The Hungary Ministry of Justice is planning to introduce a major change to the country’s economic landscape by creating a new form of registered business that would extend the limited liability now enjoyed by corporations to firms owned by a single individual. According to business daily Világgazdaság, the change could come into force next year.
The proposal comes as the number of registered sole entrepreneurs (egyéni vállalkozó) – who bear unlimited liability for their business operations – has dropped from the 483,000 registered in December 2004, to 426,000 at the end of last year.
Currently, four types of companies exist in Hungary, two of which are without “legal personality.” These are the közkereseti társaság (kkt) and the more common betéti társaság (bt).
A bt has one “internal member” (beltag) with unlimited liability, while the liability of at least one non-executive “external member” (kültag) is limited to their contributed capital. By contrast, a kkt contains several members, each of whom can perform any task within the business, and all of whom share unlimited liability.
The two forms of businesses with limited liability are korlátolt felelősségű társaság (kft) and the larger részvénytársaság (rt), which can either be an “open stock” company with tradable shares (nyrt) or closed (zrt).
The proposed change would essentially give sole entrepreneurs the legal protections of a kft, with lower capital requirements and administrative burdens.