Ailing companies receiving state aid will be allowed to do so for a longer period of time on the basis of a simplified restructuring plan, revised rules, announced by the European Commission on Wednesday, stipulate.
The rules adopted apply only to non-financial firms in difficulty as other rules are in place for financial institutions.
Some of the key principles remain unchanged, such as the fact that aid to companies undergoing financial difficulties may be granted temporarily for a period of 6 months.
Then the capital received must either be reimbursed or a restructuring plan must be notified to the Commission for the aid to be approved as “restructuring aid”.
The plan must ensure that the long-term viability of a company is restored without further state support, that the distortions of competition induced by the state support are addressed by specific measures and that the company contributes to the costs of restructuring.
Restructuring aid may be granted only once over a period of ten years (`one time, last time` principle), to prevent companies that are not viable being kept artificially alive through public support.
However, the new rules provide that such support can now be granted for at most 18 months – i.e. three times as long as the period for receiving rescue aid – on the basis of a simplified restructuring plan.
This, according to the Commission, will allow Member States to better help SMEs address liquidity problems.
At the same time better filters to ensure that state aid is used where it is really needed and to avoid waste of taxpayers` money are put in place.
The new rules also provide that investors should pay a fair share of the costs of the firm`s restructuring (“burden sharing”).
In statements, European Commission Vice President responsible for competition policy Joaquín Almunia points out that “the new rules on aid for firms in difficulty ensure that public funding is granted only where it genuinely saves jobs and know-how on a lasting basis, and after the company owners have contributed their fair share of the costs”.
