A foreign acquirer completes its due diligence on a Hungarian target. The transaction closes. Weeks later, it receives a government notice: the investment required prior notification under Hungary's investment screening rules. The consequences – transaction suspension and potential unwinding – follow.
Hungary has expanded its foreign investment screening system, introducing new mandatory notification requirements that took effect in early 2025. International investors acquiring stakes in designated sensitive sectors must file a pre-transaction notification with the competent Hungarian authority before completing any acquisition. Failure to notify carries the risk of transaction nullification and administrative penalties.
This alert sets out what has changed, which investors and sectors are now caught, and the immediate steps international companies must take before proceeding with any Hungarian acquisition or securities offering.
What changed – the regulatory development and its effective date
Hungary's investment screening legislation has undergone a significant expansion. The revised rules, which entered into force in the first quarter of 2025, broaden both the list of sectors subject to mandatory review and the categories of investors required to notify.
Previously, the screening regime applied primarily to investments from outside the European Economic Area. The updated rules extend notification obligations to a wider range of acquirers, including certain EEA-based entities where the ultimate beneficial owner originates from a third country. This change directly affects structures that previously relied on an EU-based holding vehicle to avoid scrutiny.
The revised regime also introduces new disclosure obligations at the notification stage. Investors must now provide detailed information on their ownership structure, the source of investment funds, and any affiliations with state-owned entities. These disclosure obligations align Hungary's system more closely with the EU Foreign Subsidies Regulation and broader EU-level investment screening coordination.
The rules apply to transactions signed or completed on or after the effective date. Pre-existing investments are not subject to retroactive review. However, any subsequent increase in shareholding – even by a small margin – in a previously acquired target may trigger a fresh notification requirement. Investors with existing Hungarian positions should map their structures against the new thresholds without delay.
For transactions involving listed securities or investment fund interests, the notification requirement applies irrespective of whether the acquisition occurs on-market or off-market. This means that purchases of shares via a tőzsde (Budapest Stock Exchange) transaction are not exempt simply because they occur through a regulated venue. Prospectus-backed securities offerings and IPO participations that result in the acquirer crossing a designated threshold are also within scope.
To discuss the impact of these changes on a pending or planned transaction in Hungary, contact us at info@ferrazwhitmore.com.
Who is affected – threshold criteria and business categories
The notification obligation applies when a foreign investor acquires – directly or indirectly – a qualifying interest in a Hungarian company operating in a sensitive sector. The key threshold is set at a level that captures minority acquisitions, not only controlling stakes. Investors crossing defined voting rights or ownership percentage levels must notify, regardless of the commercial rationale for the acquisition.
Sectors subject to mandatory notification now include:
- Energy production, transmission, and storage
- Transport infrastructure and logistics networks
- Financial services, banking, and capital markets infrastructure
- Telecommunications and digital infrastructure
- Healthcare, pharmaceuticals, and medical devices
The financial services category is particularly broad. It encompasses entities holding banking licences, investment firms subject to disclosure obligations under Hungarian capital markets legislation, and operators of payment systems. An investment fund domiciled in Hungary that manages assets in any of these sub-sectors may itself be treated as a sensitive-sector entity for notification purposes.
Foreign investors structured through special purpose vehicles, trusts, or investment fund arrangements are not exempt. The rules look through the immediate acquirer to the ultimate beneficial owner. Where a non-EEA state-owned entity holds – directly or indirectly – a meaningful interest in the acquiring vehicle, the notification obligation applies even if the immediate acquirer is an EU-incorporated entity.
Transactions falling below the ownership threshold but accompanied by rights that confer influence over strategic decisions. such as veto rights, board appointment rights, or information rights relating to sensitive activities – may also trigger notification. Practitioners advising international clients consistently flag this as the most commonly underestimated risk in deal structuring. A minority stake with protective governance rights can attract the same scrutiny as a majority acquisition.
For advice on how these criteria apply to your specific structure, reach out to our capital markets team in Hungary at info@ferrazwhitmore.com.
What to do now – immediate actions and compliance timeline
International companies with active or planned investment activity in Hungary should treat the following steps as urgent.
First, conduct a sector mapping exercise for each Hungarian target or portfolio company. Determine whether its primary activities fall within any designated sensitive sector. This assessment should include subsidiary activities – a target whose core business is manufacturing may still be caught if it operates a captive energy facility or a proprietary logistics network.
Second, review all pending transactions for notification triggers. Any deal signed but not yet closed should be assessed against the new thresholds. Where a pre-signing assessment was not conducted under the updated rules, an immediate gap review is essential. The competent Hungarian authority does not accept good-faith reliance on a pre-2025 compliance assessment as a defence against failure to notify.
Third, map beneficial ownership to identify state-entity affiliations. Funds and institutional investors must trace their investor base to determine whether any state-owned or state-affiliated entity from a non-EEA country holds an interest that could trigger the look-through provisions. This analysis is also relevant for listing requirements and prospectus disclosure obligations under Hungarian capital markets rules.
Fourth, prepare the notification file in advance. The authority expects a complete submission on first filing. Incomplete notifications are returned, restarting the review clock. The file should cover corporate structure charts, beneficial ownership declarations, the source of investment funds, and a description of the target's sensitive-sector activities. Engaging a banking and finance lawyer in Hungary with experience in regulatory submissions is strongly advisable at this stage.
Fifth, build the notification timeline into transaction timetables. The screening authority has a defined review period following a complete notification. Transactions must not close until either clearance is granted or the review period expires without objection. Deal documents should include conditions precedent and long-stop dates that reflect this regulatory timeline.
For context on how Hungary's approach compares to screening regimes elsewhere in the EU, the alert on investment screening developments in Portugal provides a useful reference point on parallel EU-driven regulatory trends.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our capital markets and banking practice supports international investors, investment funds, and institutional acquirers operating in Hungary and across Central and Eastern Europe. We advise on investment screening notifications, disclosure obligations, prospectus requirements, and IPO-related regulatory matters across both civil law and common law systems. The firm's practitioners have experience with regulatory submissions before Hungarian and EU-level authorities. Additionally. Our dual-tradition approach. combining Portuguese civil law expertise with English common law methodology. allows us to support cross-border deal teams from initial structuring through to regulatory clearance. Engaging a lawyer in Hungary with cross-border regulatory experience at an early stage materially reduces the risk of a failed or delayed transaction. As an international law firm serving Hungary-focused mandates, Ferraz & Whitmore provides coordinated advice across the full investment cycle. To discuss how the new notification requirements apply to your situation, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.