Overview

The Hungarian Companies Act and others have long contained provisions to protect creditors. One provision prohibits a limited liability company from paying dividends to its shareholders if it does not have sufficient funds.

The prohibition against the payment of excessive dividends is obvious, and non-lawyers will easily recognise when such a prohibited payment occurs. However, the payment of a dividend can also be made in a hidden manner.

This briefing from Schoenherr describes how this is achieved; how such transactions are affected by the "arm's length transaction" principle and "responsible corporate trading"; and what this means for shareholders and company directors.

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