Your company may have already undergone some form of transformation or may be planning to start such a process. If this will be in the future, we have good news for you, as the Transformation Act (Act CLXXVI of 2013 on the Transformation, Merger and Division of Certain Legal Persons, hereinafter "Transformation Act") has made it easier to carry out this process from October!

About transformations
To help you better understand the complex world of transformations, we will give you an example of each case.

The simplest case of transformation is when a change of form occurs in the company. For example, (A) Ltd. becomes (A) Ltd. by spin-off we mean the formation of two or more companies from (A) company, while (A) predecessor as a legal entity does not cease to exist. For example: company (A) is split into (A) and (B).Separation is very similar to demerger, where at least two companies are created from (A), but in this situation (A) ceases to exist. For example, (A) becomes (B), (C) and (D).In a merger, at least two companies form a new company, while the predecessors cease to exist. For example: (A) and (B) become a new company, (C) becomes a successor.Finally, in a merger, one or more companies merge into one company. The legal predecessor that is merged does not cease to exist, it becomes the legal successor. For example: legal entity (A) merges with companies (B) and (C), so that the legal successor becomes company (A).

The process before October 2019
It is part of a process of transformation:
Decision on the intention to convert at the general meeting of members/general assemblyFollowing this, the conversion plan is preparedDraft balance sheets and inventories of assets and liabilities are prepared and reviewed by the auditorThe drafts and the conversion plan are approved at the second meetingCourt application and registration of the conversionFinal balance sheets and inventories of assets and liabilities are prepared and approved by the auditor.

From now on

The changes to the Transformation Act, which came into force on 01.10.2019, remove some of the burden from the shoulders of companies that are not subject to an audit.

According to the Transformation Act in force until 30.09.2019, both the draft and the final forms of the balance sheet and the inventory of assets had to be audited, but this changed in October. The law now allows companies that are not otherwise required to be audited under the Accounting Act to have only the final balance sheet and inventory of assets audited.

It is also important to note that with the legislative change the legislator also clarifies the definition of the date of transformation, harmonising it with the provisions of the Accounting Act. The date of conversion is the date of the cancellation of the predecessor company and the date of registration of the successor company is the day after that date. In the case of a spin-off, the date of conversion will be the date of registration of the amended details of the predecessor company, while the date of registration of the successor company created by the spin-off will be the following day.

What remains unchanged

It is key to note that, although this change for non-audited companies came into force from October, the Transformation Act still requires companies subject to audit to have their final balance sheets and inventories audited, as well as their draft balance sheets and inventories. Only an auditor who has not audited the company or audited the value of any non-monetary contribution in the two years preceding the date of the drafts is entitled to do so. An auditor involved in the audit of the drafts is also not eligible to be appointed to audit the legal entity within the subsequent three financial years.

In the case of a merger, if the choice of auditor is mandatory for one of the parties, the audit must be carried out from the beginning of the transformation, but the merging companies still have the option of having the same professional for each of them.

Prepared by:

Bendegúz Balogh

The above is the opinion of the author and does not constitute legal, tax or accounting advice. Furthermore, they do not constitute an official interpretation of the law and are for information purposes only.