Special Information Briefing COVID-19 (No. 17): The recapitalisation of undertakings by Member States in the exceptional circumstances created by the COVID-19 outbreak

On 8 May 2020, the second amendment to the Temporary Framework for State aid measures to support the economy in the context of the current COVID-19 outbreak (the “Temporary Framework”), approved by the European Commission’s Communication of 19 March 2020, was published. This new amendment establishes the criteria of European Union (“EU”) law on State aid, which will allow Member States to provide public support in the form of equity and/or hybrid capital instruments to undertakings facing financial difficulties due to the COVID- 19 outbreak, i.e. to recapitalise companies that are facing difficulties due to COVID-19.

It is worth remembering that the Temporary Framework sets out the conditions of compatibility which the European Commission will, in principle, apply to all aid granted by Member States to support the economy in the context of the current COVID-19 outbreak, on the basis of Article 107(3)(b) of the Treaty on the Functioning of the EU (“TFEU”). Under Article 107(3)(b) of the TFEU, the European Commission may declare aid which is granted by a Member State to remedy a serious disturbance in its economy to be compatible with the internal market.

The main development contained in the second amendment of the Temporary Framework, published on 8 May 2020, is that it establishes the criteria that the European Commission will apply from now on to allow Member States to provide public support in the form of equity and/or hybrid capital instruments to companies facing financial difficulties due to the COVID-19 outbreak. These measures have been called “COVID-19 recapitalisation measures”.

This legal briefing provides a general analysis of this new regulation.

The entire content of the Information Briefing can be found in the PDF.