On 5 November 2013, the European Commission launched a consultation on proposed guidelines on state aid for rescuing and restructuring firms in difficulty ("the draft R&R guidelines") to replace the current R&R guidelines adopted in 2004.
The draft R&R guidelines only apply to non-financial firms in difficulty, i.e. the real economy. There are separate sector-specific rules for support measures to financial institutions, which were adopted in the context of the financial crisis. However, the Commission has drawn on its experience from the financial crisis in the preparation of the draft R&R guidelines.
By and large, the draft R&R guidelines contain some useful clarifications such as the definition of "undertakings in difficulty". However, in practice, the draft guidelines would appear to make it more difficult, at least for large enterprises, to be eligible for rescuing and restructuring aid, and to comply with the compatibility criteria for approval by the Commission.
The main proposed changes of the draft R&R guidelines are:
A new concept of temporary restructuring support designed specifically for SMEs. This would permit the granting of liquidity assistance, in the form of loans or guarantees. However, such liquidity assistance must be limited in amount and time (i.e. 12 or 18 months depending on the outcome of the consultation);
Additional eligibility criteria around the common interest objective. In order to meet the criteria, the granting of the aid will have to clearly prevent social hardship and market failure. This will have to be evidenced by counterfactual scenarios not involving State aid;
The concept of "burden sharing" (previously referred to as "own contribution") as already applied in the financial crisis regime, under which the Commission will look at which investors are contributing, in addition to the State. This is intended to shift losses onto shareholders as much as possible.
As the Commission's proposals are only in the context of a consultation, the draft guidelines are not yet final. Interested parties wishing to submit their comments may do so until 31 December 2013.
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