New chance policy of the Government – complex support for undertakings
In view of the current economic situation resulting from the COVID-19 pandemic, the need for complex support for undertakings is a fact. The shield package presented by the Government on March 24, 2020 included the draft Act on granting public aid for rescuing or restructuring undertakings, a.k.a. the New Chance Policy. Over 10 years, PLN 1.2 billion in total is to be allocated via this aid scheme from the state budget.
A team of dedicated Kochański & Partners lawyers are constantly monitoring legislative work on the New Chance Policy to ensure immediate support for our clients in public fundraising under the scheme described. Below please find some basic assumptions of the scheme.
The Act sets out the conditions, procedure and forms of granting public aid to undertakings. The aid will be granted under three instruments:
- rescue aid;
- temporary restructuring support;
- restructuring aid.
The aid is addressed to micro, small and medium-sized enterprises, and may be granted if it prevents and leads to reducing social hardship or remedying a market failure, and if the same would not have been achieved or would have been achieved to a lesser extent without such aid.
The aid under the Act in question may also be granted to undertakings belonging to a capital group, but only if their difficult economic situation:
- is internal and does not result from an unjustified distribution of costs within the capital group;
- is too serious to be remedied by an undertaking in difficulty or undertakings belonging to the same capital group.
The aid is granted from the state budget upon written application.
The technical handling of the aid procedure will probably be entrusted to the Industrial Development Agency.
Rescue aid may be granted to an undertaking in difficulty in order to enable its operation for the period necessary to:
1) work out a restructuring plan;
2) wind-up the business
– and to allow time for necessary analysis in this respect.
Rescue aid is granted in the form of a low-interest loan for no longer than 6 months.
The granting of the loan is made conditional, inter alia, upon establishing a collateral for repayment of the amount requested in favour of the Minister competent for the economy, with its amount being dependent on the type, liquidity and financial economic situation of an undertaking in difficulty that offers the collateral, but not lower than 50% of the planned public aid.
The following forms of collateral are particularly accepted:
1) a mortgage;
2) a civil or registered pledge;
3) assignment of receivables;
4) a declaration of submission to enforcement directly under Article 777 § 1 (4)-(6) of the Act of November 17, 1964 – Code of Civil Procedure (Journal of Laws of 2019 item 1460 as amended6));
5) a blank promissory note.
Importantly, rescue aid may not be used to finance expenses related to the acquisition of assets or expenses incurred to expand the scope of economic activity of an undertaking in difficulty, unless such financing is necessary to maintain the operational activity of that undertaking in the period for which the aid is granted.
Applications for rescue aid and attachments thereto should be assessed in terms of their formal aspects and merits no later than within 30 days of being filed (in particularly complex cases, this period may be extended to 45 days).
TEMPORARY RESTRUCTURING SUPPORT
Temporary restructuring support may be granted to:
- a micro, small or medium-sized enterprise in difficulty in order to enable its operation for the time necessary to implement restructuring measures aimed at the enterprise regaining its long-term market competitiveness;
- a micro, small or medium-sized enterprise that is not in difficulty, however, requires immediate financial liquidity assistance due to exceptional and unforeseen circumstances.
Temporary restructuring support is granted in the form of a low-interest loan. Collateral conditions in this respect are the same as for rescue aid.
Importantly, applications for temporary restructuring support must be accompanied by, inter alia, a simplified restructuring plan the implementation of which is a condition for granting the support.
The amount of temporary restructuring support is limited to the amount necessary for further operation of a micro, small or medium-sized enterprise in the period for which the support is granted, but no longer than 18 months.
Temporary restructuring support may not be used to finance expenses related to the acquisition of assets or expenses incurred to expand the scope of economic activity of an undertaking in difficulty, unless such financing is necessary to maintain the operational activity of that undertaking in the period for which the support is granted.
Restructuring aid may be granted to undertakings in economic difficulty to implement a restructuring plan enabling the undertaking to restore its long-term ability to compete in the market.
Restructuring aid may be granted if:
1) it prevents social hardship or leads to remedying a market failure,
2) in the absence of the aid the undertaking in difficulty would have been restructured, sold or wound up in such a way that the objective referred to in point 1 above would have not been achieved, or would have been achieved to a lesser degree;
3) a credible alternative scenario is presented involving actions not constituting restructuring aid and being part of a restructuring plan, which scenario shows that without the aid the objective referred to in point 1 would not have been achieved, or would have been achieved to a lesser degree.
Restructuring aid may only be complementary to the undertaking’s own contribution to the restructuring costs, such contribution including:
1) the undertaking in difficulty’s own resources, except for depreciation and anticipated profits, or
2) funds from shareholders of the undertaking in difficulty or other undertakings from the same group of companies to which the undertaking in question belongs, or
3) funds from the creditors of the undertaking in difficulty, or
4) other funds, raised on market terms.
The own contribution should, as a rule, amount to at least 50% of restructuring costs (under certain conditions this amount may be reduced).
Restructuring aid may be granted in the form of:
2) subscription of shares in an increased share capital or a share in a share capital increase by increasing the nominal value of existing shares;
3) subscription of bonds;
4) changing the dates of loan repayment to the entity granting restructuring aid;
5) conversion of a loan, granted as rescue aid or temporary restructuring support, into shares of the undertaking.
Most importantly, restructuring aid may also be granted in the form of a relief in the execution of an administrative fine through:
1) postponing the execution of the administrative fine or spreading it into instalments,
2) postponing the execution of an overdue administrative fine or spreading it into instalments,
3) cancelling the administrative fine in whole or in part,
4) cancelling default interest in whole or in part
– provided that the equivalent of the aid granted is allocated to the implementation of the restructuring plan.
Restructuring aid may not be used to finance a new investment unless such new investment is necessary to restore the undertaking’s long-term ability to compete in the market.
Importantly, the application for restructuring aid must be accompanied by, i.a., the restructuring plan (in this case not a simplified one) with the implementation of such plan being a condition for the aid to be granted.
Restructuring aid may not be granted if the restructuring measures identified in the restructuring plan:
1) are limited to the restructuring of liabilities;
2) involve new investments, except those necessary to restore the undertaking’s ability to compete in the market in the long term.
In addition to the Commercial Law Practice, you can benefit from legal assistance from our other departments in all areas affected by threat arising from the state of epidemic, in particular labour, restructuring and banking law aspects. We can assist you 24/7.
Advocate, Partner, Head of Commercial Law Practice
M +48 881 048 481
Bar Trainee, Associate, Commercial Law Practice
M +48 883 323 454