Further extension and sixth amendment to the EU commission state aid temporary framework

On November 18, the European Commission further extended the Temporary Framework on State Aid for six months, from December 31, 2021, to June 30, 2022.

Member States will be able to notify State aid measures under the Temporary Framework until June 30, 2022. As in previous occasions, the Commission will reassess the need to further prolong the Temporary Framework when the expiration date nears.

Without prejudice to the general extension of the Temporary Framework, certain State aid measures will continue to have a different duration. In particular, the possibility for Member States to convert repayable instruments (e.g., guarantees, loans, repayable advances) into other forms of non-repayable aid (grants) is extended until June 30, 2023. The Commission has also prolonged the list of non-marketable risk countries from December 31, 2021, to March 31, 2022.

On the other hand, the Commission has adapted the aid ceilings of certain types of aid in accordance with the extended duration of the Temporary Framework, and it has clarified the use of the exceptional flexibility provisions of the Commission’s Rescue and Restructuring Guidelines.

In addition, together with the extension, the Commission has introduced two new aid measures available to Member States.

Investment support measures

First, the Temporary Framework now provides for the possibility of creating incentives for investment to address the investment gap resulting from the crisis and to accelerate the green and digital transition. When assessing this type of aid, the Commission will particularly consider whether aided investments are harmful or contrary to the EU’s environmental objectives.

The basic conditions for this new category of aid measures are as follows:

> The aid must be granted on the basis of a scheme. As a general rule, the maximum amount of aid per company may not exceed 1% of the scheme’s total budget or €10 million per company in nominal terms, regardless of the specific aid instrument or measure. However, companies in assisted areas with access to regional aid may receive aid beyond that limit. Investment support measures may be granted in various forms, including direct grants, tax advantages, subsidized interest rates or guarantees. Also, the general aid scheme may provide for repayable instruments to be converted into grants. Aid in the form of guarantees, loans or similar figures will be subject to specific intensity limits.

> Eligible costs may only include the costs of investments in tangible and intangible assets, expressly excluding financial investments.

> The aid intensity may not exceed 15% of the eligible costs, except for SMEs and investments in assisted areas.

> Member States may limit the aid to specific economic areas provided that this does not lead to an artificial limitation of potential beneficiaries.

> Companies that were already in difficulty before December 31, 2019, cannot benefit from the aid, with certain exceptions for micro and small companies.

Solvency support measures

The Temporary Framework reinforces the possibility of granting solvency support aid by incentivizing private investments in equity or subordinated debt subject to the following conditions:

> The aid must be granted on the basis of a scheme in the form of guarantees or similar instruments. Investment must be made through financial intermediaries, which may in no case be the final beneficiaries and which must assume a risk of at least 10% of the relevant volume.

> Only SMEs, start-ups and small mid-caps are eligible for this aid.

> The risk taken by the State must be returned in conditions similar to market conditions.

> The duration of the guarantee cannot exceed eight years in total.

> Maximum financing cannot exceed €10 million per company.

> This type of aid is incompatible with recapitalization measures also provided for under the Temporary Framework, so that a company may not benefit from both at the same time.

Solvency support aid may be granted until December 31, 2023.

Following the extension, Member States must notify the extensions and amendments to their national aid schemes for their express approval by the European Commission.

The consolidated version of the Temporary Framework is available here.