Hungary to revise its FDI screening regime to make transactions simpler, faster
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The Hungarian government has published a draft bill that would restructure the country’s foreign direct investment (FDI) screening framework that would exempt many acquisitions from FDI control and simplify the M&A process, effective 1 January 2027.
Hungary currently operates two parallel FDI regimes established under separate legislation enacted in 2018 and 2025. The bill would consolidate these into a single statute containing two distinct sub-regimes with largely uniform procedural rules.
Repeal of the 2025 FDI regime
According to the draft law, Chapter IV of Act L of 2025, setting out the rules of the FDI screening mechanism enacted in 2025, would be repealed on 1 January 2027. Thia chapter was only applicable until 31 December 2026, and its application is now proposed to be discontinued.
Amended 2018 FDI Act: two categories of notifiable transactions
From 1 January 2027, Act LVII of 2018 on the control of foreign investments infringing Hungary’s security interests (FDI Act) would be amended to contain two “sub-regimes” based on the affected target companies’ activities.
First sub-regime: targets already covered by the 2018 regime
- The first sub-regime includes the acquisition of ownership in target companies whose main or ancillary activities already fall within the sectors caught by the FDI Act, such as public utility services, arms manufacturing, dual-use products manufacturing, development and operation of electronic information and telecommunication systems, financial services and insurance.
- For Hungarian target companies in this category, the rules would remain essentially unchanged. The validity of the acquisition of ownership in such companies would be conditional upon the notification of the minister responsible for the management of civil national security services (currently, the Minister of the Interior) and the acknowledgement thereof, if:
- The acquired ownership interest exceeds 25% (10% in the case of a public limited company), or the acquirer obtains a dominant influence within the meaning of the Hungarian Civil Code; and
- The acquirer is a person or entity based outside the EU, EEA or Switzerland or an EU-based entity under the majority control of persons or entities based outside the EU, EEA or Switzerland.
- The acquired ownership interest exceeds 25% (10% in the case of a public limited company), or the acquirer obtains a dominant influence within the meaning of the Hungarian Civil Code; and
- The existing notification obligation relating to the acquisition of operating rights, the establishment of Hungarian subsidiaries and branches and the start of new activities in the above sectors would also be maintained.
Second sub-regime: threshold-based screening of targets in new key industrial sectors
- The second sub-regime would apply to Hungarian target companies whose main activity (not merely an ancillary activity) falls within any of the following sectors:
- Manufacture of coke and refined petroleum products;
- Manufacture of chemicals and chemical products;
- Manufacture of basic pharmaceutical products;
- Manufacture of basic metals;
- Manufacture of fabricated metal products; or
- Electricity, gas, steam and air conditioning supply.
- Manufacture of coke and refined petroleum products;
- An acquisition in a Hungarian target company pursuing any of the above activities would require notification only if the following conditions are met:
- The direct acquirer is a foreign investor based outside the EU, EEA or Switzerland;
- The foreign investor acquires majority control; and
- either the target company’s net revenue in its last closed financial year reaches or exceeds HUF 180 billion (approximately EUR 497 million); or the value of the transaction reaches or exceeds HUF 10 billion (EUR 27.5 million).
- The direct acquirer is a foreign investor based outside the EU, EEA or Switzerland;
Common procedural rules
The procedural rules would be largely identical for both categories of transactions. In particular:
- The minister would have 60 days to decide on a notification, extendable once by a further 60 days; and
- All notifications would have to be submitted to the Minister of the Interior.
What this means for investors
Investors planning M&A transactions involving Hungarian targets with signing expected on or after 1 January 2027 should take legal advice as to whether, and on which basis, a notification obligation relating to FDI screening arises. Key factors to consider include the target company’s business activity, the residence/seat of the acquiring foreign investor and whether the revenue or transaction-value thresholds are met. Where these factors trigger a notification obligation, the relevant M&A transaction may only close once the minister has acknowledged the notification because acknowledgment is a condition for acquiring ownership.
The bill is not yet final. It is currently subject to public consultation and then parliamentary approval, and its final text may differ. The introduction of this amendment to the FDI Act would be considered a significant development since a substantial number of acquisitions would be exempt from FDI control, which would make M&A transactions involving Hungarian companies and business units simpler and faster.
For more information on the proposed changes to Hungary’s FDI framework, contact your CMS client partner or the CMS experts who contributed to this article.
