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Hungary

Europe-Valuation of non-cash contributions in Hungarian companies

The new Act on Companies, which became effective in June 1998, contains several provisions on the valuation of non-cash consideration for the allotment of shares in Hungarian companies that made it necessary to review the Hungarian Criminal Code.

Until recently, the Criminal Code stated that a person participating in the determination of the value of a non-cash contribution differing from the real value at the time of the contribution, committed a crime and should be punished with imprisonment of up to three years. This statutory provision, however, conflicts with two of the general provisions of the new Act on Companies.

Hungarian company law does not mandatorily provide for all company forms to have the value of their non-cash contribution valued by an auditor. If the value of the contribution in kind is determined by the shareholders themselves, they are liable for five years as of the transfer of the contribution not determining the real value of the contribution at the time of the transfer by the value determined in the articles of the company. Should the value of the contribution be determined by an auditor, the shareholders may determine a lower value in the articles than the value ascertained by the auditor.

It follows from both provisions that determining the value of the non-cash contribution lower as it actually is not forbidden. Only an over-valuation is prohibited in the interest of the creditors of the relevant company. The Criminal Code had to be modified in this respect and was modified with effect of March 1 1999.

One exception from this regulation is provided for in both, the Act on Companies and the Criminal Code. If state or municipality owned property is contributed, the value determined by the articles of the company may neither be above nor below

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