State aid: Commission approves €2 billion French scheme to support uncovered fixed costs of companies affected by the coronavirus outbreak

State aid: Commission approves €2 billion French scheme to support uncovered fixed costs of companies affected by the coronavirus outbreak

The European Commission has approved a French scheme to support the uncovered fixed costs of companies affected by the coronavirus outbreak. The scheme was approved under the State aid Temporary Framework.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Many French companies have experienced a significant decline in their revenues due to the restrictive measures that France had to put in place to limit the spread of the coronavirus. This €2 billion scheme will enable France to support those companies by helping them cover the fixed costs that are not covered by their revenues. We continue working in close cooperation with Member States to find workable solutions to mitigate the economic impact of the coronavirus outbreak, in line with EU rules.”

The French support measure

France notified to the Commission a scheme, with a budget of approximately €2 billion, to further support companies affected by the coronavirus outbreak under the Temporary Framework.

The scheme will be open to all companies, irrespective of their size and of the sector where they operate (with the exception of the financial sector). The public support will take the form of direct grants. The measure will enable the French authorities to support companies that suffered a monthly turnover decline between January 2021 and November 2021 of at least 30% compared to the same period prior to the coronavirus outbreak (January 2019 – November 2019), by helping them cover the losses incurred during that period.

The amount of aid that each beneficiary will be eligible to receive will be calculated on the basis of the so-called excédent brut d’exploitation (EBE), a financial figure included in a company’s monthly accounts which reflects its uncovered fixed costs. The EBE will have to be verified by certified accountants before submitting the application for aid. The aid will help the beneficiaries pay 70% (90% in case of micro and small companies) of their fixed costs that are not covered by revenues, up to a maximum of €10 million per undertaking.

The purpose of the scheme is to mitigate the economic difficulties and the liquidity shortages that the beneficiaries are facing due to the restrictive measures that the French government had to impose by the French government to limit the spread of the coronavirus.

The Commission found that the French scheme is in line with the conditions set out in the Temporary Framework. In particular, the aid (i) will not exceed €10 million per company; (ii) will cover uncovered fixed costs incurred during a period comprised between 1 January 2021 to 30 November 2021; (iv) will be granted to undertakings that suffer a decline in turnover during the eligible period of at least 30% compared to the correspondent period prior to the coronavirus outbreak and (iii) will be granted no later than 31 December 2021.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.

On this basis, the Commission approved the aid measure under EU State aid rules.

Background

The Commission has adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the coronavirus outbreak. The Temporary Framework, as amended on 3 April, 8 May, 29 June, 13 October 2020 and 28 January 2021, provides for the following types of aid, which can be granted by Member States:

(i) Direct grants, equity injections, selective tax advantages and advance payments of up to €225,000 to a company active in the primary agricultural sector, €270,000 to a company active in the fishery and aquaculture sector and €1.8 million to a company active in all other sectors to address its urgent liquidity needs. Member States can also give, up to the nominal value of €1.8 million per company zero-interest loans or guarantees on loans covering 100% of the risk, except in the primary agriculture sector and in the fishery and aquaculture sector, where the limits of €225,000 and €270,000 per company respectively, apply.

(ii) State guarantees for loans taken by companies to ensure banks keep providing loans to the customers who need them. These state guarantees can cover up to 90% of risk on loans to help businesses cover immediate working capital and investment needs.

(iii) Subsidised public loans to companies (senior and subordinated debt) with favourable interest rates to companies. These loans can help businesses cover immediate working capital and investment needs.

(iv) Safeguards for banks that channel State aid to the real economy that such aid is considered as direct aid to the banks’ customers, not to the banks themselves, and gives guidance on how to ensure minimal distortion of competition between banks.

(v) Public short-term export credit insurance for all countries, without the need for the Member State in question to demonstrate that the respective country is temporarily “non-marketable”.

(vi) Support for coronavirus related research and development (R&D) to address the current health crisis in the form of direct grants, repayable advances or tax advantages. A bonus may be granted for cross-border cooperation projects between Member States.

(vii) Support for the construction and upscaling of testing facilities to develop and test products (including vaccines, ventilators and protective clothing) useful to tackle the coronavirus outbreak, up to first industrial deployment. This can take the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(viii) Support for the production of products relevant to tackle the coronavirus outbreak in the form of direct grants, tax advantages, repayable advances and no-loss guarantees. Companies may benefit from a bonus when their investment is supported by more than one Member State and when the investment is concluded within two months after the granting of the aid.

(ix) Targeted support in the form of deferral of tax payments and/or suspensions of social security contributions for those sectors, regions or for types of companies that are hit the hardest by the outbreak.

(x) Targeted support in the form of wage subsidies for employees for those companies in sectors or regions that have suffered most from the coronavirus outbreak, and would otherwise have had to lay off personnel.

(xi) Targeted recapitalisation aid to non-financial companies, if no other appropriate solution is available. Safeguards are in place to avoid undue distortions of competition in the Single Market: conditions on the necessity, appropriateness and size of intervention; conditions on the State’s entry in the capital of companies and remuneration; conditions regarding the exit of the State from the capital of the companies concerned; conditions regarding governance including dividend ban and remuneration caps for senior management; prohibition of cross-subsidisation and acquisition ban and additional measures to limit competition distortions; transparency and reporting requirements.

(xii) Support for uncovered fixed costs for companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 in the context of the coronavirus outbreak. The support will contribute to a part of the beneficiaries’ fixed costs that are not covered by their revenues, up to a maximum amount of €10 million per undertaking.

The Commission will also enable Member States to convert until 31 December 2022 repayable instruments (e.g. guarantees, loans, repayable advances) granted under the Temporary Framework into other forms of aid, such as direct grants, provided the conditions of the Temporary Framework are met.

More information on the Temporary Framework and other action the Commission has taken to address the economic impact of the coronavirus pandemic can be found here.

Source: State aid: Commission approves €2 billion French scheme (europa.eu)

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