Relaxation of State aid rules in France: how to take advantage of the new scheme

Written on 6 Apr 2020

Facing the spread of Covid 19 and to alleviate its serious economic repercussions, the European Union announced a relaxation of state aid rules for business affected by this crisis.

On the basis of principles developed in the context of the financial and banking crisis in 2008, the European Commission adopted, on 19 March 2020 a Communication, based on Article 107(3)(b) TFEU, establishing a Temporary Framework to approve, in a very short delay, coronavirus-related State aid schemes set up by Member States in support of national economies.

Implementation in France

Pursuant to the temporary framework described above, France has already received the green light from the European Commission to set up the following schemes:

Bpifrance State guarantees

Two schemes enabling the French public investment bank Bpifrance to provide State guarantees on commercial loans and credit lines.

Beneficiaries: Small and Medium-sized Enterprises and mid-caps Enterprises , with up to 5 000 employees and an annual turnover less than 1,5 billion €, whatever their sectors of activity. Exclusion of measures for undertaking who were not in difficulty on 31 December 2019, unless they became so due to the COVID-19 pandemic occurrence.

Budget : €700 million.

Duration of the measures: Until 31 December 2020.

General State guarantees

A scheme to provide State guarantees to banks on portfolios of new loans for all types of companies. This is direct aid to the companies that will enable banks to quickly provide liquidity to any company that needs it.

Beneficiaries: Any company registered in France, whatever their size or sector of activity, subject to certain exceptions. Those exceptions are: (i) undertakings were not in difficulty (bankruptcy proceedings or equivalent) on 31 December 2019, unless they became so due to the COVID-19 pandemic occurrence, (ii) property investment companies (“Société Civile Immobilière”), or (iii) credit or financial institutions.

Budget : €300 billion.

Duration of the measure: Until 31 December 2020.

“Fonds de solidarité” (solidarity fund) scheme for small enterprises

This scheme takes the form of direct grants to allow beneficiaries to face their operating costs in the difficult situation caused by the coronavirus pandemic.

Beneficiaries: small and micro-enterprises, as well as self-employed people affected by the coronavirus outbreak, with a maximum of 10 employees and an annual turnover not exceeding 1 million € (or annual taxable profit of less than 60 000 €). Companies are eligible when their business was closed by administrative decision as a result of the coronavirus outbreak, or when their monthly turnover in March 2020 dropped by 50% (initially 70%) compared to their turnover in the same period last year.

Budget : €1.2 billion.

Duration of the measure: Until 31 December 2020.

Deferring tax payments by airlines

The government has set up a deferral payment scheme of certain aeronautical taxes to compensate damages suffered by airlines due to the coronavirus outbreak. The scheme will offer the possibility to defer the payment of certain taxes that would in principle be due between March and December 2020. The payments are deferred until after 1 January 2021 and can be paid over a period of up to 24 months. The aim of the scheme is to reduce the pressure on airlines’ cashflows.

Beneficiaries: Airlines with an operating licence in France.

Budget : Not estimated.

Duration of the measure: Until 31 December 2020.

What’s next?

The new legal framework on State aid in France is an opportunity for French businesses to benefit from the State cash that should allow them to continue their activities despite the huge economic impact of the coronavirus outbreak.

Each scheme being subject to strict conditions and amendments over time, companies should constantly make sure they meet all the conditions to benefit from the aid and avoid any risk of restitution.

Our team is following these developments. Please get in touch with one of our specialist lawyers to assist you in the implementation of such aid.