Context of the measures and scope of application
The approved Umbrella Scheme is part of a broader package of measures taken by France, in order to financially support companies facing a sharp drop in their activities. It was adopted on the basis of Article 107 § 3 b) of the Treaty on the Functioning of the European Union (“TFEU”) and, more particularly, in application of the “Temporary framework for State aid measures to support the economy in the current context of the Covid 19 outbreak” (“the Temporary Framework”) of 19 March, amended by the Commission on 3 April 2020 (see our newsletter of 20 March).
Authorized only three days after its notification, its scope of application is as follows:
- The Umbrella Scheme allows aid to be granted by French authorities at all levels, including central government, local or regional authorities and other competent public bodies.
- It targets all firms – irrespective of their location and size – in all sectors of activity, including firms engaged in the primary production of agricultural products and in the fisheries and aquaculture sector. Only firms in difficulty before 31 December 2019 within the meaning of Commission Regulation (EU) No 651/2014 of 17 June 2014 declaring certain categories of aid compatible with the internal market are excluded.
- The Umbrella Scheme covers all aids for which the decision to grant the aid will have been taken until 31 December 2020.
The authorized aid measures
The authorized Umbrella Scheme allows for the provision of:
1. Limited amounts of aid in the form of direct grants, equity injections, guarantees, repayable advances and subsidized loans.
These aids comply with section 3.1 of the Temporary Framework. Accordingly, their amounts will not exceed EUR 800 000 per company, with the exception of companies in the primary agricultural, aquaculture and fisheries sectors, for which the maximum nominal amount will be lower. Certain aid measures are also explicitly excluded (i.e. export aid, certain aid to companies active in the processing and marketing of agricultural products, etc.).
The French authorities have budgeted EUR 4 billions for this measure, which is the highest item in the overall estimated budget.
2. Aids in the form of public guarantees for individual loans (for an estimated budget of EUR 1 billion).
These specific aid measures fulfil the conditions set out in section 3.2 of the Temporary Framework. As such, the amount of the loan principal will not exceed the double of the beneficiary’s annual wage bill or 25 % of its turnover. In this respect, the Umbrella Scheme adopts the same ceilings as those proposed by the Temporary Framework. In addition, the Umbrella scheme, in accordance with the conditions laid down in the Temporary Framework, provides for minimum guarantee premiums (which may vary according to the company’s size) and provides that the public guarantee will not exceed 90 % of the underlying loan (and 35 % of the underlying loan where the losses are first incurred by the State and then only by the credit institutions).
These guarantees, which cover both investments and working capital requirements, are granted for a maximum period of 6 years.
3. Aids in the form of loans and subsidized loan rates (for an estimated budget of EUR 2 billions)
These specific aid measures meet the conditions laid down in section 3.3 of the Temporary Framework. These loans of a maximum duration of six years will only be granted at reduced interest rates, corresponding at least to the base rate (IBOR or equivalent rate published by the Commission), to which credit risk margins are added.
Similarly to the case of aid in the form of guarantees, the amount of the loan must not exceed the above mentioned ceilings. For these forms of aid, the Temporary Framework provided for the possibility, by exception, of setting a higher amount of the loan principal for loans with a maturity until 31 December 2020. However, the Umbrella Scheme does not provide for such an exception.
Aid in the form of guarantees or loans may be granted either directly or indirectly via credit or financial institutions. The Umbrella Scheme, identifying the risk of possible indirect aid in favor of the credit institutions or other financial institutions, provides for a number of safeguards to ensure that the aid is effectively passed on to the final beneficiary. In this context, it requires financial intermediaries to produce a report listing all transactions with final beneficiaries and the conditions applied to them.Aid granted under sections 3.2 and 3.3 of the Temporary Framework may not be cumulated if the aid is granted for the same underlying loan.
Aid granted under the Umbrella Scheme may be cumulated, at the level of each firm, with aid granted under any notified or exempted scheme in force in France and with aids falling within the scope of the de minimis regulations, provided that the aid ceilings and maximum aid intensities authorized by each of the aid schemes are respected.
We are at your disposal to answer any questions you may have regarding the various measures adopted in France and at the European level, to mitigate the effects of the health crisis on your company. |