State Aid Temporary Framework Extension - good news for small companies
The European Commission has made a third amendment to the Temporary State Aid Framework, allowing for further measures to be taken by Member States in response to the financial effects of COVID-19.
In March, at the outbreak of the pandemic in Europe, the Commission allowed for measures including grants of up to €800,000 and loans with subsidised interest rates to be rolled out across the EU.
The UK has since had an “umbrella scheme” approved under this framework, by which up to £50 billion of state aid can be granted. This has been implemented through measures such as the Coronavirus Business Interruption Loan Scheme.
Who will benefit from the latest change?
The latest amendment to the Framework allows for additional support to be granted to micro and small companies that were not previously eligible for aid under the framework.
Until now, measures under the framework were only to be granted to companies which were not in financial difficulty at the end of 2019. This was in order to ensure that money was directed to companies struggling as a result of the pandemic, and not those who were already in difficulty.
However, the test of whether a company was in “difficulty” has not been without controversy - with the definition sometimes catching, what would seem to be, otherwise healthy companies and depriving them of access to public funding under the GBER or Temporary Framework.
Now additional support is being made available to micro and small companies even if they were already caught by the definition of financial difficulty at the end of last year. This is intended to reduce the number of bankruptcies and insolvencies of micro and small companies which is expected as a result of the serious disturbance to the economy caused by the coronavirus.
What are Micro and Small Companies?
Micro and small companies (a subgroup within the EU definition of SMEs) are a previously existing category in EU law. They are companies with less than 50 employees (or equivalent on a part-time basis) and less than €10 million of annual turnover. Smaller companies generally have less financial reserves and are less resilient to changes in the economy, hence why access to state aid is being made more broadly available for them.
The amendment to the framework has also introduced incentives for private investors to participate in coronavirus-related recapitalisation aid measures, and clarified that state aid measures should not be conditional on the relocation of economic activities within the single market.
If your business would benefit from any of these new measures please get in touch and we can help you access them as efficiently as possible.
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