Update on state aid in relation to COVID-19

In the wake of the publication of the Temporary Framework (see our article of 20 March 2020) and its subsequent amendments (see our articles of 6 April 2020 and 11 May 2020), the European Commission and the EFTA Surveillance Authority have adopted an impressive number of decisions in application of the Temporary Framework and continue to adopt such decisions on almost a daily basis. The status as of 30 June 2020 can be found here for the European Commission and for the EFTA Surveillance Authority.

On 29 June 2020, the European Commission adopted a third amendment to the Temporary Framework.

This amendment mainly expands the scope of the Temporary Framework to micro and small companies that were already in financial difficulties on 31 December 2019, unless such companies are in insolvency proceedings, have received rescue aid that has not been repaid and/or are subject to a restructuring plan under the general state aid rules.

In addition, the third amendment changes the conditions for recapitalisation measures – introduced to the Temporary Framework by the second amendment – in those cases where the state grants recapitalisation aid (as an existing or as a new shareholder) and private investors contribute to the capital increase in a significant manner (in principle at least 30% of the new equity injected) at the same conditions as the state. In such cases, certain restrictions such as the acquisition ban, the cap on the remuneration of the management and the dividend ban will be relaxed or lifted.

The amendment also clarifies that aid cannot be made conditional on the relocation of activities from one EEA Member state to another.

Finally, the amendment makes various smaller clarifications e.g. concerning (i) the scope of wage subsidies which also includes the preservation of business activities of self-employed individuals, (ii) the continued application of the Temporary Framework when a state sells its stake below market price or (iii) the remuneration limit on new members of management after state recapitalisation.

We continue to closely monitor the situation. In Brussels and elsewhere in our network, we have a dedicated group of EU state aid experts able to guide companies and public authorities through the maze of EU state aid law and to assist in the procedure before the European Commission.

Should you need assistance, have any further questions regarding this client alert or state aid generally, please do not hesitate to contact any of the individuals listed or your usual contact at Simmons & Simmons.