On Friday 12 June, the European Commission sent to Member States for consultation a draft proposal to further expand the scope of the State Aid Temporary Framework adopted on 19 March 2020 to support the economy in the context of the coronavirus outbreak.
The Temporary Framework was first amended on 3 April 2020 to increase the possibilities for public support to research, testing and production of products relevant to fight the coronavirus outbreak, to protect jobs and to further support the economy. On 8 May 2020, the Commission adopted a second amendment extending the scope of the Temporary Framework to recapitalisation and subordinated debt measures.
The Commission now proposes to further extend the scope of the Temporary Framework by allowing Member States to: - support certain micro and small enterprises, including start-ups that were already in difficulty before 31 December 2019; - provide incentives for private investors to participate in coronavirus-related recapitalisation measures. Member States now have the opportunity to comment on the draft Commission proposal.
Margrethe Vestager, Executive Vice-President in charge of Competition Policy, said that the Commission proposes to extend the Temporary Framework to allow Member States to provide additional support to micro and small enterprises, including start-ups. “Furthermore, we propose to introduce conditions that provide incentives for private investors to participate alongside the State in recapitalisations. This is welcome as it reduces the need for State Aid and the risk of distortions to competition”, Ms Vestager also explained.
The main purpose of the Temporary Framework is to provide targeted support to otherwise viable companies that have entered into financial difficulty as a result of the coronavirus outbreak.
Therefore, companies that were already in difficulty before 31 December 2019 are not eligible for aid under the Temporary Framework, but may benefit from aid under existing State Aid rules, in particular the Rescue and Restructuring Guidelines.
The Commission is therefore consulting Member States on the possibility of providing public support under the Temporary Framework to all micro and small companies, even if they qualify as being in financial difficulty on 31 December 2019. This provision would apply unless such companies are in insolvency proceedings, have received rescue aid that has not been repaid or are subject to a restructuring plan under State Aid rules.
Temporary State Aid to micro and small enterprises is less likely to distort competition in the Internal Market than State Aid granted to larger companies.
In addition, the Commission proposes to adapt the conditions for recapitalisation measures under the Temporary Framework for those cases when private investors contribute to the capital increase of companies together with the State. The proposed changes: - would allow enterprises with an existing State shareholding to raise capital similar to private enterprises, whilst maintaining the same safeguards to preserve effective competition in the Single Market; - would encourage capital injections with significant private participation also in private companies, limiting the need for State Aid and the risk of competition distortions. (Original version in French by Lionel Changeur)