Termination of Liquidation Proceedings

How to Save a Financially Viable Company?

In the Hungarian entrepreneurial sector, it is unfortunately not uncommon for an otherwise stable and solvent company to be subject to liquidation proceedings due to administrative failures, disputed claims, or neglect of official correspondence. When liquidation is ordered by the court, company leaders may fear that this is the end: the company will be deleted, operations will cease, and already initiated business projects will be lost. However, there is a lesser-known, so-called “atypical” solution that allows the termination of liquidation proceedings if the company is not actually insolvent.

This article provides a comprehensive overview of what insolvency proceedings mean, how the company can be saved, what obligations the business faces, the most important deadlines, and the role of a well-prepared law firm – such as Molnár & Márk – in the company’s survival and continued successful operation.

Liquidation Proceedings – Why Are They Ordered, and What Do They Mean?

The primary purpose of liquidation proceedings is to resolve the fate of insolvent companies and satisfy creditors’ claims. The court orders liquidation if it determines the company’s insolvency or if the company requests liquidation. However, there may be situations where the company is actually financially stable, but failed to respond to claims in a timely manner, did not collect official mail, or simply did not consider the claims against it as valid, leading to the court ordering liquidation. What happens in such cases?

• The company’s previous representative (e.g., the CEO) loses the right to sign on behalf of the company and make legal declarations.
• The liquidator replaces the leadership and represents the business in all matters.
• The goal is typically to uncover and liquidate the company’s assets, with the proceeds being used to pay creditors.

In such circumstances, the question arises: What should we do if we are not actually insolvent and wish to preserve our company?

Termination of Liquidation According to Section 45/A of the Bankruptcy Act

Section 45/A of the Bankruptcy Act (Act XLIX of 1991) provides a procedure that offers a way for a viable and operating company to exit liquidation proceedings. The legislator intended to ensure that a business does not have to be deleted if its debts can be settled and normal operations can be maintained. This legal option is not widely known, and it is relatively atypical in practice, but it is highly effective if the company can secure creditors’ claims.

The Most Important Conditions

1. The company must settle all registered, recognized (or undisputed) debts.
2. For disputed claims, the company must provide appropriate collateral (such as a bank guarantee or bond).
3. The liquidator’s fees and costs must also be settled; this amount is calculated based on the book value of the company’s assets (usually 2%, but at least 300,000 HUF + VAT).
4. The liquidator or the debtor (or the company owner) must submit a request to the court that ordered the liquidation for the termination of the liquidation proceedings.

Deadlines

The application cannot be submitted at any stage of the process without limitations. The law specifically states that the request can only be made after the creditors’ deadline for submitting claims has passed, but no later than the preparation of the final balance sheet and asset distribution proposal.

Insolvency Proceedings or Actually Company Rescue from Liquidation?

The intended purpose of insolvency proceedings (liquidation) is to remove non-operating businesses from the economy. However, in practice, not only truly insolvent companies end up in this situation. The legislator recognized that there may be a need for a legal tool to allow otherwise viable and solvent companies to “reverse” the liquidation process.

The so-called “company rescue from liquidation” is only possible if the company makes every effort to satisfy or secure creditors’ claims. This often requires significant financial resources, particularly if new costs, fees, or fines arise during the liquidation process.

New Debts Arising During Liquidation

It is worth mentioning that if the company continues to operate during the liquidation, certain costs still need to be paid (e.g., employee salaries, utilities, etc.). These expenditures may increase the amount of money the company or its owners need to raise.

Liquidator’s Fees and Court Practice

One of the key costs in the procedure is the liquidator’s fee, which is determined by the aforementioned 2% rate based on the book value of the company’s assets. In addition, the court may consider the liquidator’s actual expenses, the volume of work, and may reduce this amount in certain cases. However, in practice, the court rarely deviates significantly from the legal minimum, so it is generally advisable to ensure that the amount is fully provided for.

When Might the Fee Be More Favorable?

• If the company’s assets are low, the 2% could represent a relatively smaller amount, but the law still establishes a minimum (300,000 HUF + VAT), which is payable even if the 2% would otherwise be lower.
• The court may specifically consider how much time and energy the liquidator has invested in the process. If a solution is found quickly, and the liquidator’s workload is less, there may be some flexibility in reducing the fee – although this is rare.

How Does the Atypical Company Rescue from Liquidation Work in Practice?

1. The debtor – or the owner – contacts the liquidator.
   • They express their intention to pay all registered debts and provide collateral for disputed claims.
2. The liquidator compiles the claims and fees, and communicates the necessary form and amount of collateral.
   • A “cost estimate” is also prepared, detailing the amount of money that needs to be raised.
3. The company or its owners settle the debts or deposit the necessary amount to secure disputed claims.
   • This includes the registered claims of creditors, the liquidator’s fee, and any other costs arising during the liquidation.
4. Application to the Court
   • The liquidator or the company (owner) submits an official request to the court to suspend and terminate the liquidation process.
   • The court examines whether the legal conditions have been fully met.
5. Court Decision – Liquidation Proceedings are Terminated
   • If the court finds the application justified, it issues a decision terminating the liquidation.
   • The company can resume operations freely.

Molnár & Márk: Professional Legal Support During Liquidation Proceedings

As outlined above, rescuing a company from liquidation is a complicated process that involves many administrative and legal obstacles. The key to success in this process lies in accurate documentation, meeting deadlines, and whether the company’s leadership is able to provide the necessary financial resources to meet creditors’ and the liquidator’s claims.

Molnár & Márk Law Association provides services in multiple areas that are closely related to liquidation and other insolvency proceedings, including:

• Corporate Law and Business Transactions: The legal framework for business operations, including commercial contracts, M&A processes, and corporate governance amendments.
• Economic Law: Comprehensive advice on legal and tax matters affecting businesses, including debt collection.
• Litigation and Non-litigation Representation: Resolving disputes either in court or through alternative dispute resolution forums.
• Real Estate Law: Legal background for property sales, developments, and rental arrangements.

Since the termination of liquidation requires not only precise knowledge of the law but also strong negotiation skills, an experienced law firm like Molnár & Márk can engage with the liquidator, negotiate with creditors, and develop an optimal legal strategy to protect the company’s interests.

What Else Does the Firm Provide to Terminate Liquidation?

• Full representation in court during liquidation proceedings.
• Managing communication with the liquidator and analyzing claims submissions.
• Assessing the financial flexibility of the company or its owners to settle debts, disputed claims, liquidator fees, and other costs arising during liquidation.
• If necessary, assisting in obtaining new investors or financial sources to help the company meet its payment obligations.

Bankruptcy Act 45/A – The Importance and Text of the Law

Section 45/A of the Bankruptcy Act provides the legal framework under which the court may order the termination of liquidation proceedings. The law stipulates that if the debtor (or other eligible person) settles the registered claims and provides collateral for disputed claims, the court – before the preparation of the final balance sheet – may terminate the liquidation proceedings.

It is important to emphasize that to utilize this legal option, it is essential to know the deadlines precisely and maintain rigorous documentation. The court has no discretion beyond the specified deadlines, so if the company delays payment or providing collateral, there may be no opportunity to terminate the liquidation proceedings.

Tips and Advice for Business Owners – How to Prevent Complications?

1. Collect official mail! Many liquidation cases start because company leaders fail to collect registered letters, electronic messages, or court summonses, thus missing important deadlines.
2. Respond to claims, even if disputed! Even if we doubt the validity of a bill, we must respond and submit our objections to the appropriate legal forum. Failure to do so leads to an omission that is difficult or impossible to correct later.
3. Be aware of our solvency! If a significant debt becomes a problem, it may be wise to initiate bankruptcy protection or other insolvency proceedings (e.g., a bankruptcy agreement), as this provides a more structured framework for resolving claims.
4. Seek legal advice promptly! Terminating liquidation proceedings is much harder than preventing them. Lawyers can assist early in resolving disputed claims or avoiding them altogether.
5. Plan ahead for financing! If we foresee the possibility of liquidation proceedings, it’s wise to assess whether there will be financial resources to pay debts or provide collateral. This saves time and avoids additional costs from ad-hoc solutions.

Liquidation is often equated with the end of a company, resulting in the company’s removal from the company register. However, for an operational, solvent business, company rescue from liquidation is a viable alternative, thanks to Section 45/A of the Bankruptcy Act. To succeed, however, precise knowledge of legal requirements, close cooperation with the liquidator, and settlement of all registered claims, securing disputed claims, and paying the liquidator’s fee are essential.

If the process is successful, the court will terminate the liquidation proceedings, and the company can continue its operations. However, this requires timely recognition and precise administration.

Molnár & Márk Law Association, with its extensive legal experience and effective non-litigation and litigation representation, can support business owners who recognize early that prevention always costs less than reversing already ordered liquidation. Through its expertise and comprehensive service offering, the firm can assist not only in terminating liquidation proceedings but also in ensuring the long-term sustainability of the business.

If you believe that your company may be subject to liquidation or it has already been ordered and you are looking for a viable solution, it is advisable to consult professionals as soon as possible. Deadlines are tight, and the stakes are the company’s continued existence and the professional credibility of its leadership. Seek professional assistance in time, and give your company a chance to survive and continue its successful operation!

(The above article was prepared in accordance with applicable Hungarian legislation – particularly the Bankruptcy Act. For specific legal advice and clarification of detailed rules, it is strongly recommended to consult an attorney.)