Act on public aid for rescuing or restructuring enterprises comes into effect on 11 August 2020.
The Act of 16 July 2020 on public aid for rescuing or restructuring enterprises was published (Journal of Laws, item 1298, of 27 July 2020) (hereinafter: “the Act”). The Act sets forth the conditions, procedures and forms of public aid granted to entrepreneurs with the aim of rescuing them, providing them with temporary restructuring support, and restructuring. Aid will be provided by the minister of economy from the national budget; this task is to be entrusted to Industrial Development Agency JSC [Agencja Rozwoju Przemysłu SA]. Upon implementation of the Act, Article 139a of the Act of 15 May 2015 – Restructuring Law will be repealed. The Act will come into force 14 days of the date of its publication.
The purpose of the Act is to facilitate public funding support for restructuring processes at enterprises taking remedial actions in connection with the existing crisis, depending on the scale of the issue and the stage of such remedial actions. For micro, small and medium-sized enterprises, the entry into force of the Act constitutes implementation of the aid scheme approved by the European Commission pursuant to decision of 29 August 2016 (OJ C 369 of 07.10.16, p. 1, pp. 6-7), provided for as one of the instruments under the “New Chance Policy.” The solutions adopted under the Act are to complement the so-called “Anti-Crisis Shield” which (as aid programmes notified separately in connection with COVID-19) does not apply to enterprises for which a restructuring application or a bankruptcy application has been submitted. Under the Act, the amount of PLN 120 million per year, for the total period of 10 years, is earmarked for the support of entrepreneurs. Although the Act concerns various reasons for difficult circumstances of entrepreneurs, which justify the request for the support, until the end of 2021 it may apply to entrepreneurs experiencing difficulties as a result of the COVID-19 pandemic (and in this period, the implementation of tasks related to public aid can be subsidised from the COVID-19 Response Fund).
Below, we present the most important information on three aid instruments provided for in the Act.
Aid for rescuing
The first form of aid provided for in the Act is the so-called “Aid for rescuing” which, in principle, may be granted to entrepreneurs experiencing financial difficulties, in order to allow them to conduct their business activity for a period necessary to develop a plan to restructure or liquidate the business and to conduct any relevant analyses required in this scope. The aid for rescuing will be granted in the form of a loan not exceeding the amount required by the entrepreneur to continue their business operations over the period of application. The entrepreneur requesting aid for rescuing is obliged to establish a security for the loan, e.g. in the form of mortgage, a civil pledge or a registered pledge, or a blank promissory note. Aid for rescuing will be granted for up to 6 months and can be extended, if the entrepreneur applies for temporary restructuring support or aid for restructuring.
Temporary restructuring support
Aid is also provided in the form of “Temporary restructuring support” which may be provided to micro, small and medium-sized entrepreneurs experiencing financial difficulties, in order to enable them to conduct their business activity for a period necessary for the implementation of restructuring activities aimed at restoring their long-term capacity to compete on the market. Importantly, temporary restructuring support can be provided, if it prevents social hardship or leads to overcoming market failures. In order to receive temporary restructuring support, the entrepreneur must implement a simplified restructuring plan, and subsequently, the fundamental restructuring plan, both of which must be accepted by the minister of economy or the Industrial Development Agency. Like in the case of aid for rescuing, temporary restructuring support will be provided in the form of a loan in an amount necessary to allow business to be continued in the period for which the support is provided, and the entrepreneurs who apply for such temporary restructuring support are obliged to establish a security for repayment of the loan. Temporary restructuring support will be provided for no longer than 18 months and may be extended if the entrepreneur applies for aid for restructuring.
Aid for restructuring
The last instrument provided for in the Act is the so-called “Aid for restructuring;” it may be granted to entrepreneurs experiencing financial difficulties in order to implement a restructuring plan to restore their long-term capacity to compete on the market. Aid for restructuring is the most far-reaching instrument aimed at supporting the entrepreneurs, designed not only to help the entrepreneurs make up for their losses, but, above all, eliminate the causes of such losses. For this reason, in order for aid for restructuring to be provided, the entrepreneur must submit to the entity granting such aid a feasible, consistent and far-reaching restructuring plan aimed at restoring the long-term profitability of the entrepreneur. What is more, the entrepreneurs requesting aid for restructuring will be obliged to include a “plausible alternative scenario” in their application, including activities other than aid for restructuring, whose implementation would not allow for the achievement of the goal of the Act, or the goal would be achieved to a lesser extent. For example, a plausible alternative scenario could be the sale of an undertaking, an organised part of an undertaking or assets, in connection with liquidation proceedings.
It should be stressed that aid for restructuring is only intended to supplement own contribution of the entrepreneur experiencing financial difficulties, i.e. a contribution to finance the costs of restructuring which can include own funds of the entrepreneur, funds from the entrepreneur’s shareholders, funds from the entrepreneur’s creditors, or other funds obtained on market terms.
Aid for restructuring can be provided in the form of:
- acquisition of shares in increased share capital, or a share in the increase in the share capital by way of increasing the nominal value of the existing shares,
- acquisition of bonds, change of the dates of repayment of loans to the entity granting aid for restructuring,
- conversion of a loan provided as aid for rescuing or as temporary restructuring support to shares of the entrepreneur,
- relief from an administrative financial penalty (in this case, the decision on the provision of public aid is made by the authority that imposed the penalty).
All of these forms of aid may be granted to entrepreneurs once in 10 years and, if they concern micro, small or medium-sized entrepreneurs, and the total value of aid does not exceed EUR 10 million, no individual notification to the European Commission is required. In the course of parliamentary work, article 10 was added to the Act, which limits the amount of salary of the entrepreneur’s executives (from members of the management and the supervisory bodies, through directors, managers – including those playing managerial roles under civil law contracts – and their deputies, to chief accountants) – for a period starting the moment aid is granted to the end of the year in which the aid period finishes – up to 400% of the average salary published by the President of the Central Statistical Office in the preceding quarter, and excluding the grant of profit commission to such individuals, as well as any awards from the company award fund, and a claim for share in the profit or any balance surplus.
Above, we have presented the key aspects of the aid instruments dedicated to entrepreneurs, provided for in the Act. Should you have any questions or concerns, do not hesitate to contact us.