The stoppage of Alfoldi Tej’s acquisition and a short-lived amendment to the FDI laws establishing the right of first refusal for the Hungarian State attracted much attention to Hungary’s far too wide FDI regime. Let’s shed light on what it really means.
Since 2020, Hungary has maintained a dual system for screening foreign direct investments (FDI). The “general” FDI regime and the “special” FDI regime operate in parallel, each serving different policy goals and sectors.
The general FDI regime, governed by Act LVII of 2018 (implementing EU Regulation 2019/452), functions as a national security screening mechanism. It applies to investments in traditionally strategic industries such as defense, financial services, energy, and electronic communications. Transactions in these sectors may require prior acknowledgement from the relevant ministry to ensure they do not endanger national security.
The special FDI regime was first introduced in 2020 as a temporary measure during the state of emergency caused by the pandemic. Although it was originally intended as a crisis response, the special FDI regime has been repeatedly extended and remains in force today. It is now justified with reference to the geopolitical situation arising from the war in Ukraine.
The current legal framework is set out in Act L of 2025, effective since August 19, 2025, and scheduled to remain in force until December 31, 2026. However, the special FDI regime’s continued operation since 2020 suggests it will likely become a long-term feature of Hungary’s investment landscape.
Unlike the general regime, the special FDI rules cover a much broader range of sectors. These include not only the traditional strategic areas such as energy and finance, but also most forms of manufacturing, wholesale trade, information technology services, healthcare, education, tourism, and communications. The regime can apply even when the investor is an EU, EEA, or Swiss entity.
Under the special regime, certain transactions require prior acknowledgment from the competent minister if a foreign investor intends to acquire, directly or indirectly, ownership in a Hungarian “strategic company.” A strategic company is defined as a limited liability company (kft.), a private company limited by shares (zrt.), or a public company limited by shares (nyrt.), whose activity, whether main or ancillary, falls within one of the strategic activities listed in the annex to the act.
The investment thresholds triggering notification depend on the investor’s origin. For non-EU, non-EEA, and non-Swiss investors, a filing obligation arises when acquiring at least 5% of a private company (or 3% in the case of a public company). For EU, EEA, or Swiss investors, notification is required only if a majority stake is obtained, provided that the transaction value exceeds HUF 350 million (approximately USD 900,000). In addition, regardless of value, any acquisition by a non-EU, non-EEA, or non-Swiss investor of 10%, 20%, or 50% ownership in a strategic company must be notified.
The notification must be submitted within 10 days following the transaction. The Ministry has 45 working days to make a decision, which may be extended by an additional 15 days. In practice, these deadlines are often fully utilized, so investors are advised to take them into account when planning a transaction timeline.
Since January 13, 2024, transactions involving Hungarian companies active in solar power generation are subject to an additional rule: the Hungarian State has a pre-emption right, allowing it to step in as the buyer. This summer, the pre-emption right of the Hungarian State was extended to all transactions falling under the special FDI regime, but this legislation was only temporary and came to an end on August 19, 2025, when the new act entered into force.
The special regime does not apply if the legal transaction takes place at a foreign parent company level and the change in ownership of a Hungarian subsidiary occurs only indirectly.
Despite its “temporary” label, the special FDI regime has become an integral element of Hungary’s regulatory environment, shaping how both domestic and foreign investors approach strategic acquisitions. It is strongly recommended to assess FDI implications during the due diligence stage and factor potential ministerial review periods into a transaction’s schedule. In some cases, innovative structuring may come into place, like starting with the definitive agreement and postponing the costly DD exercise post-FDI. Finally, in “really” strategic sectors, like basic food supply or energy supply, even a stoppage of the transaction might become a reality.
By Zoltan Forgo, Managing Partner, and Eszter Bedo, Senior Associate, Forgo, Damjanovic & Partners
This article was originally published in Issue 12.10 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
