COVID-19: the European Commission prolongs the Temporary Framework on State Aid until 30 June 2021 and expands its scope

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On 19 March 2020, the Commission adopted a Temporary Framework on State aid measures to support the economy in the current COVID-19 outbreak. The Framework foresees a series of aid measures that can be granted by Member States to support their companies facing financial difficulties as a result of the crisis, subject to prior authorisation by the European Commission. The Temporary Framework has been amended several times to include new categories of aid or to modify their compatibility modalities.

This Framework was initially in force until the end of 2020 but in view of the evolution of the pandemic, the European Commission decided on 13 October 2020 to prolong its application until 30 June 2021. The recapitalisation measures can be implemented until 30 September 2021. The Commission also made changes to the current rules and extended its scope.

Indeed, the Commission introduced a new measure allowing Member States to support companies facing a decline in turnover of at least 30% due to COVID-19 during the eligible period compared to the same period in 2019. It is now possible to contribute to the fixed costs not covered by the beneficiaries' revenue, up to a maximum of EUR 3 million per company. The aim of the measure is to prevent the deterioration of companies’ capital, to maintain their business activity and to help them relaunch their activities.

The Commission also adapted the conditions applicable to recapitalisation measures under the Temporary Framework, in particular for the State's exit from the recapitalisation of enterprises where the State was an existing shareholder prior to the recapitalisation. The State may exit from the equity of such enterprises subject to an independent valuation, while restoring its previous shareholding and maintaining the necessary safeguards to preserve effective competition within the Single Market.

Finally, the Commission has decided to extend until 30 June 2021 the temporary removal of all countries from the list of "marketable risk" countries under Annex 1 of the Communication on short-term export-credit insurance. Please refer to our written news on this subject.

In the coming months, it is not excluded that the Commission will reassess the need to prolong the Temporary Framework again and/or adapt its content to the reality of the health crisis and its impact on the economy.

We refer you to the Guide published by CMS on public support measures put in place in 21 European countries in the context of the COVID-19 crisis.

CMS has the widest coverage and the broadest team of state aid specialists in Europe. Furthermore, we have extensive experience in setting up aid schemes and in public interventions in favour of undertakings in difficulty.

Please refer to our brochure for the CMS contact in your jurisdiction.