Iván Sólyom and Soma Schóber (Lakatos, Köves and Partners) authored this publication

Introduction

The summer of 2025 was an intensive period with respect to significant changes in the Hungarian FDI laws concerning the "Special FDI Regime." Hungary has two separate FDI regimes in force. The first regime, the so-called "General FDI Regime," still focuses on a narrower scope and covers only sectors closely related to national security and public utility services, while the second, the "Special FDI Regime," covers a much wider part of the economy, affecting numerous deals in general.

First, the Hungarian Parliament adopted an act, Act L of 2025, effective August 19, 2025, making the Special FDI Regime a permanent regulation and extending its applicability to December 31, 2026. The Hungarian government also adopted significant modifications to the then-applicable Government Decree, Government Decree No. 561/2022, introducing a pre-emption right for the Hungarian state in case of blocked deals and significantly extending the deadlines of FDI screening processes. After the introduction of the new rules, it became clear that the changes had been adopted with regard to a specific transaction, the acquisition of Alföldi Tej Kft., and they proved to be short-lived and were removed from the regulation by the end of August 2025. This means that despite the regulatory fluctuations over the summer, no significant changes remained in the regulation for the long term, and the current Hungarian FDI laws contain basically the same rules as a year ago.

Summary of major changes in 2025

• The Special FDI Regime has been enacted in Act L of 2025, regulating the Special FDI Regime from August 19, 2025, onward and replacing Government Decree 561/2022.
• The Special FDI Regime will be applicable until December 31, 2026.
• Deadlines in relation to the state's pre-emption right relating to companies active in power generation with solar power plants under the Special FDI Regime are slightly extended.

Who files?

In the case of both regimes, the foreign investor makes the FDI notification to the competent minister. However, the definition of foreign investor under the two regimes differs.

Under the General FDI Regime, any natural person or legal entity qualifies as a foreign investor if it is a citizen of, or registered in, a country outside the EU, EEA, or Switzerland, or a legal entity registered in the EU, EEA, or Switzerland but controlled by a non-EU, non-EEA, or Swiss person or entity.

According to the Special FDI Regime, foreign investors are natural or legal persons or organizations that are citizens of, or registered in, a country outside the EU, EEA, or Switzerland, or legal entities registered in the EU, EEA, or Switzerland if they are under the majority control of natural or legal persons or organizations that are citizens of, or registered in, a country outside the EU, EEA, or Switzerland.

The Special FDI Regime also applies to EU, EEA, and Swiss investors, both natural and legal persons, if they acquire majority control and the investment exceeds HUF 350 million, approximately US$1.06 million.

Types of deals reviewed

Under the General FDI Regime, a number of transaction types are covered.

A deal will be reviewed if a foreign investor establishes a new Hungarian company or acquires more than 25 percent ownership interest in an existing Hungarian privately held company, or more than 10 percent in publicly listed companies, or acquires a "dominant influence" in such a company.

The regime also applies when a foreign investor acquires equity of less than 25 percent in a privately held company registered in Hungary, but the total equity held by foreign investors exceeds 25 percent as a result.

Transactions will also be reviewed where a company registered in Hungary in which foreign investors hold equity equivalent to that set out above takes up a listed strategic activity.

Other covered transactions include where a foreign investor registers a branch office in Hungary for the purpose of carrying out listed strategic activities, or where a foreign investor acquires a right to operate or use infrastructure or assets that are indispensable for carrying out listed strategic activities.

The Special FDI Regime covers transactions involving the acquisition of ownership interest; capital increases; mergers, demergers, or transformations to another company form; issuance of bonds that are convertible or convert to equity or provide preferential subscription rights; and establishing a "usufruct" right over equity, in other words, a right to enjoy the use of and benefits from equity, absent or in lieu of ownership.

The above applies provided that, as a result of the transaction, the foreign investor would acquire majority control, through ownership, voting rights, appointing management, or otherwise, if the investment reaches or exceeds HUF 350 million; or in the case of non-EU and non-EEA investors, at least 5 percent ownership interest, or 3 percent ownership interest in publicly listed companies, if the investment reaches or exceeds HUF 350 million; or an ownership interest reaching 10 percent, 20 percent, or 50 percent in a strategic company or any level of interest that, if computed together with any other foreign investors' interest, exceeds 25 percent.

In addition, irrespective of ownership thresholds or transaction sizes, the transfer of use or operational rights of infrastructure and assets that are "indispensable for the operation of strategic companies," including the pledging of these assets and infrastructure, requires both notification to, and acknowledgment by, the competent minister.

In relation to transactions caught by the Special FDI Regime, it is important to note that indirect acquisitions and thus higher-level intragroup restructurings fall outside its scope.

Scope of the review

Under the General FDI Regime, the competent minister reviews whether the triggering event "harms Hungary's security interests," which is not defined in the relevant laws and thus gives a broad framework for discretion to the competent minister.

In the case of an EU entity controlled by a non-EU investor, a blocking decision can be made only in the case of circumvention, for example, if it can be established that the EU entity's involvement in the transaction is for the purpose of circumventing the FDI screening rules. This could be the case, in particular, if the EU entity controlled by a non-EU investor does not carry out any actual economic activities or has no real presence in EU Member States.

Under the Special FDI Regime, the competent minister evaluates whether the proposed transaction endangers or threatens to endanger the national interest, public order, or public security of Hungary, with particular attention to the security of supply relating to the basic needs of society, in accordance with the relevant articles of the Treaty on the Functioning of the European Union, which invoke, among others, public policy, public security, or public health issues.

The minister also evaluates whether the foreign investor is directly or indirectly under the control of any administrative agency of any non-EU state, including its ownership structure or financing; whether the foreign investor is or was involved in any activity relating to public security or public order in any other member state; and whether there is a substantial risk that the applicant will commit any crime or illegal activity.

It is worth highlighting that under the Special FDI Regime, there is a pre-emption right for the Hungarian state relating to transactions affecting companies active in power generation with solar power plants. The relevant rules for these cases provide that if the target of a potential transaction is a Hungarian company active in power generation with solar power plants, the FDI notification must include an additional notification to the Minister of National Economy noting that the pre-emption rights of the Hungarian state may apply to the transaction.

If the minister also concludes that the transaction is subject to the pre-emption right of the state, the Ministry of National Economy informs the minister responsible for energy policy about the transaction, who can decide on exercising the pre-emption right within 30 business days from receiving the information. If the minister responsible for energy policy decides to exercise the pre-emption right, the original transaction must be concluded between the seller and the Hungarian state, and the Minister of National Economy will not decide on the FDI notification.

If the Hungarian state does not exercise its pre-emption right, the Minister of National Economy will decide on the acknowledgment of the FDI notification in accordance with the general rules.

Review process timeline

Under the General FDI Regime, the foreign investor must make a notification to the minister leading the prime minister's Cabinet Office before implementation and within 10 days of both signing the contract, in the event of equity acquisitions and operation right acquisitions, and the registration of the newly subscribed strategic activity in the company registry for strategic activities.

The deadline for review by the minister is 60 days, extendable by 60 days, from the date of filing.

According to the Special FDI Regime, the foreign investor must make a notification to the Minister of National Economy within 10 days from signing the transaction documents. The minister has 30 business days to decide on the transaction, and this deadline can be extended by an additional 15 calendar days.

In the case of target companies active in power generation with solar power plants, the Hungarian state can exercise its pre-emption right within 90 business days, and the Minister of National Economy has 75 business days, extendable by 15 calendar days, to decide on the notification. The deadlines are counted from the ministry's notification to the notifying party of the existence of the pre-emption right of the Hungarian state.

The relevant ministries do not always comply with the deadlines set out in relevant laws; therefore, substantial delays may occur in certain cases, and there are no effective remedies against such delays.

How foreign investors can protect themselves

Conducting an FDI analysis at the initial stages of the intended transaction is critical if the contemplated transaction touches on Hungarian companies or assets. In certain cases where FDI screening may be needed based on the applicable legal provisions, an informal discussion with the competent ministry or a written request asking it to express its views on the transaction on a no-name basis can be useful. However, it should be highlighted that the ministries are not keen to provide such opinions, and those opinions would be on a nonreliance basis.

If the initial FDI analysis shows that an FDI notification is necessary under the General FDI Regime, the FDI notification is mandatory. However, if the initial FDI analysis indicates that an FDI notification is necessary under the Special FDI Regime, there are some exceptions to explore, and potentially use, before making such a notification.

These include potential structuring of the transaction to avoid the effects of the Special FDI Regime by making the transaction indirect from the Hungarian company's perspective. Alternatively, consider whether an adjustment can be made to the registered activities of the target company to avoid unnecessary strategic activities. Hungarian targets may sometimes register a broad list of activities, even though the actual activities of the target are narrower and do not include strategic activities.

If a filing is necessary, the process can be expedited if the filings are well prepared, address potential questions, and appropriate communications and advocacy efforts with relevant authorities are undertaken during the process.

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