What Hungary's Special FDI Regime (act L of 2025) Means for Cross‑border M&A in 2026, Practical Guide for Foreign Buyers and Sellers

Hungary’s foreign investment screening landscape shifted decisively on 19 August 2025, when Act L of 2025 came into force and converted the country’s temporary Special FDI Regime into permanent legislation. For anyone planning or negotiating cross‑border acquisitions in Hungary, whether as a private‑equity sponsor, a strategic corporate buyer or an in‑house counsel advising the sell side, understanding the Hungary FDI regime M&A 2026 implications is now a gating item for every deal involving energy, telecoms or critical infrastructure. This guide sets out, in practical terms, exactly which transactions are caught, how the notification process works, what the review timelines look like, and how to draft deal documents that preserve commercial certainty while satisfying the new statutory requirements.

It is designed as a step‑by‑step compliance playbook that goes beyond the high‑level regulatory summaries available elsewhere.

1. What Is Act L of 2025 and the Special FDI Regime?

Hungary has operated a dual foreign investment screening system for several years. The first pillar, Act LVII of 2018, establishes a permanent national‑security‑focused review mechanism administered by the Minister responsible for defence and national security. The second pillar originated as an emergency government decree (Government Decree 227/2020) introduced during the COVID‑19 pandemic. That decree created a broader, more interventionist “Special FDI Regime” covering a wider range of strategic sectors and applying to a larger pool of investors. Because the decree relied on emergency powers, it had to be periodically extended.

Act L of 2025, published in the official gazette (Nemzeti Jogszabálytár) and effective from 19 August 2025, ended that cycle of renewals by transitioning the Special FDI Regime into permanent statute. According to UNCTAD’s Investment Policy Monitor, the legislation codifies and broadens the scope of the temporary regime, making the screening obligation a standing feature of Hungary’s investment framework rather than an exceptional measure. The practical consequence for dealmakers is clear: foreign investment screening in Hungary is no longer a temporary overlay that might lapse, it is embedded in the regulatory architecture for the foreseeable future.

Key Dates and Legal Framework

The interplay between the two pillars matters. Act LVII of 2018 targets a narrower set of national‑security concerns (defence, dual‑use technologies, critical public services), whereas Act L of 2025 casts a wider net over strategic economic sectors. A single transaction can trigger notification obligations under both regimes, and practitioners need to conduct a parallel assessment at the earliest stage of deal planning.

2. Which Transactions Are Caught by Hungary’s FDI Review?

The Special FDI Regime applies to a broad category of transactions involving “foreign investors” and Hungarian target companies operating in designated strategic sectors. Foreign investment screening in Hungary under Act L of 2025 is triggered by the acquisition of ownership, control or significant influence over such targets, regardless of whether the transaction is structured as a share deal, an asset deal or an indirect acquisition through a chain of holding companies.

Entity Types, Triggers and Examples

The following comparison table summarises reporting obligations by entity type. Acquirers should assess their position against all three categories during preliminary due diligence.

The definition of “foreign investor” under the Special FDI Regime is deliberately expansive. It encompasses not only non‑EEA natural and legal persons but also entities domiciled within the EEA that are ultimately owned or controlled by non‑EEA persons. This means that a Luxembourg holding company backed by a Middle Eastern sovereign wealth fund, or a Dutch SPV controlled by a Chinese industrial group, will typically be treated as a foreign investor for notification purposes.

Strategic sectors captured by the regime include, but are not limited to, energy production and distribution, electronic communications, financial services, defence and military technology, water supply and wastewater treatment, and certain categories of advanced manufacturing. Industry observers expect the Hungarian government to expand or refine these categories through implementing decrees as new security and economic policy priorities emerge.

3. Notification Requirements and FDI Timelines in Hungary

Under the Hungary FDI regime M&A 2026 framework, notification is mandatory for covered transactions. Parties cannot close a notifiable deal without first obtaining clearance (or the expiry of the review period without a decision), because the regime has suspensory effect. Completing a transaction without the required clearance renders it null and void, and the competent minister may impose significant fines.

Standard Notification Content

A complete filing typically includes the following elements:

1. Corporate identification data, full details of the acquirer, its ultimate beneficial owners, the target company, and any intermediate holding entities in the chain of control.
2. Transaction documents, the signed or draft share‑purchase agreement, shareholders’ agreement, and any side letters or ancillary agreements affecting control or governance.
3. Sectoral information, a description of the target’s activities falling within strategic sectors, including licences, concessions, government contracts and any pending regulatory applications.
4. Ownership and control chart, a diagram showing direct and indirect ownership structures before and after the transaction, highlighting any non‑EEA links.
5. Financing details, sources of acquisition funding, especially where third‑country state‑backed financing is involved.

Timelines and Escalation

The statutory review proceeds in phases. Practitioners should build the following planning buffers into their deal calendars:

Exemptions and Recent Amendments

Certain financing transactions have been carved out from the notification obligation following amendments to the regime. As noted in guidance published by Schoenherr, exemptions have been introduced for specific categories of financing arrangements, such as intra‑group loans and certain refinancing transactions, that do not involve a change of control or material influence. These exemptions are narrowly drawn, however, and should be confirmed on a case‑by‑case basis with Hungarian counsel before being relied upon.

4. Practical Effects on M&A Deal Structure, Warranties and Closing Conditions

The FDI review under Hungary’s regime directly impacts how cross‑border acquisitions in Hungary are structured, negotiated and documented. The suspensory nature of the regime, meaning a deal cannot close until clearance is obtained, shifts significant deal‑certainty risk onto both parties and demands careful contractual allocation of that risk.

Deal Certainty: Key Risk Allocation Mechanisms

The core challenge for buyers is the possibility that clearance is denied, delayed or granted subject to onerous conditions (such as divestiture of certain assets or restrictions on governance). Sellers, meanwhile, face the risk that a protracted review period leaves the target in operational limbo. Effective deal documentation should address the following mechanics:

• Suspensive closing condition (condition precedent). Every notifiable transaction should include a CP requiring FDI clearance before closing can occur. The CP should specify whether deemed clearance (expiry of review period without decision) also satisfies the condition.
• Long‑stop date. Set a realistic long‑stop date that accommodates the full review timeline, including potential Phase 2 review. A 120‑ to 180‑day window from signing is prudent for energy and infrastructure transactions.
• Reverse termination rights and break fees. If clearance is denied or conditions are unacceptable, the buyer typically triggers a reverse termination right. The commercial question is whether a break fee applies, and whether it is stepped (higher if denial is attributable to information known at signing).
• Escrow and holdback mechanisms. Where conditions are attached to clearance, an escrow arrangement can secure the buyer’s compliance with post‑closing remediation commitments, giving the seller recourse if the buyer defaults.
• Interim governance restrictions. Between signing and closing, the seller should covenant to operate the target in the ordinary course and refrain from actions (asset disposals, key personnel changes, contract terminations) that could trigger adverse findings during FDI review.

Sample Condition Precedent Wording

The following illustrative drafting variants show how the FDI clearance condition can be tilted toward different commercial positions:

• Buyer‑friendly. “Closing is conditional upon the Buyer having received unconditional FDI Clearance (or Deemed Clearance) under Act L of 2025 and Act LVII of 2018, in each case without conditions, obligations or undertakings that the Buyer, acting reasonably, considers materially adverse to the economic rationale of the Transaction.”
• Balanced. “Closing is conditional upon FDI Clearance (or Deemed Clearance) having been obtained. If FDI Clearance is granted subject to conditions, the Parties shall negotiate in good faith to agree amendments to the Transaction necessary to satisfy those conditions, provided that neither Party shall be obliged to accept conditions that reduce the enterprise value of the Target by more than [X]%.”
• Seller‑friendly. “The Buyer shall use all reasonable endeavours (including offering commitments and undertakings) to obtain FDI Clearance. If FDI Clearance is not obtained by the Long‑Stop Date, either Party may terminate this Agreement, provided that the Buyer shall pay the Reverse Termination Fee.”

Sample Indemnity and Escrow Triggers

Indemnity language should address the scenario where a party’s failure to comply with FDI filing obligations causes loss. A typical clause will provide that if a Party fails to make a timely or accurate notification and, as a consequence, the transaction is unwound, declared void or subject to fines, that Party shall indemnify the other for all direct losses, costs and penalties incurred. Escrow release can be tied to confirmation from the competent ministry that all post‑closing FDI conditions have been satisfied.

Coordinating FDI Clearance with Competition and Sector Approvals

Many cross‑border acquisitions in Hungary that trigger FDI review will also require merger control clearance from the Hungarian Competition Authority (GVH) and, in regulated sectors, separate approvals from the Hungarian Energy and Public Utility Regulatory Authority (MEKH) or the National Media and Infocommunications Authority (NMHH). The practical scheduling template below helps deal teams run these workstreams in parallel:

1. Weeks 1–2 post‑signing: File FDI notification and competition merger notification simultaneously; begin sectoral licence‑transfer applications.
2. Weeks 3–6: Respond to information requests from all authorities; coordinate messaging to avoid inconsistencies.
3. Weeks 6–12: Receive Phase 1 outcomes; if FDI review escalates to Phase 2, adjust long‑stop date expectations and brief the board.
4. Weeks 12–18: Finalise conditions, remedies or commitments across all regulatory tracks; prepare for closing.

5. Sector Hot Spots: Energy M&A Hungary 2026, Telecoms and Critical Infrastructure

While the Hungary FDI regime M&A 2026 framework applies across all designated strategic sectors, certain industries face heightened scrutiny and additional regulatory overlays that materially increase deal complexity and timelines.

Energy M&A

Energy transactions, including acquisitions of power‑generation assets, electricity and gas distribution networks, district heating systems and renewable‑energy project portfolios, sit at the top of the government’s sensitivity list. Deals in this sector should address the following additional considerations:

• Grid and generation licences. Transfer of operational licences issued by MEKH is a separate regulatory process running parallel to FDI review; both must be secured before closing.
• Power‑purchase agreements (PPAs). Long‑term PPAs with state‑owned off‑takers may contain change‑of‑control provisions that require counterparty consent, independently of the FDI filing.
• State pre‑emption rights. The Hungarian state may exercise a pre‑emption right over strategic energy assets, effectively blocking the sale to the foreign acquirer. Early engagement with the competent ministry is essential to gauge whether pre‑emption is likely.
• Remediation and ring‑fencing. Where clearance is granted subject to conditions, the buyer may need to ring‑fence certain security‑sensitive assets or agree to maintain minimum domestic ownership levels for regulated subsidiaries.

Telecoms and Data Infrastructure

Acquisitions of telecommunications operators, data‑centre businesses and providers of critical digital infrastructure face a dual review: the FDI screening under Act L of 2025 and a security assessment increasingly influenced by EU‑level frameworks on 5G security and cybersecurity. Buyers should anticipate questions about the ultimate beneficial owner’s government affiliations, access to network‑level data, and the target’s role in national communications resilience.

Early indications suggest that deals involving non‑EU acquirers in the telecoms space are receiving longer Phase 2 reviews and more onerous conditions, including requirements to maintain data localisation, retain Hungarian senior management and submit to periodic post‑closing audits.

6. Deal Playbook: Step‑by‑Step Checklist for Buyers and Sellers

The following checklist distils the FDI review process into actionable items for both sides of a transaction, mapped against realistic timelines relative to signing.

Buyer Actions

• Day 1–14 (pre‑signing / signing): Conduct preliminary FDI assessment, is the target in a strategic sector? Is the buyer (or its UBO) a foreign investor? Engage Hungarian counsel for formal classification.
• Day 1–30 (post‑signing): Prepare and file FDI notification; simultaneously file competition notification with GVH and any sectoral applications.
• Day 30–60: Respond to ministerial information requests; prepare commitment proposals if conditions appear likely.
• Day 60–90: Receive Phase 1 decision or Phase 2 escalation notice; brief board and financing parties on timeline implications.
• Day 90–180: Negotiate and finalise any conditions attached to clearance; coordinate with competition and sector regulator timelines; prepare for closing.

Seller Actions

• Pre‑marketing: Prepare a vendor FDI information pack (corporate structure, licences, government contracts, UBO data for the target group) to accelerate buyer due diligence and filing preparation.
• At signing: Ensure the SPA contains appropriate FDI‑related CPs, long‑stop dates, interim governance covenants and reverse termination/break‑fee provisions.
• Post‑signing: Cooperate with the buyer’s notification process; provide information to the competent ministry as requested; operate the target in the ordinary course during the review period.

7. Compliance Toolkit: Sample Notification Checklist and Contract Clauses

This section provides a ready‑to‑use notification checklist and four sample contract clauses that address the key FDI‑related risks in cross‑border acquisitions in Hungary.

Notification Document Checklist

1. Completed notification form (prescribed template, if available, or structured letter to the competent ministry).
2. Certified copies of the acquirer’s constitutional documents (articles of association, certificate of incorporation).
3. UBO declarations and ownership charts (pre‑ and post‑transaction).
4. Executed or near‑final transaction documents (SPA, SHA, ancillary agreements).
5. Description of the target’s activities in strategic sectors, including licence numbers and concession references.
6. Financing term sheet or commitment letters showing sources of acquisition funding.
7. Power of attorney for the filing agent or legal representative.

Sample Contract Clauses

• Filing and cooperation covenant. “Each Party shall, and shall procure that its Affiliates shall, promptly prepare and file all notifications required under Act L of 2025 and Act LVII of 2018, provide all information reasonably requested by the competent authority, and cooperate in good faith to obtain FDI Clearance as expeditiously as practicable.”
• Suspensive condition precedent (FDI clearance). “Closing shall be conditional upon FDI Clearance having been obtained (or Deemed Clearance having occurred) without conditions that would constitute a Material Adverse Effect.”
• Reverse termination and stepped break fee. “If FDI Clearance has not been obtained by the Long‑Stop Date, the Buyer may terminate this Agreement and shall pay to the Seller a Reverse Termination Fee of [amount]. If the failure to obtain FDI Clearance is attributable to the Buyer’s failure to provide accurate or timely information, the Reverse Termination Fee shall be increased to [higher amount].”
• Indemnity for non‑compliance. “If either Party’s breach of its obligations under this Clause results in the Transaction being declared void, unwound, or subject to fines or penalties by the competent authority, the breaching Party shall indemnify the non‑breaching Party against all Losses arising therefrom.”

A comprehensive set of model FDI notification templates and contractual protections is being prepared as a companion resource to this guide.

8. Conclusion: Recommended Next Steps Under the Hungary FDI Regime for M&A in 2026

The permanent codification of the Special FDI Regime through Act L of 2025 means that foreign investment screening is now a structural feature of every cross‑border deal involving a Hungarian target in a strategic sector. The compliance decision rule is straightforward: if the target operates in energy, telecoms or critical infrastructure, or if the buyer (or its ultimate beneficial owner) is a non‑EEA person, treat the transaction as caught until a formal assessment proves otherwise. Engage experienced Hungarian counsel at the pre‑signing stage, prepare the notification file in parallel with commercial due diligence, and build realistic review timelines into your SPA long‑stop dates.

In the current environment, proactive engagement with the competent ministry, including informal pre‑notification consultations where possible, consistently delivers faster and more predictable outcomes than a reactive approach.

Sources

1. Nemzeti Jogszabálytár, 2025. évi L. törvény (Act L of 2025)
2. UNCTAD, Investment Policy Monitor: Hungary Transitions Temporary Special FDI Screening Regime into Permanent Legislation
3. White & Case, Foreign Direct Investment Reviews 2026: Hungary
4. Schoenherr, Hungary: Changes to the FDI Notification Regime, Certain Exemptions Introduced for Financing
5. ICLG, Foreign Direct Investment Regimes 2026: Hungary
6. Eversheds Sutherland, Notification Requirements for Foreign Direct Investment (FDI) in Hungary
7. IBA, Five Critical Remarks About Hungary’s FDI Screening Regime