What Can the Share Capital of a Kft. Be Used For, and When Must It Be Made Available?

Before company formation in Hungary, many entrepreneurs ask the same question: is the mandatory share capital money that cannot be touched later, or can it also be used to finance the start of the business?

Money already transferred to the company can be used for the operation of the business: it can be used to purchase a laptop or inventory, pay rent, wages, marketing expenses and accounting fees. The full amount does not need to remain in the bank account at all times. However, it is important to ensure that the contribution is transferred to the company on time, that its use is properly documented, and that the company’s financial position remains stable.

The payment and use of a Kft.’s share capital are therefore connected, but they are two separate questions. Let us look at what this means in practice.

What does share capital mean, and how much is required to establish a Kft.?

Share capital is the total amount of capital contributions undertaken by the owners. To establish a Kft., at least HUF 3 million in share capital is required, which may consist of cash, suitable assets, or a combination of the two.

The contribution of each individual owner is called a capital contribution. Each capital contribution must be at least HUF 100,000; the members do not have to contribute equal amounts. The minimum amounts are determined by the Hungarian Civil Code.

Alongside share capital, the concept of equity is also frequently mentioned. This is a broader accounting category reflecting the financial position of the business: in addition to registered share capital, it is also affected, for example, by the results of previous years and the profit or loss of the current year. Capital that has not yet been paid in appears as a reducing item.

The bank account balance, on the other hand, simply shows how much money is currently held in the company’s account. The business may also own machinery, inventory and receivables from customers. Share capital, equity and the bank account balance are therefore not the same thing, and during business operations they will usually show different amounts. The accounting background is determined by the Hungarian Accounting Act.

Can share capital only be provided in cash?

Not necessarily. In addition to a cash contribution, an in-kind contribution, meaning a non-cash asset contribution, is also possible. This may include, for example, a computer, machinery, real estate or a transferable property right.

Certain receivables may also be used for this purpose if they have been acknowledged by the debtor or are supported by a final court judgment. However, the owner’s future work or a promise to provide services to the company at a later date cannot be counted as an in-kind contribution.

The contributed asset must be valued realistically. For example, the value of a used computer cannot simply be increased arbitrarily to reach the required amount of share capital. If the in-kind contribution is worth less at the time of transfer than the amount declared, the company may claim payment of the difference within five years. Other members who knowingly accepted the overvaluation may also become liable for the resulting damage. These rules are set out in the Hungarian Civil Code.

When must the share capital of a Kft. be paid in?

Cash contributions may also be provided later

Not every Kft. is required to pay the full cash contribution into the company before registration. The articles of association – or, in the case of a single-member company, the deed of foundation – may allow payment at a later date.

However, this does not mean that payment can be postponed indefinitely. The document must clearly specify the amount, the method of payment and the deadline, and the statutory limitations must also be observed.

In the case of deferred payment, the owner may also settle the contribution from the company’s distributable profits. Any dividend due to the owner must then be credited toward the outstanding contribution until the full cash contribution undertaken by that owner has been paid. Until then, this amount cannot be freely received and spent as a dividend.

The final deadline is linked to the financial statements of the company’s first years of operation. If any part remains unpaid by the end of the second complete twelve-month financial year following registration, it must be transferred to the company within three months after the financial statements for that year have been approved.

The articles of association may also specify an earlier deadline. Deferred payment also carries personal liability: the member is required to cover the company’s debts up to the amount of the outstanding cash contribution.

A simple deadline example: if a calendar-year Kft. is registered in October 2026, its first two complete financial years will be 2027 and 2028. If the financial statements for 2028 are approved on 15 May 2029, the final deadline for paying the remaining cash contribution will be 15 August 2029. Naturally, any earlier deadline undertaken in the articles of association must still be observed.

Different deadlines apply to in-kind contributions

In the case of a Kft. established by several owners, if the in-kind contribution reaches or exceeds half of the total share capital, the entire in-kind contribution must be transferred by the time the application for registration is submitted.

If its proportion is lower, the articles of association may allow later performance, but no later than three years after the company’s registration.

When establishing a single-member Kft., the rule is stricter: regardless of its proportion, the entire in-kind contribution must be transferred by the time the application for registration is submitted. Legal background.

How can the contribution be paid?

Many people automatically think of a bank transfer, although this is not necessarily the only possible solution in every case. In accordance with the company’s constitutional document, the money may be paid into the company’s bank account, or, if properly documented, into the company’s cash register.

For bank payments, the bank confirmation and account statement can help prove the transaction, while for cash payments, a cash receipt and the company’s cash records provide documentation.

The key point is always the same: the money must actually be placed at the company’s disposal. The contribution is not considered paid simply because the owner has the money in their personal account or because a declaration has been signed without an actual transfer of funds.

What can the share capital be used for in everyday business operations?

A newly established company will typically have expenses even before receiving its first revenue. It may need work equipment, inventory, business premises, a website, advertising or an accountant. The money transferred to the company may also be used to finance these expenses, as well as employee wages and the related taxes and contributions.

The purchase or service must be related to the business and must be properly documented. This generally means an invoice issued in the company’s name, and, where necessary, a contract and proof of performance; wages must also be supported by the appropriate employment and payroll documentation.

However, the payment itself and the recognition of the expense do not necessarily occur at the same time. The purchase price of a laptop used for several years is generally recognised gradually through depreciation. Goods purchased for resale initially become inventory, and their acquisition cost is generally recognised as an expense when the goods are sold. The relevant rules are contained in Sections 52 and 78–79 of the Hungarian Accounting Act.

Buying a laptop: part of the cash becomes business equipment

A service company starts with fully paid share capital of HUF 3 million and purchases a laptop for HUF 600,000.

For simplicity, VAT, taxes and all other economic transactions are disregarded; the acquisition cost of the laptop is HUF 600,000.

After the purchase, the company has HUF 2.4 million in cash and a laptop worth HUF 600,000. The company’s equity has not decreased solely because of this transaction: part of its assets has simply been converted from cash into business equipment.

If the laptop is depreciated evenly over three years with zero residual value, depreciation of HUF 200,000 is recognised for one full year of use. Without any other revenue or expenses, this already results in a loss of HUF 200,000, reducing equity to HUF 2.8 million. At that point, the company must also consider whether its capital position needs to be restored.

Purchasing inventory: the purchase itself does not mean a loss

A trading company uses HUF 1.2 million of its initial HUF 3 million in cash to purchase goods. It then has HUF 1.8 million in cash and HUF 1.2 million in inventory. Its equity remains HUF 3 million.

If it sells the entire inventory for HUF 1.6 million and the customer pays the amount, its cash balance will rise to HUF 3.4 million. Against the HUF 1.6 million in revenue, it recognises the HUF 1.2 million acquisition cost of the goods.

Disregarding VAT, taxes and all other items, the profit is HUF 400,000 and the company’s equity increases to HUF 3.4 million.

Does the full share capital have to remain in the bank account at all times?

No, there is no general requirement for the full amount of share capital to remain untouched in the bank account. As the examples above show, using the money may allow the company to acquire other assets.

The situation is different when expenses are not supported by sufficient revenue. Rent, accounting or marketing expenses may result in a loss, which reduces equity. The expenditure may still be justified, but the loss and its consequences must be monitored.

Liquidity is also a separate issue. A company may have valuable inventory in its warehouse, but that will not help if it does not have enough cash to pay the next salaries or supplier invoices.

Can the owner take back the money that was paid in?

Once transferred to the company, the amount becomes company property, so it cannot simply be transferred back for private purposes on the basis that it was originally paid in by the owner.

A dividend may be paid from distributable profits, provided that the appropriate decision has been made and the company’s financial position allows it. The payment must not endanger the company’s solvency, and after the payment, adjusted equity must not fall below the share capital. The restriction relating to deferred capital contributions described earlier must also be taken into account.

A shareholder loan is a different form of financing: the owner lends money to the company, creating a repayment obligation for the business. This is not share capital and does not in itself improve equity, because the company’s cash increases together with its liabilities.

A capital reduction may allow capital to be withdrawn in certain circumstances, but this requires a separate corporate and company registration procedure, including creditor-protection rules. It does not provide a freely available method of withdrawing money; the share capital of a Kft. may not fall below the statutory minimum. Legal basis: Sections 3:202–3:206 of the Hungarian Civil Code.

What happens if the contribution is not paid or equity decreases?

If an owner fails to provide the undertaken contribution on time, the management must issue a formal notice granting an additional 30-day deadline and inform the owner of the consequences. If this additional deadline also expires without payment, the membership terminates on the following day, and the member may also be liable for the damage caused. This applies to both cash and in-kind contributions. Legal basis: Section 3:98 of the Hungarian Civil Code.

A loss of capital during the operation of the company must also not be ignored. The managing director must initiate a decision by the members without delay if, as a result of losses, the company’s equity falls to half of its share capital or below the statutory minimum of HUF 3 million. The same applies if there is a risk of insolvency or if the company’s assets do not cover its liabilities.

Possible solutions may include an additional capital contribution that meets the applicable conditions or another form of capital restoration. If this is not possible, a decision must be made regarding the company’s future form of operation or termination. The adopted resolutions must be implemented within three months; if the reduction of the share capital to half persists, a mandatory capital reduction may also become necessary. Legal basis: Section 3:189 of the Hungarian Civil Code.

A separate rule applies if equity fails to reach the statutory minimum during two consecutive complete financial years. If the situation has not been resolved within three months after approval of the second financial statement, a decision on transformation must be made within the following 60 days; a merger or termination without legal succession may also be chosen. This does not mean that there is a two-year grace period for measures that were already required earlier.

Frequently Asked Questions

Can the share capital of a Kft. be spent?

Yes. Money transferred to the company may be properly used for the operation of the business.

Does the entire contribution have to be paid in cash?

No. The contribution may also be provided through suitable in-kind contributions or through a combination of cash and in-kind contributions.

What is the deadline for paying in the share capital?

The articles of association determine the deadline within the statutory limits. In the case of cash contributions, the final deadline is three months after approval of the financial statements for the second complete financial year.

Does money spent on a laptop have to be replaced?

Not simply because of the purchase itself. However, any reduction in equity resulting from a loss must be assessed separately.

As the sole owner, can I freely withdraw the money?

No. The assets of a single-member Kft. are also separate from the private assets of its owner.

Planning the share capital is part of starting the business

Before establishing a company, it is worth considering what purchases will be necessary, when the first revenues are expected to arrive, and how much financial reserve the business will need.

The company formation, legal and accounting services of FirmaX Hungary can help ensure that the timing and use of the capital contribution are aligned with the company’s business plans. If you are planning to establish a Kft., we can review the available options with you during a personalised consultation.