{"id":12344,"date":"2022-07-24T23:00:06","date_gmt":"2022-07-24T23:00:06","guid":{"rendered":"http:\/\/legalblog.ie\/?p=12344"},"modified":"2022-09-25T15:31:36","modified_gmt":"2022-09-25T15:31:36","slug":"business-in-difficulty","status":"publish","type":"post","link":"https:\/\/legalblog.ie\/business-in-difficulty\/","title":{"rendered":"Business in Difficulty [EU]"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_63 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/legalblog.ie\/business-in-difficulty\/#State_aid_for_businesses_in_difficulty\" title=\"State aid for businesses in difficulty\">State aid for businesses in difficulty<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/legalblog.ie\/business-in-difficulty\/#State_aid_European_Union_financial_crisis_rules_for_banks\" title=\"State aid: European Union financial crisis rules for banks\">State aid: European Union financial crisis rules for banks<\/a><\/li><\/ul><\/nav><\/div>\n<h3><span class=\"ez-toc-section\" id=\"State_aid_for_businesses_in_difficulty\"><\/span>State aid for businesses in difficulty<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The European Commission has revised its rules as to how it assesses European Union (EU) countries\u2019 State aid (public subsidies) to support firms in difficulty. This is to ensure that public money is targeted where it is most needed and that company owners pay their fair share of restructuring costs.<\/p>\n<p>State aid to firms in difficulty gives them an advantage over healthier, more efficient competitors not receiving aid (i.e. it can distort competition). It can also serve as a brake on economic growth by diverting taxpayers\u2019 money away from alternative, potentially more productive uses. The guidelines lay down the rules governing the granting of State aid to businesses in difficulty requiring them to meet strict conditions.<\/p>\n<p>The aim of the guidelines is to ensure that State aid granted by EU countries is genuinely in the public interest. An example of this could be the saving of a business which would prevent the social hardship arising from a closure in an area that already has a high unemployment rate. The guidelines contain examples of situations illustrating where aid can be justified.<\/p>\n<p>In addition, those granting aids must demonstrate that the aid will make a difference. To do so, they have to present a comparison with a credible alternative scenario in which there is no aid.<\/p>\n<p>Rescue aid allows firms facing imminent collapse to stay in business enough time to prepare a restructuring plan. This plan must be in the form of liquidity support (loans or guarantees) and last no longer than 6 months.<\/p>\n<p>After this 6-month period, the aid has either to be reimbursed or a restructuring plan has to be notified to the Commission for the aid to be approved as \u2018restructuring aid\u2019.<\/p>\n<p>Restructuring aid may be granted only once over a period of 10 years (the \u2018one time, last time\u2019 principle*). The restructuring plan has to show how the firm\u2019s long-term viability will be restored without further state support.<\/p>\n<p>As a precondition for granting restructuring aid and to reduce the share of taxpayers\u2019 money involved, the guidelines require the firm\u2019s losses to be fully allocated to existing shareholders and subordinated creditors.<\/p>\n<p>The firm must also agree how it can limit the distortions of competition arising from the aid (for example, this might mean selling off profitable parts of its business).<\/p>\n<p>Once it returns to profitability, a firm that received aid must agree to return a share of the profits to the state.<\/p>\n<p>The guidelines apply from 1 August 2014 until 31 December 2020. They replace similar guidelines adopted in 2004.<\/p>\n<p>BACKGROUND<\/p>\n<p>Communication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak<\/p>\n<h3><span class=\"ez-toc-section\" id=\"State_aid_European_Union_financial_crisis_rules_for_banks\"><\/span>State aid: European Union financial crisis rules for banks<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The European Commission has produced a new set of temporary state aid rules to assess public support to financial institutions during the financial crisis.<\/p>\n<p>Communication from the Commission on the application, from 1 August 2013, of State aid rules to support measures in favour of banks in the context of the financial crisis (\u2018Banking Communication\u2019) (OJ C 216 of 30.7.2013).<\/p>\n<p>New European Union crisis rules for state aid to banks during the crisis have been in force since August 2013. The new rules set out common EU conditions under which EU Member States can support banks with funding guarantees, recapitalisations or asset relief measures.<\/p>\n<p>In the period that followed the collapse of Lehman Brothers, the European Commission adopted a comprehensive framework via the Banking Communication, the Recapitalisation Communication, the Impaired Assets Communication and the Restructuring Communication. The main idea was to establish the rules that allowed for the support of the financial sector during the crisis so as to ensure financial stability while minimising distortions of competition between banks in the European Union.<\/p>\n<p>This framework of rules sets out common conditions at EU level for access to public support and the requirements for such aid to be compatible with the EU\u2019s internal market in the light of state aid principles. The framework allows the European Commission to approve state support to remedy a serious disturbance in the economy of an EU Member State.<\/p>\n<p>The main changes set out in the Commission\u2019s Banking Communication of July 2013 are aimed at improving the restructuring process and ensuring a level playing field between banks.<\/p>\n<p>Changes include:<\/p>\n<p>banks will not be able to receive recapitalisations or asset protection measures before their restructuring plan is approved by the European Commission<br \/>\nin case of capital shortfalls, bank owners and junior creditors will be required to fully contribute as a first resort, before any injection of public money<br \/>\nfailed banks should apply strict executive remuneration policies. The new Banking Communication sets out a cap on total remuneration as long as the entity is under restructuring or relying on state support. This will give management the proper incentives to implement the restructuring plan and repay the aid.<\/p>\n<p>Communication from the Commission Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak<\/p>\n<!--themify_builder_content-->\n<div id=\"themify_builder_content-12344\" data-postid=\"12344\" class=\"themify_builder_content themify_builder_content-12344 themify_builder tf_clear\">\n    <\/div>\n<!--\/themify_builder_content-->\n","protected":false},"excerpt":{"rendered":"<p>State aid for businesses in difficulty The European Commission has revised its rules as to how it assesses European Union (EU) countries\u2019 State aid (public subsidies) to support firms in difficulty. This is to ensure that public money is targeted where it is most needed and that company owners pay their fair share of restructuring [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[125,160],"tags":[],"_links":{"self":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12344"}],"collection":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/comments?post=12344"}],"version-history":[{"count":2,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12344\/revisions"}],"predecessor-version":[{"id":18656,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/posts\/12344\/revisions\/18656"}],"wp:attachment":[{"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/media?parent=12344"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/categories?post=12344"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/legalblog.ie\/wp-json\/wp\/v2\/tags?post=12344"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}