State aid Temporary Framework scope extended and extra & further aid for restoration attainable (sixth Amendment)
In temporary
On 18 November 2021, the European Commission (“Commission”) additional extended the Temporary Framework for COVID-19 State aid (“Temporary Framework”) till 30 June 2022. This sixth Amendment has additionally added funding assist measures and solvency assist measures to assist financial restoration and elevated sure aid ceilings.
Background: In March 2020, the European Commission adopted the Temporary Framework to assist the financial system within the context of the COVID-19 outbreak, which permits EU Member State to have State aid authorised shortly by the Commission. It has since been amended six instances: First, rising potentialities for public assist to analysis, check and produce merchandise related to struggle the COVID-19 outbreak. Second, to allow recapitalization and subordinated debt measures, and third, to additional assist micro, small and start-up firms and to incentivize personal investments. A fourth modification prolonged the protection of the Temporary Framework once more and extended its software into 2021. The fifth modification extended the appliance of the Temporary Framework to the top of 2021, elevated aid quantities that the Commission would approve and allowed for the conversion of restricted quantities of repayable Temporary Framework aid to grants.
Key Takeaways
The sixth Amendment prolongs the appliance of the Temporary Framework till 30 June 2022. In addition, it provides two new classes of assist measures for which EU Member States can receive fast Commission State aid approval:
● Investment assist schemes for sustainable restoration to shut funding gaps created by the disaster for investments. Aid will be granted to qualifying firms, together with massive firms, till 31 December 2022 for as much as EUR 10 million (or EUR 15 million if it entails a assure or repayable instrument) for qualifying investments that don’t predate 1 February 2020.
● Solvency assist schemes for SMEs and small mid-caps to incentivize personal funding in firms with progress potential. The aid might be within the type of ensures or related assist measures for devoted funding funds and will be granted as much as 31 December 2023.
In extra detail
Prolongation
The Temporary Framework, which was set to run out on 31 December 2021, has now been extended till 30 June 2022 (besides as famous in any other case). It stays topic to additional extension if mandatory. Executive Vice-President Margrethe Vestager famous that “[t]he limited prolongation gives the opportunity for a progressive and coordinated phase-out of crisis measures, without creating cliff-edge effects, and reflects the projected strong recovery of the European economy overall.”
Two new classes of assist measures
The sixth Amendment consists of two new classes of assist measures that EU Member States could undertake to assist firms get well:
● “Investment support measures towards a sustainable recovery” These are meant to permit Member States to assist firms shut the funding hole created by the disaster, topic to the circumstances of the Temporary Framework, crucial of that are:
● The aid must be granted on the premise of a scheme and will solely cowl investments in tangible and intangible belongings; not monetary investments.
● The aid could also be granted as non-repayable grants, tax grants or deferrals, sponsored rates of interest on loans, or as ensures. Repayable devices will be eligible for conversion into grants beneath predefined circumstances. Repayable devices, comparable to loans or ensures, can’t exceed a period of eight years.
● The whole aid quantity could not exceed EUR 10 million per firm (EUR 15 million for ensures, loans or different repayable benefits); in areas eligible for regional aid top-ups could also be accessible.
These funding assist measures will be granted by Member States till 31 December 2022.
● “Solvency support measures” enable Member States to leverage personal funds and make them accessible for investments in SMEs and small midcaps, topic to sure circumstances, together with:
● The assist measure ought to take the type of public ensures or related measures for funding funds devoted to investments in SMEs and Small-Midcaps, to incentivize these funds to put money into SMEs and Small-Midcaps by means of subordinated loans, fairness and quasi-equity investments, and must be granted on the premise of a scheme.
● The devoted investments funds must be chosen in an open, clear, and non-discriminatory choice process, and the remuneration of their managers must be primarily based on the efficiency of all the fund portfolio.
● The State ought to obtain an sufficient, market-oriented return both within the type of a assure premium or revenue participations rights, relying on the character of the supported funding (be it subordinated loans or fairness).
● First loss protection by the State must be restricted to 30 % of the underlying portfolio.
● Guarantees, must be restricted to eight years in whole, whatever the underlying instrument (debt or fairness) however can’t exceed the maturity of the underlying debt instrument, in case of debt assure, and, in case of fairness investments, the assure could not cowl investments made by the funding fund after 31 December 2023.
Provided applicable justifications are made by the Member State, the Commission could settle for various choice and remuneration strategies, larger aid quantities per firm or extending the appliance to investments to bigger firms. Aid beneath these solvency schemes will be granted till 31 December 2023.
Other notable amendments
In addition to the prolongation of the Temporary Framework and the 2 new classes of State aid measures added, the sixth Amendment:
● Prolongs the chance for Member States to transform repayable devices (e.g. ensures, loans, repayable advances) granted beneath the Temporary Framework into different types of aid, comparable to direct grants from 30 June 2022 till 30 June 2023;
● Has elevated the utmost quantities of sure sorts of aid proportionately to the prolonged period of the Temporary Framework, as an example a rise from EUR 10 million to EUR 12 million for assist for uncovered fastened prices;
● Clarifies the usage of the distinctive flexibility provisions of the Commission’s Rescue and Restructuring Guidelines by permitting a deviation from the necessity to cowl at the very least 50% of the prices of the restructuring plan by personal contributions in addition to the precept that the identical firm can solely profit as soon as from rescue and restructuring assist (“one time last time”). But the remaining provisions of the Guidelines, specifically the necessity for a restructuring plan, the return to long-term viability, and burden sharing, proceed to use; and
● Prolongs the listing of non-marketable danger international locations (i.e. international locations the place there’s a lack of enough personal insurance coverage capability for short-term export-credits) within the context of the communication on the short-term export credit score insurance coverage (“STEC”) from 31 December 2021 to 31 March 2022, in order that Member States can assist export credit score insurance coverage to these international locations.
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