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New Temporary Framework for State aid - COVID-19

Communication from the Commission

The European  Communication has issued a new Temporary Framework for additional State aid measures to support the economy in the current COVID-19 outbreak.

The  Temporary Framework provides for five types of additional lawful State aid:

  1. Direct grants, selective tax advantages and advance payments: Member States will be able to set up schemes to grant up to €800,000 aid  to an undertaking  to address its urgent liquidity needs. Restrictions apply in relation to undertakings in the agriculture, fishery and aquaculture sectors whether primary producers or processing or marketing of such goods.

  2. State guarantees for loans taken by undertakings  from banks: Member States will be able to provide State guarantees to ensure banks keep providing loans to the customers who need them.

  3. Subsidised public loans to undertakings : Member States will be able to grant loans with favourable interest rates to undertakings. These loans can help businesses cover immediate working capital and investment needs. This is separate from any subsidised  loans granted pursuant to the State aid de minimis  regime or loans made outside the State aid regime under the market economy investor principle. The loans have a minimum interest rate by reference to 1 year IBOR plus a risk  margin which varies depending on the term of the loan and whether the borrower is an SME or a Large Enterprise. The loans are for a maximum term of 6 years. If the maturity date is beyond 31 December 2020 then the loan must not exceed twice the undertaking’s annual wage bill or 25% of annual turnover. The borrower must not have been an undertaking in difficulty as at 31 December 2020 i.e. before the COVID-19 outbreak.

  4. Safeguards for banks that channel State aid to the real economy: The Framework makes clear 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.

  5. Short-term export credit insurance: The Framework introduces a mechanism to demonstrate that certain countries are not-marketable risks, thereby enabling short-term export credit insurance to be provided by the  Member State where needed.

We await further announcements from British Business Bank as to the implementation of the CBILS (Coronavirus Business Interruption Loan Scheme) and a further announcement (hopefully imminently) to deal with business with greater than £45 million turnover but not eligible for the Covid-19 Corporate Financing Facility.

For further information please contact Gary Jones at gary.jones@weightmans.com or by telephone on +44 (0)7813 568209.  

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