EC Temporary Framework to support micro and small enterprises

12 June 2020, the European Commission proposed to further extend the scope of the Temporary Framework by enabling Member States (i) to support certain micro and small enterprises, including start-ups that were already in difficulty before 31 December 2019, and (ii) to provide incentives for private investors to participate in coronavirus-related recapitalisation measures. Member States now have the possibility to comment on the Commission’s draft proposal. The State aid Temporary Framework was adopted on 19 March 2020 to support the economy in the context of the coronavirus outbreak.

Micro and small companies have been particularly affected by the liquidity shortage caused by the economic impact of the current coronavirus outbreak, exacerbating their existing difficulties to access financing compared to medium-sized and large enterprises. If left unaddressed, these difficulties could lead to a large number of bankruptcies of micro and small companies, causing serious disturbances for the entire EU economy.

The Commission is therefore consulting Member States on the possibility of providing public support under the Temporary Framework to all micro and small companies, even if they qualify as being in financial difficulty on 31 December 2019. Given their limited size and involvement in cross-border transactions, temporary State aid to micro and small companies is less likely to distort competition in the Internal Market than State aid to larger companies.

This amendment will effectively increase the possibilities to support start-up companies, especially innovative ones which may be loss-making in their high-growth phase, which are crucial for the economic recovery of the Union. The Commission recalls further that all small and medium-sized enterprises that were in existence for less than three years on 31 December 2Next steps: the EU Member States will comment on the European Commission’s draft proposal.

For more information, please see here.