Hungary: will the security interest vanish when the underlying secured obligations are transferred?
By Gergely Szalóki
The fact that the new Hungarian Civil Code, which entered into force on 15 March 2014, has at last recognised the concept of transfer of contractual position was a welcome development. Previously, a similar effect was achievable through the parallel assumption of debt and assignment of claims, but this solution was problematic in rather complex transactions (e.g. in case a lender wishes to transfer its stake under a credit facility agreement along with all security interests).
Under the new Civil Code, banks are provided with the most obvious solution, as they can simply transfer their contractual positions under a credit facility agreement to the new lender. However, the rules that the new Civil Code provides for the transfer of the security interests securing such credit facility agreement are ambiguous.
With regard to the regulation of the security interests, the new Civil Code stipulates that due to their accessory nature the security interests are to be transferred to the new lender along with the transferred claim without any further actions (i.e. the security interest transfers automatically)…
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