Markets
Hungary: the zártkörű alaptőke-emelés must name the subscriber, and the board's submission must state the price
A Budapest-listed company can issue a convertible bond, but not one whose conversion price is discovered later. Hungarian company law requires a closed-circle capital increase to name each subscriber in the resolution itself, and the board submission that removes pre-emption must state the intended issue price before the meeting votes. A drawdown facility does not survive that.
Key takeaways
- The resolution designates the person, not a class of investor. Ptk. section 3:296: a zártkörű alaptőke-emelés (closed-circle capital increase) must name those entitled to take up the shares and how many each may take.
- Removing pre-emption forces the price into the open early. The general meeting may exclude the jegyzési elsőbbségi jog (subscription pre-emption right) on the igazgatóság's written submission, which must give the reasons, the intended issue price and the committed subscriber's identity.
- Conditional capital is capped at half the share capital. Ptk. section 3:303(2): the aggregate nominal value of átváltoztatható and átváltozó kötvény in issue may not exceed half of the alaptőke.
- The board can be given a five-year mandate. Ptk. section 3:294: the general meeting may authorise the board to raise capital up to a stated maximum for no more than five years.
- No issue below nominal value. Article 47 of Directive (EU) 2017/1132 forbids issuing below névérték, so a fallen price is a corporate-action problem first.
Two convertible bonds, one conditional capital increase
Hungarian law names the instrument twice. An átváltoztatható kötvény is a bond the holder may elect to convert into shares; an átváltozó kötvény converts automatically on the terms fixed at issue. Both are serviced by a feltételes alaptőke-emelés, a conditional capital increase resolved in advance and drawn down as bonds convert, under Title XI of the Third Book of the Polgári Törvénykönyv (2013. évi V. törvény). Section 3:303(2) caps the aggregate nominal value of those bonds at half the alaptőke — headroom an issuer can compute on day one, and which does not refresh annually the way a placement capacity does.
Where a refixing price fails: the board's written submission
Nothing in the Civil Code says in terms that a conversion price may not float. The obstacle is procedural, and it sits earlier in the sequence than most investors expect. Section 3:297 gives existing shareholders, and then holders of convertible and subscription-right bonds, a jegyzési elsőbbségi jog over a cash issue. That right has to be removed before a single outside investor can be served, and the general meeting may only remove it on the written submission of the igazgatóság. The submission is not a formality: it must set out the reasons, the planned issue price of the shares, and the person who has given the prior commitment. Hungarian corporate law asks for the price in the papers circulated before the vote, and a mechanic whose whole purpose is that the price is unknown until a drawdown window closes has nothing to put in that box.
Section 3:296 closes the second door. A closed-circle increase resolution must designate the persons authorised to take up the shares and the number each may take, and only a person who has already made a commitment declaration may be designated. An investor cannot hold an unnamed, open-ended right to subscribe on the company's demand.
| The structure needs | The Ptk. requires | Where that leaves it |
|---|---|---|
| A price fixed at each drawdown | The intended issue price in the board's submission, before the vote | Price settled early, or per tranche |
| An unnamed investor with a standing right | Named subscribers and stated allocations in the resolution (s.3:296) | A standing designation, or a fresh resolution per tranche |
| Open-ended issuance headroom | Conditional capital capped at half the alaptőke (s.3:303(2)) | Sized at signing, not extended by drawing |
| Speed between decision and cash | A three-quarters majority of the general meeting | Board mandate under s.3:294, or a meeting each time |
| Rule summaries as at 10 September 2026. Not an offer, a quote, or a rate card. | ||
The five-year mandate is what makes repetition workable at all
Section 3:294 lets the general meeting authorise the igazgatóság to increase the alaptőke up to a stated maximum for no more than five years, carrying with it decisions that would otherwise belong to the general meeting or the articles. That is the Hungarian authorised-capital mandate. It does not dispose of the naming and pricing requirements above; it moves the body that applies them.
The commercial constraint, stated plainly
BÉT is small, and a VWAP-referenced structure is a volume product. The Budapest Stock Exchange runs Prime and Standard categories plus Xtend, a multilateral trading facility launched in 2017 for medium-sized companies. Very few Hungarian issuers trade with the average daily value a facility needs to fund without moving the price it is measuring. Here liquidity usually answers the financing question before the law is reached.
Getting from a subscription to a tradable share
No Hungarian statutory lock-up on privately subscribed shares was identified. The route to tradability is sequential rather than time-based: the capital increase is registered, then the new shares are admitted to trading, which needs a prospectus approved by the Magyar Nemzeti Bank or a Prospectus Regulation exemption. The MNB has been the integrated supervisor and prospectus approver since it absorbed the former PSZÁF in 2013. Until admission the shares exist and do not trade — a different problem from a lock-up, and not cured by waiting. If free-trading shares is doing work in a term sheet, this is where it is tested.
General information, not legal advice. Section numbers appear only where the section was located in the statutory text; the majority for a capital resolution is given as a principle because the section was not confirmed, and no Xtend rulebook provision was reviewed. Take advice from qualified Hungarian counsel.
Two facts decide a Hungarian conversation: your alaptőke against the half-of-capital ceiling, and whether a general meeting is obtainable. Send those with your traded value. Read across to a listed-issuer convertible debt decision and to equity facilities where drawdowns are permitted.
- All markets
- Poland: the resolution may state a pricing method
- Czech Republic: pre-emption and the company's interest
- Austria: no simplified exclusion
- Romania: a par floor
- Private placements
Primary sources
- Polgári Törvénykönyv — 2013. évi V. törvény, consolidated text
- Ptk. Third Book — sections 3:293 to 3:305
- Directive (EU) 2017/1132, Article 47
- Magyar Nemzeti Bank
- Budapest Stock Exchange — BSE Xtend
Financing a Hungarian listed issuer: frequently asked questions
Does Hungarian law recognise a convertible bond?
Yes, and it recognises two of them. An atvaltoztathato kotveny converts at the holder's election; an atvaltozo kotveny converts automatically on terms set at issue. Both are serviced by a conditional capital increase under the Civil Code, and the aggregate nominal value of those bonds may not exceed half the company's share capital under section 3:303(2).
Can a Hungarian conversion price be set as a discount to a later VWAP?
No Hungarian rule was found that permits or prohibits it in terms, but the corporate machinery works against it. Where the general meeting excludes the subscription pre-emption right, the board's written submission must state the intended issue price before the vote. A price discoverable only at a future drawdown cannot be put in that submission.
Is there a Hungarian equivalent of a standby equity facility?
Not in a recognisable form. A closed-circle capital increase resolution must designate the persons entitled to take up the shares and the number each may take, and only a person who has already given a commitment declaration may be designated. Each tranche therefore points back to a named subscriber and a fixed allocation.
Can the board raise capital without going back to shareholders?
It can, within limits. Section 3:294 of the Civil Code lets the general meeting authorise the board of directors to increase the share capital, specifying a maximum amount and a period of no more than five years. That authorisation is what makes repeat tranches administratively possible.
If this is about a live situation
Hungarian law makes an issuer name the subscriber and the intended issue price before the meeting votes, which is the opposite of an open drawdown right. If you are listed on BÉT or Xtend, the structures that price once are the relevant ones.