Commission consults on new draft rescue and restructuring state aid guidelinesPrint publication
On 5 November 2013, the European Commission published draft revised guidelines on state aid for rescuing and restructuring firms (non-financial firms) in difficulty. The original guidelines were adopted in 2004 and were originally due to expire in October 2009 but were extended. The main aim of the revised guidelines is to ensure that rescue and restructuring aid is given on strict conditions. It is in the consultation stage and runs until 31 December 2013. The Commission plans to adopt new guidelines in the first half of 2014, as part of its state aid modernisation programme.
According to the current guidelines, companies in difficulty will receive state aid under two conditions:
- Rescue aid. This is available as a temporarily support to a company confronted with an important deterioration of its financial situation.
- Restructuring aid. This is to ensure that the long-term viability of the company is restored without further intervention from the state.
Draft revised guidelines
The Commission’s main proposals are:
- An introduction of a new concept of temporary restructuring support for SMEs. This support is designed to simplify the granting of state aid for restructuring of small and medium sized enterprises (SMEs). Such temporary support will only be available to SMEs and must be in the form of loans or loan guarantees lasting no longer than 12 or 18 months (the Commission is inviting comments on which period is most suitable).
- Better filters. This is to ensure that state aid is targeted at cases where it is really needed. This includes the need to show that the aid is needed to prevent hardship, for example in areas of high unemployment, and that the granting of restructuring aid will improve the outcome. The draft guidelines therefore set out a non-exhaustive list of situations in which aid would be justified under this provision.
- Burden sharing. Suggestions are made on how burden sharing can be implemented for non-financial firms. This requires that a company’s investors make a fair contribution to the costs of its restructuring.
The Commission also considered the definition of undertakings in difficulty. According to both the current and draft revised guidelines, only firms that qualify as undertakings in difficulty can receive aid under the rescue and restructuring guidelines. The definition of undertaking in difficulty in the current guidelines contains both hard (objective) criteria and soft criteria, which require a broader and more subjective assessment of the undertaking’s situation. The draft revised guidelines propose removing the soft criteria but the Commission encourages comments on whether there are other criteria that could identify undertakings in difficulty more reliably than the ones they have suggested.
If you wish to respond to the consultation, there are instructions on how to do so (and links to the draft revised guidelines) here
For further information and if you would like help with your response to the consultation, please contact David Kilduff or Richard Auton.