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Attorneys’ Escrows Held by Sberbank May be Released

Attorneys’ Escrows Held by Sberbank May be Released

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At the initiative of the Ministry of Justice, the Hungarian National Bank and the Hungarian Bar Association, the Government adopted a Government Decree in April 2022 regulating in detail the payment of lawyers' deposits at financial institutions in the event of liquidation and winding-up proceedings. The Government Decree provides that in the event of the winding-up and liquidation of a financial institution, the provisions of the Bankruptcy Act, the Company Registration Act, the Act on Credit Institutions and Financial Undertakings and the Investment Firm Act shall apply with the additions and derogations included in the Government Decree.

As a background, in a letter dated 2 March 2022, the President of the Hungarian Bar Association turned to the President of the National Bank of Hungary regarding the deposits placed in attorneys’ escrow accounts held at Sberbank Hungary Zrt. As already known, that the Hungarian National Bank prohibited Sberbank from paying out amounts exceeding HUF 7 million per client for 30 days from 2 March 2022, revoked the business activity licence of the bank and initiated the winding-up of the company before the court. In his letter, the President of the Hungarian Bar Association recorded that as a consequence, the attorneys are unable to meet their obligations arising from the escrow agreements, and therefore requested the President of the Hungarian National Bank to ensure that the aforementioned restrictions do not apply to the transactions to be carried out on the escrow bank accounts of the attorneys.

As a result, under the Government Decree, the administrator or the liquidator must arrange for the payment or release of assets which are not part of the assets subject to winding-up or liquidation, including the amounts placed at the account relating to a notary, executor, attorney escrow or custody activity administered by the financial institution within 30 days of the order of winding-up or liquidation. The amount must be issued and paid if the purpose of the funds can be clearly established from the contract concluded between the financial institution and the customer. The administrator or liquidator must initiate the transfer of deposit portfolio and other repayable funds, as well as the transfer of the portfolio of payment services framework agreement at the Hungarian National Bank within 120 days from the order of winding-up or liquidation. The provisions of the Government Decree entered into force on 15 April 2022.

By Lidia Suveges, Attorney at law, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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