As business entities that participate professionally in economic transactions, entrepreneurs bear the burden of exercising due diligence in selecting their business partners, as they may be held criminally and financially liable. Therefore, to avoid the painful consequences of associating with an unreliable and dishonest business partner, it is recommended to conduct a business intelligence investigation beforehand, which will verify the contractor and provide information on their ownership structure. Special caution must be exercised when establishing relationships with a company from Hungary, as the Hungarian government, despite the outbreak of the war in Ukraine, presents a pro-Russian stance, while Poland and the European Union impose high sanctions on trade with Russia, as well as with Belarus and its companies. So how can you conduct a business intelligence investigation and check a company from Hungary?
Economic cooperation with Hungary
According to a report by the Ministry of Development and Technology, Polish-Hungarian trade turnover in 2018 amounted to EUR 9.657 billion, which means an increase of 6.9% compared to 2017. Polish exports amounted to EUR 5.959 billion (+9.1% year on year), imports amounted to EUR 3.697 billion (+3.4% year on year). Polish exports to Hungary accounted for 2.7% of Poland’s global exports, imports from Hungary accounted for 1.6% of Poland’s global imports, and the total Polish-Hungarian turnover accounted for 2.1% of Poland’s foreign trade turnover. In 2018, Hungary was Poland’s 10th largest partner in exports and 17th in imports.
The cumulative value of Polish direct investments in Hungary at the end of 2018 amounted to EUR 1.59 billion, which means that Hungary is the 4th largest recipient of our investments. Cumulative Hungarian investments in Poland amounted to EUR 1.29 billion, and according to data from the Central Statistical Office, at the end of 2017, there were 116 entities with Hungarian capital operating in Poland. Hungarian companies are present in our country in the energy, chemical, pharmaceutical and food sectors.
The Ministry of Development and Technology sees potential areas for intensified cooperation in increasing Polish exports of agricultural and food products, furniture, clothing and leather goods, cosmetics and pharmaceuticals, as well as building materials to Hungary. Cooperation in the automotive industry (including low-emission transport vehicles), advanced technologies, construction and energy is also promising.
National and EU Sanctions
For over a year now, Polish companies have been even more cautious about cooperating with foreign business partners, including those from Hungary. The reason is the policy of the Hungarian government led by Prime Minister Viktor Orban. As of April 4, 2023, the Polish Institute of International Affairs reported that the Hungarian government, while not blocking allied support for Ukraine in principle, still favors Russia, which is contrary to the strategic interests of NATO and EU partners, including Poland. Since the beginning of the Russian invasion of Ukraine, Hungary has maintained an unchanged pro-Russian position towards the conflict. It maintains close diplomatic relations with Russia and wants to continue economic cooperation. Among other things, Hungarian Minister of Foreign Affairs Péter Szijjártó discussed this issue in Moscow last year, and in February of this year, he also visited Minsk to discuss the possibility of strengthening bilateral economic cooperation.
In connection with Russia’s military aggression against Ukraine, the European Union has already imposed 9 packages of sanctions on Russia by the end of 2022. Poland also imposes additional sanctions, targeting key individuals and companies from Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs face a financial penalty of up to 20 million PLN and up to 15 years of imprisonment for violating this ban. However, Russian and Belarusian entrepreneurs have learned how to bypass international sanctions by using complex holding structures established in other countries, making it difficult to detect the actual ownership structure. How can one verify a company from Hungary to avoid sanctions?
National and EU information resources
Detailed information on the types of economic transactions with Belarus and Russia that are subject to the EU ban can be found on the European Council’s website: https://www.consilium.europa.eu/. The Official Journal of the European Union at https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721 provides a list of individuals and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where one can check a contractor’s connections, reasons for being included in the registry, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
Therefore, the first step in checking a company from Hungary is to check whether it appears in any of the above-mentioned registers. The Regulation (EU) 2022/576 of the Council of 8 April 2022 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s destabilising actions in Ukraine is also a useful source of information.
Economic intelligence, or how to verify a contractor from Hungary?
Verification of a contractor can be entrusted to a professional economic intelligence agency that deals with such orders on a daily basis. A private detective in Warsaw, Poznań, Wrocław or other cities will know how to obtain the necessary information to verify a current or future contractor.
The most important way to verify a contractor and their possible connections to Belarus or Russia is to determine the entity that is their ultimate beneficiary and then check if they are on the above-mentioned sanctions list maintained by the Ministry of Interior and Administration. These findings can be made in the Central Register of Ultimate Beneficial Owners maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj
Direct inquiry to the contractor
In case of difficulties in determining the ownership structure of a business partner using available registers, another method of verifying them as part of economic intelligence activities is to directly ask them to confirm who their real beneficiary is. Of course, to verify the response, you can ask the Hungarian entrepreneur to provide documents confirming their declarations.
Environmental intelligence
An accessible way to obtain information about a contractor is to search the Internet. Verification of a company, checking whether it has a website, what opinions are there about it, and perhaps we will come across some publication about it. You can ask for references from other companies that have dealt with this contractor.
If we do not want to do it ourselves for certainty, we can entrust a research detective agency specializing in professional economic intelligence. Because there are many more sources of information than just the Internet. For example, you can contact the Embassy of the Republic of Poland in Budapest with a request for information about a specific entity, whether complaints from other entrepreneurs have already reached them, or perhaps according to the knowledge of the diplomatic mission, the Hungarian contractor has a bad reputation? Similar information can be provided by Polish-Hungarian trade chambers.
Registries
In the Bulletin of Public Information of the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, a registry of foreign entrepreneurs’ representations is maintained. If we find our contractor’s representation in this registry, we can assume that they still exist and are conducting business. Another registry in which one can check the contractor is the European VAT taxpayers’ registry and the EORI registry. Companies and individuals wishing to conduct commercial activities within the EU must use the EORI number as their identification number in all customs procedures.
How to check a business partner from Hungary?
The best way is to consult the official register of business activities, maintained by the Hungarian Ministry of Justice, available at https://www.e-cegjegyzek.hu/. It contains data on registered companies and the documents on the basis of which the registration was made. The data is managed by the registration courts and the information and documents relating to the companies are stored electronically. The following data can be accessed free of charge:
• company registration number (cégjegyzékszám);
• company name (firma);
• registered office (székhely);
• place or places of business (telephelyek);
• branch(es) (fióktelepek);
• type of business activity;
• share capital;
• tax identification number;
• information on whether bankruptcy, settlement (felszámolás) or liquidation (végelszámolás) proceedings have been initiated;
• information on whether a person currently or in the past holding management or supervisory positions in an economic entity (gazdasági társaság), in accordance with § 3:22 of the Hungarian Civil Code of 2013, is prohibited from holding management or supervisory positions in another economic entity.
In the above scope, access to the registry is free of charge. Access to more detailed information is subject to a fee. The search can be conducted by company name, registry number, or tax identification number.
A commercial business search engine can be found at https://www.cegtalalo.hu/. It offers certified founding documents, company statements, extracts, and company history for a fee. The documents are available in electronic format and can be downloaded in English. The founding documents reveal the members of the company’s structure, as does the company history. Some of these documents are available (without certification) for free at http://www.e-cegjegyzek.hu/index.html.
The Budapest Stock Exchange maintains a list of stock issuers, which includes the company’s address, contact information, and date of establishment (https://bse.hu/pages/section-members). The website offers access in English.
The Hungarian Intellectual Property Office has search engines for industrial property and copyright applications. Online versions of the “Intellectual Property Gazette” are also available (https://www.sztnh.gov.hu/en).
It is worth verifying a Hungarian counterparty
Before making a transaction or entering into a business partnership with a Hungarian counterparty, it is important to conduct due diligence and verify them thoroughly, especially if they are affiliated with Belarus or Russia. Violating sanctions on trade with these countries can result in a financial penalty of up to 20 million PLN and imprisonment for 3 to 15 years.
Do you now know how to check a company from Hungary? If not, or if you need help finding more detailed information, we can assist you. Please feel free to contact us.
