Stromman facts in 2023
Origin of the word Stróman
The word stroman originally dates from the 1580s. The term is derived from the English word "straw man" and the German word Strohmann. It means strawman. They were used to imitate the movements of an attacking party, on which defensive or offensive moves could be practised.
The word began to be used figuratively when it began to be used in legal and business contexts in its symbolic meaning. A strawman is in fact a person or entity who puts their name to a transaction, but is really only acting to keep the identity of the real person from being known to the public.
The term is generally used in situations where another person or organisation is put in the spotlight to protect or promote someone else's interests or goals. This can be in legal or business transactions, political disputes, money laundering or tax evasion, etc. This is why we also call it a puppet, a stooge or a shadow director.
The meaning of Stróman
A strawman is a person or entity that appears to be a party to a transaction or situation, but in reality only gives its name, thus hiding the name of the real owner. The strawman often appears only on paper or in official documents, but the real decision-maker and beneficiary on behalf of the strawman is someone else.
The term strawman therefore refers to a method by which someone provides a fictitious presence on a case to hide or alter the reality and generally serve the interests of others, without further real work.
Using Stróman in business
The use of the stromman in business life can take different forms. Some examples of the use of a stromman for a business:
- Transfer of assets and concealment of ownership: a person or entity may be listed as a nominee as the owner of a business or asset in order to conceal the true owners or transfer of assets. This may provide opportunities for tax avoidance, avoidance of liability, concealment of competitive disadvantages or to secure privacy.
- Becoming a company director: a person can be a puppet at the head of a company, posing as a front man, while another person or group is actually running the company. This method can allow the real owners to influence the company's activities from behind the scenes or to hide the real link to the company.
- In many cases in Hungary, ordinary small business owners use their family members as stewards, for example because the person is already retired and can manage the company on more favourable terms, without having to pay them an income. This can reduce the contribution payable by the director. Since it is within the family, there is no great risk.
- Someone wants to enter as a new competitor in a market where he is already present and well known and does not want his competitors to know that he is the real owner. In such cases, he will look for someone to act as his substitute in the public eye and the name of the steward will appear in the official records.
- Of course, there are cases where, quite legitimately, only private purposes are served by stringency, such as ensuring privacy. We have clients who are well known to the public and more people are concerned about their financial situation. For example, when the company results of the previous year are published after 31 May, a multitude of journalists try to get as many clicks as possible on which celebrity has earned what dividends or how much revenue they have made in the past year. When someone's income comes from the free market, they have a legitimate claim not to be on the front page of the newspapers.
- There are certain positions that preclude you from running your own company. These can be political positions or even exclusive contracts in the competitive sector. In such cases, a shadow director will act on behalf of the real business owner.
- It is also used by dubious businessmen to hide the real person behind.
- Money laundering and illegal activities: stooges are often used for business activities that aim to launder money or other criminal proceeds to a legitimate business. A stooge can provide an opportunity for the perpetrators of criminal activity to hide or eliminate their trail. This is of course illegal and punished severely by law.
The risk of using a stroman
The use of a stromman can have many risks and negative consequences in business. Here are the main risks:
- In case of illegal activity, the steward is fully punishable and all his/her actions have legal consequences. This is a risk for the stroker.
- Entitlements and responsibilities: if someone is listed as a promoter in a company, they actually have all the entitlements, i.e. they can also control the bank account, for example. In Hungary, it was very fashionable to use stooges, but perhaps in recent years this has diminished and the old method has fortunately disappeared completely. In practice, the post was filled by homeless people. The risk of these was that the person used as a stromman might not be available again and the money might be stuck in the bank. In formal places, the real owner cannot act for the steward and this could upset the structure at any time.
- For example, banks may at any time request an actual ownership statement or other type of data update, which can be difficult to achieve in the absence of the shadow director's availability.
- If there is a suspicion that a strawman, just a strawman and money laundering is likely to be behind it, lawyers, accountants and banks have all been required to report in recent years.
It is vital that you carefully consider the risks and legal limits of using a stroman in your business activities and always consult with experts and legal advisers to make sure that all activities are in line with the law.
Is it legal to use bromine?
The use of a stróman is legal in Hungary, but it is important to note that it does not allow you to commit an offence with impunity.
Depending on the purpose of the particular business or transaction and the circumstances of the shadow director's use, the use of a strawman may be lawful, for example in the case of company formation or asset transfers, as long as the purpose is not to hide illegal activities or tax evasion.
However, illegal or dishonest forms of using a stróman (e.g. tax evasion, money laundering, fraud or other criminal offences) have serious legal consequences in Hungary and can lead to criminal liability.
It is therefore very important that you always consult experts, such as a legal adviser or tax adviser, before you decide to use a stromman.
The biggest risk of using Stromman
Misappropriation by strawman: The word strawman means that the puppet gives his name to the business and acts in his own name and interest instead of the owner hiding his name. This means that the stooge can disable all access in the bank and request a new one at any time, which he can use to control the account, even if the real decision-maker may have kept bank access private. So in effect the stooge is not just giving his name, but actually the person holding it. Thus, if he 'smartened up', he can act in his own name and on his own behalf, withdraw cash, initiate transfers, sell movable and immovable property, i.e. the power of the stromman is also a power he can abuse.
Using Stromman safely
If the puppet gives his name to the company instead of the principal, we have very little control over the company's assets. However, if the stooge is only a director and we can keep the ownership level in our own hands anonymously, we can replace the director if necessary and regain control by appointing a new managing director. As an owner, the managing director can be held accountable and if he or she uses the company's money for his or her own purposes, can be charged with embezzlement, and in the case of grossly negligent employee injury, the company can claim damages.
One of the best ways to do this is to own the company through an offshore company. The ownership of this offshore company can be kept completely secret, but you can exercise your ownership rights with confidence at any time. Thus, an entrepreneur who wishes to hide his name can own his company anonymously. You can read more about this here. Alternatively, if you are interested in this topic, please contact us for more information.
Is Lőrinc Mészáros Viktor Orbán's stooge?
According to some, Lőrinc Mészáros gives his name to Viktor Orbán's empire. However, the Prime Minister has minimal wealth under his own name by comparison. In recent years, this opinion has become very strong in Hungary. We do not have any information on this, nor do we take a position on it.