looking at green projects such as renewable energy electricity, new energy vehicle manufacturing, the rechargeable battery production where the Chinese market players are showing their interest or have been making successful investments in the CEE region.

CEEIHM: What were the main challenges in concluding the deal – both in terms of negotiating and structuring the deal as well as from a legal perspective?

Lucy: The main challenges were the Hungarian real estate laws and the electricity laws when the lender structured the local security package, analyzed the chain effect from different project documents.

CEEIHM: What were Kinstellar’s and Arhusts’ mandates precisely? How did you split the legal work between your in-house team and your external advisors?

Lucy: Kinstellar’s Budapest office and Ashurst have advised on the review, negotiation, and signing of all related finance documents.  Our in-house team has followed the day-to-day negotiation with the external advisors, made necessary comments to the finance documents from a compliance point of view, helped our business team to understand and clarify certain legal questions with the external law firms, provided guides on the communication with the external advisors, and did the final internal reviewing before the signing of the finance documents. In short, our in-house team put its trust in our external advisors and relied on the legal opinions issued by them.

CEEIHM: And, while on the subject, why did you opt to use Kinstellar / Ashurst specifically to assist on this project?

Lucy: We selected our legal counsel mainly based on qualitative criteria. These two law firms stood out from other candidates in terms of their record in project financing in the electricity sector and PV projects. We are impressed by both firms’ considerable support and their strong cooperation with each other.

Originally reported by CEE In-House Matters.

Hungary’s Lakatos, Koves & Partners and Norway’s Schjodt Law Firm have advised Norbit ASA on its acquisition of IData Kft. The transaction gives IData an enterprise value of EUR 14.5 million. Szecskay Attorneys at Law advised the sellers on the deal.

IData is a technology company headquartered in Hungary that specializes in services related to vehicle tracking and fleet management that reported EUR 5 million in revenue in 2020. It claims to be tracking 34,000 vehicles for 4,200 customers. 

LKT’s team was led by Partner Ivan Solyom and included Senior Lawyer Nora Szigeti and Senior Counsel Eva Bognar.

Szecskay’s team included Senior Partners Orsolya Gorgenyi, Hedi Bozsonyik, and Gusztav Bacher, and Partners Katalin Szecskay and Robert Dezso.

Former BekesPartners lawyer Stella Simon and Perger Law attorney Gabor Perger have founded the AegisLegal law firm in Budapest.

Both Simon and Perger specialize in Competition Law, Capital Markets, and Trusts, as well as having transactional experience. 

Stella Simon began her career in 2015 at the Hungarian Competition Authority. She moved to EY Law in 2017, where she spent two and a half years, then spent a year and a half at BekesPartners. She obtained her Juris Doctor and her Master of Laws in Competition Law from the Pazmany Peter Catholic University in 2015 and 2016, respectively. 

Gabor Perger spent nearly five years with the Perger Law firm. He received his Juris Doctor from the University of Pecs. 

“In business life, in the field of transactions, capital markets and trust structures, our clients from time-to-time face complex legal challenges,” commented Stella Simon. “It is our intention to offer company owners and executives highly specialized legal services and strategic advisory services in these situations. We are also proud that AegisLegal is currently the only law firm in Hungary that employs three professionals who have work experience at the Hungarian Competition Authority.”