EU Commission paves the way for COVID-19 recapitalisation measures

15 May 2020

The European Commission now also allows Member States to provide support to companies in need of capital as a result of the COVID-19 outbreak.

On 8 May 2020, the European Commission confirmed that Member States can now also provide State aid to restore a company's capital structure to the level of 31 December 2019. Such aid may only be granted on condition that the company concerned was not yet "in difficulty" on that date. Public authorities may grant recapitalisation aid by subscribing to newly issued shares and/or hybrid instruments such as profit participation rights or convertible bonds. Recapitalisation aid may be granted until 30 June 2021 at the latest. It must be repaid by the company within a period of four years. Where appropriate, repayment may take place through the sale of the State's participation on the market. Until repayment has taken place, aid recipients may not make payments to shareholders and must freeze management remuneration at the 2019 level.