The acquisition of a target business in Hungary can be effected by the purchase either of the company owning that business's shares (company limited by shares)/quotas (limited liability company) or of some, or all, of the assets comprising that business. The more commonly encountered route is the share purchase.

A share/quota purchase involves the seller and the buyer (and any other parties, such as guarantors) entering into a share/quota purchase agreement to record the agreement of the parties as to their respective rights, obligations and liabilities in connection with the sale of the shares/quotas in the target. Upon completion of the share/quota purchase agreement, title to the shares/quota transfers to the buyer. The share/quota transfers are usually subject to the company's approval. In addition, in limited liability companies, members have statutory preemption rights regarding the business quota of any member who intends to sell their business quota to a third party.

Once a share/quota transfer is completed, the new share/quotaholder must notify the target company's management. Upon notification, the managing director must update the target company's membership list and indicate the buyer as a new share/quotaholder of the company.

A business purchase also involves the seller and the buyer (and any other parties, such as guarantors) entering into an asset (or business) purchase agreement to record the agreement of the parties as to their respective rights, obligations and liabilities in connection with the sale of the target business. This agreement must provide for the transfer of each type of asset in accordance with the formalities for the transfer of an asset of that type. Subject to any requirements for the transfer and/or registration of the transfer of ownership of a particular asset (such as intellectual property), legal title to the assets transfers on completion of the asset purchase agreement.

Auction processes are frequently encountered in Hungary for both share and asset sales.

A limited liability company (in Hungarian: korlátolt felelősségű társaság).

The different types of limited liability companies are: (i) classic limited liability companies without any securities (Kft); and (ii) companies limited by shares (Zrt).

The ownership rights of a member of a limited liability company are represented by the member's business quota. In a company limited by shares, the shareholder's rights are represented by the shares that the company issues.

In general, members/shareholders are responsible for the contribution of the nominal value of their quotas/shares upon the establishment of the company. Under Hungarian corporate law, the limitation of the shareholders'/quotaholders' liability may only be lifted in exceptional cases (e.g., the quotaholder/shareholder willfully reduces the company's equity to make it impossible for the company to settle debts to the company's creditors). 

A private/public company limited by shares must always have at least one shareholder, but there is no maximum limit on the number of shareholders.

To transfer legal title to the shares/quotas in a Hungarian company, a share/quota purchase agreement must be executed. In addition, it may be necessary to obtain and deliver preemption right waiver letters at the time of completion. The parties may mutually determine additional conditions precedent to the transfer occurring.

When a business is being transferred by way of an asset purchase, each individual asset must be transferred in accordance with the formalities for a transfer of an asset of that nature. For some assets, this will simply be a case of physically delivering the asset to the buyer, but, in other cases, the formalities are more prescriptive, such as for real property or intellectual property (where a separate instrument of transfer must be delivered and later registered). In addition, asset sale and purchase agreements usually include TUPE provisions regulating the transfer of employees.