Brussels, 09/07/2014 (Agence Europe) - The European Commission has changed its state aid guidelines for struggling companies to ensure that investors play their part.
On Wednesday 9 July, the European Commission unveiled new guidelines for state aid for struggling companies (not including banks) which will come into force on 1 August 2014. The new guidelines aim to ensure that public funding is channelled where it is needed most and that investors in failing firms carry their fair share of the costs of restructuring, rather than leaving the burden to taxpayers. EU Competition Commissioner Joaquin Almunia said: “The new rules on aid for firms in difficulty ensure that public funding is granted only where it genuinely saves jobs and know-how on a lasting basis, and after the company owners have contributed their fair share of the costs”.
The guidelines include new rules allowing temporary restructuring support for SMEs, designed to simplify the granting of state funding for restructuring while reducing distortions of competition by favouring measures that are less distortive, such as loans and guarantees, over structural aid such as direct grants or capital injections. Such support can now be granted for at most 18 months - i.e. three times as long as the period for receiving rescue aid - on the basis of a simplified restructuring plan. Member states will have to demonstrate that the aid is needed to prevent hardship, for example, in areas of high unemployment, and that the granting of restructuring aid will make a difference in that respect, for example, by reducing the scale of job losses.
Aid to companies undergoing financial difficulties may be granted temporarily for a period of six months (“rescue aid”). Beyond this period, the aid must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved as “restructuring aid”. As at present, restructuring aid may be granted only once over a period of ten years to prevent companies that are not viable being kept artificially alive through public support. (MD)