Latest state aid updates6 July 2020
1. The State Aid Temporary Framework
The State Aid Temporary Framework (the “Temporary Framework”) has been adopted on 19 March 2020 by the European Commission (the “Commission”) and subsequently extended on 3 April 2020, on 8 May 2020 and, the latest, on 29 June 2020. Having as its main purpose to mitigate the negative consequences of the COVID-19 outbreak on the EU economy, the Temporary Framework aims to ensure that sufficient liquidity remains available to businesses and that the continuity of economic activity will be preserved.
Extended support for micro and small companies, including start-ups, that were already in financial difficulties on 31 December 2019
In order to not distort competition, as a rule, the Temporary Framework has not been addressed to companies with financial difficulties on 31 December 2019 but targeted viable companies which have entered in difficulties due to the COVID-19 outbreak. However, since micro and small companies have been especially affected by the liquidity shortage and face greater difficulties in accessing financing in general, the Commission, extended the Temporary Framework to such undertakings, even if they were in financial difficulty on 31 December 2019. In addition to other general conditions, the provision of state aid is conditioned on the companies not being subject to collective insolvency procedure and not having received rescue aid (not yet repaid) or restructuring aid (still being subject to a restructuring plan).
New incentives for capital injections by private investors in COVID-19-related recapitalisations
The prior update of the Temporary Framework has set out the criteria for recapitalisation measures based on which Member States may provide public support in the form of equity and/or hybrid capital instruments to undertakings facing financial difficulties due to the COVID-19 outbreak. New provisions have been added for recapitalisation measures involving private investors, together with the State, contributing to the capital increase of undertakings. If private investors contribute to the capital increase in a significant manner (in principle at least 30% of the new equity injected) in the same conditions as the State (which can be an existing or new shareholder) the acquisition ban and the cap on the remuneration of the management, previously provided, are limited to three years. In the case of holders of the new shares and for the holders of existing shares (diluted to below 10% in the company) the dividend ban is lifted.
Aid cannot be made conditional on the relocation of activities from one EEA Member state to another
Granting the aid should not condition the beneficiary to relocate the production activity or another activity to the territory of the Member State granting the aid from another country within the European Economic Area.
2. A new EUR 800 million Romanian state aid scheme has been approved by the Commission under the Temporary Framework
On 1 July 2020, the Commission has approved, under the Temporary Framework, a Romanian RON 4 billion (approximately EUR 800 million) scheme aiming to support companies affected by the COVID-19 outbreak. The scheme includes subsidised loans and State guarantees on loans managed by the Import – Export Bank of Romania (“EximBank”). The main aim of the scheme is to provide access to financing to small and medium-sized enterprises (SMEs) having a turnover of above RON 20 million (approximately EUR 4 million) in 2019 and to large companies.
3. Prolonged EU State aid rules
On 2 July 2020, the Commission extended the validity of certain rules for the provision of state aid which would have expired at the end of 2020 and made modifications to the existing rules with the goal to alleviate the economic and financial impact of the COVID-19 outbreak on the EU economy.
A new Regulation which amends the General Block Exemption Regulation (“GBER”) and the de minimis Regulation has been adopted. Seven sets of State aid guidelines were amended and the ones which would have expired on 31 December 2020 were prolonged by a new Communication.
Companies with financial difficulties due to the COVID-19 outbreak will be eligible to receive aid under GBER and other regulations
One of the changes introduced to the existing rules allows companies with financial difficulties arisen from the COVID-19 outbreak to be able to receive aid under the GBER and other sets of rules for a specific amount of time during and after the crisis. Such companies would have not been able to receive aid under the previous rules.
Job relocations will not constitute a breach of the commitments taken under regional investment aid
Targeted modifications have been introduced to the existing rules in order to ensure that companies that have received regional investment aid falling under the GBER and that incur job losses due to the COVID-19 outbreak in other EEA entities with similar activities to the entity which received the aid will not be considered in violation of commitments regarding relocation which would have resulted in reimbursement of the aid.