2026. From January 1st, fundamental changes will come into effect regarding the criminal liability of companies: not only natural persons, but companies can also face charges.
The criminal liability of companies arises particularly when any of the company’s representatives (their executives, employees, supervisory board members, or the owners themselves) engage in illegal activities, especially if the company benefits from it, i.e., the crime is committed for the company’s benefit or advantage. Typical such crimes include economic and corruption offenses, such as budget fraud (tax fraud), or when company management accepts fictitious invoices not backed by actual performance, potentially worth millions of forints, or when a company executive offers money to a bidder in a public procurement procedure to ensure the company wins the tender.
When exactly is a company liable?
- if a company executive commits a corruption offense within the scope of the company’s activities,
- if a company executive uses the company’s assets and resources to commit the crime,
- if one of the company’s employees, or even the owner themselves, commits a corruption or other crime, especially if management had the opportunity to prevent the act but failed to exercise proper control and oversight,
- if the crime is carried out by another person with the knowledge of the executives.
Types of Criminal Sanctions
- fine,
- restriction of the company’s operations,
- dissolution of the company.
2026. From January 2026, the criminal court will always determine sanctions taking into account the company’s financial status and the responsibility of its executives, adjusted to the severity of the crime and the extent of the damage or financial detriment caused, in order to ensure that the imposed measures are more effective, predictable, proportionate, and necessary.
However, in the indictment, beyond the fine, the prosecution may also propose the restriction or dissolution of the company’s operations.
The forthcoming stricter regulations and amendments primarily aim to ensure that affected companies proactively participate in criminal proceedings, thereby securing for themselves the opportunity for defense, cooperation, and voluntary reparation.
Fine
From 2026, the minimum amount of the fine that can be imposed will be HUF 1 million, and its maximum amount can be 5% of the company’s revenue in the year preceding the offense, if a crime punishable by imprisonment exceeding three years has been committed.
The company may even avoid the fine if administrative authorities or courts have already applied legal disadvantages against it in the same case, and, in consideration of this, the application of a criminal sanction is no longer justified.
For example: if, in the case of VAT fraud, the tax authority has already made the company pay the tax shortfall, then the criminal court must take that amount into account when determining the fine to be imposed on the company.
Asset Freeze – as Security for the Fine
In 2025, an asset freeze on a company’s property can be ordered if there is a well-founded suspicion that the enforcement of the expected fine could be hindered, for example, by concealing assets. From 2026, in order to avoid asset freezes in cases causing minor financial damage and to ensure that the amount of seized assets is not unduly high, the criminal court must first thoroughly review the company’s conduct and the circumstances of its asset management. This will help determine whether ordering an asset freeze is justified.
From 2026, an asset freeze ordered as security for a fine must only be recorded in the company register if it is clearly probable that the company’s dissolution is inevitable.
Restriction of Company Operations
From 2026, this measure can only be applied if the conditions for dissolution are not met and the restoration of the company’s lawful operation cannot be ensured otherwise. Restrictions include, for example, prohibiting the company from participating in public procurement procedures, entering into concession agreements, or receiving state subsidies.
Dissolution of the Company
Dissolution, as the most severe measure, can only occur in exceptional and rare cases if the company was established as a result of a crime or to conceal one, and there is no realistic chance of restoring its lawful operation, or if recidivism cannot be prevented otherwise. The court may also consider other circumstances when applying the sanction; for example, in cases of environmental damage, it may mitigate the sanction if the company has remedied the harmful consequences caused.
Entry in the Company Register
From 2026, it will no longer be necessary in all cases to record in the company register if the company is threatened with criminal sanctions. In cases of less serious crimes, it can cause significant economic disadvantage if a criminal “stigma” appears on the company extract, which can lead to a significant loss of prestige among business partners.
If the investigating authority believes that a connection may exist between the committed crime and the company, and initiates criminal proceedings against the company, then this fact can be registered on the company’s extract. The harsh truth is that in such cases, the company court has no discretion, and the registration entails numerous unpleasant and sometimes crippling consequences: the company’s credit rating decreases, such a company is prohibited from transformation, it generally cannot participate in public procurement, it may lose its ongoing and future tender opportunities, and may have to repay awarded grants, etc.
The most unpleasant aspect of all this is that during the investigation phase, companies generally have not even been able to present their legal position and are already considered stigmatized.
Furthermore, an important innovation is that companies will be granted legal remedies against these entries, which is a significant step towards their legal protection.
Plea Bargain with Companies?
One of the most important innovations is that from 2026, a company under criminal proceedings and the prosecution can enter into an agreement, or ‘plea bargain’.
Until 2026, the ‘plea bargain’ or agreement was only available to individual offenders, thus companies were forced into passive defense rather than cooperation with authorities. An individual offender could not even indirectly negotiate with the authorities, meaning there was no way for them to conclude a plea bargain that also covered the company, for example, to agree that if they confessed everything, the company would repay the damage caused to the state.
The above concept could not be effective because in corporate crimes, it is most often the company that benefits financially: the company profits through tax fraud, as well as from rigged public procurement procedures. For these reasons, it also became necessary for legislation not to deprive companies of the opportunity for voluntary reparation.
When can a company enter into a plea bargain?
A plea bargain can be concluded during the investigation or even later. If the investigation has concluded and the case is before a criminal court, it is also possible to reach an agreement at the preliminary hearing, thus the criminal case can be concluded even in the preparatory phase.
An agreement can be reached if the company admits its involvement in the commission of the crime and undertakes to compensate for the damage caused, remedy the harmful consequences, or surrender the illicit gains to the authorities, or if it ensures that recidivism does not occur.
A prerequisite for a plea bargain is the company’s cooperative conduct, by which it provides the authorities with information, data, documents, and other evidence necessary for the detection of the crime, and pays the amount of the ‘negotiated’ fine.
If the company’s legal representative participates in the criminal proceedings as a defendant, then a condition for concluding the agreement is that the representative admits to committing the crime. A safeguard rule: a company that has entered into an agreement with the prosecution cannot be dissolved, and other measures can only be imposed to the extent specified in the agreement – thus, the culpable company can enter into a quasi-negotiating position with the prosecution.
Also in ongoing proceedings? IMPORTANT!
The new rules described above, entering into force on January 1, 2026 –
What steps should be taken?
To prevent criminal proceedings or survive the investigation process, it is advisable for the company to prioritize lawful operation, i.e., it is worth taking the following steps:
- review the rules governing the company’s operations,
- document the necessary policies in writing, communicate them demonstrably within the company, and promote their adherence with the help of management,
- if necessary, a compliance audit of financial, invoicing, and tax processes, with particular attention to risky VAT transactions,
- review of executive responsibility, documentation of contracts, competencies, delegations, and instructions,
- internal reporting and investigation protocol: whistleblower channel, activation of external legal advice,
- financial planning: consideration of potential fines in liquidity and risk analysis,
- training – regular training for management and the finance department on legal risks, recognition of fictitious invoices and fraud schemes.
Our further practical experience suggests that it is advisable to proceed much more cautiously with new contracting partners and, as far as possible, to map out the economic activities of the contracting partner, especially if they are acting through an authorized representative not registered in the company register as a legal representative. Furthermore, after concluding a contract, every step of cooperation should be documented and its veracity verified (e.g., handover of goods, measurement, transport, unloading, acceptance, or personal verification of the completion of the specific contractual activity), to prevent the acceptance of an invoice from a billing chain that is not backed by actual performance, or where performance may have occurred between other parties, as in such a case, the parties must prove that the transaction actually took place between the contracting parties. It can also be useful to periodically check contracting partners to ensure they comply with lawful operations and that no proceedings registered in public records have been initiated against them, from which the unlawful operation of the given company could be inferred.
