Brussels Calls For State Aid Not To Be Conditional On The Repatriation Of Companies

The European Commission (EC) reminded member states on Monday that public aid, granted to companies during the coronavirus pandemic, should not include as a condition that companies repatriate their activities to the country that provides money from other territories within the European Economic Area (EEA).

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Brussels included that warning in a new time frame amendment that makes EU rules on state aid more flexible, so that European Union (EU) governments can help firms experiencing difficulties as a result of COVID-19.

“With the amendment, the Commission has clarified that the aid should not be conditional on the transfer of the production activity or other activity of the beneficiary from another country within the European Economic Area to the territory of the Member State granting the aid,” the Community executive in a statement.

Brussels added that imposing that requirement “would be particularly damaging to the internal market.”

On May 26, the President of France, Emmanuel Macron, presented a plan of 8,000 million euros to help the automotive sector to deal with the crisis, which included the commitment of the PSA and Renault groups to manufacture in the French country their “clean” electric and hybrid vehicles.

Macron explained that in exchange for public support, PSA and Renault will have to “relocate production with added value in France and consolidate and maintain all industrial production” in the plants they have in the country.

Beyond including that warning, the new amendment makes it easier for governments to give public money to small businesses.

The relaxation of the rules on State aid in the face of the pandemic aims to support viable firms experiencing difficulties due to the economic and health crisis.

For this reason, companies receiving public money are required to be viable before December 31, 2019.

However, Brussels clarified this Monday that all micro and small firms, that is, companies with less than 50 workers and an annual turnover of less than 10 million euros, will be able to benefit from the relaxation of the rules on State aid, even if they were already experiencing difficulties on December 31.

The EC specified that the companies will not be able to benefit from the flexibility if they are already in insolvency proceedings, have received ransoms that have not been returned, or are subject to a restructuring plan under the State aid rules.

The Commission assured that due to “their limited size and involvement in cross-border transactions”, state aid to these firms “is less likely to distort competition in the internal market than state aid to larger companies”.

Today’s amendment also increases the chances of supporting startups, which are mostly small in size.

The Community Executive recalled, in addition, that all SMEs with less than three years of life on December 31, 2019 could already benefit from the relaxation of the rules on public aid.

On the other hand, Brussels adapted this Monday the conditions for recapitalizations in which private investors contribute to the capital increase together with the State.

Thus, if the State decides to recapitalize a company, but the private sector contributes at least 30% of the new capital under the same conditions as the Government, the prohibitions on acquiring other companies and the limits on directors’ remuneration will be limited to three years.

Similarly, the prohibition on paying dividends disappears for the owners of the new and existing shares, provided that those who have those existing shares “are fully diluted below 10% in the company.”

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