State aid: Commission expands Temporary Framework to further support micro, small and start-up companies and incentivise private investments

The European Commission has recently adopted a third amendment to extend 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 main purpose of the Temporary Framework is to provide targeted support to otherwise viable companies that face financial difficulties as a result of the coronavirus outbreak. Micro and small companies (i.e. undertakings with less than 50 employees and less than EUR 10 million of annual turnover and/or annual balance sheet total) have been particularly affected by the liquidity shortage caused by the economic impact of the current coronavirus outbreak, making their access to financing even more difficult, compared to larger enterprises.

The said amendment widens the scope of the Temporary Framework to allow Member States to provide public support under this Framework to all micro and small companies, even if they already faced financial difficulties on 31 December 2019. This will 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. Moreover, the amendment increases the possibilities to support start-up companies, the great majority of which fall within the micro and small companies cluster.

The Commission has also adapted the conditions for recapitalisation measures under the Temporary Framework for those cases where private investors contribute to the capital increase of companies along with the State. It is anticipated that these changes will encourage capital injections with significant private participation in companies, limiting the need for State aid and the risk of competition distortions.

For more information please speak with Ioannis Sidiropoulos or your usual contact at Elias Neocleous & Co LLC.