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23 March 2020

Romania: State aid available to Romanian companies in the COVID-19 pandemic

Both the European Commission ("EC") and the Romanian Government make available public support for national companies that may face liquidity issues, suffer direct damages as a result of state measures aimed at slowing down the spread of the COVID-19 or simply struggle with economic difficulties during and after the pandemic.

Any support granted to companies during these times must be in line with the EU state aid rules. Companies should therefore carefully assess the aid they may receive during these challenging times, as this might ultimately be reimbursed with interest (in case it proves to be unlawful aid not in line with existing rules). As a rule of thumb, companies should simply confirm that the support measure has been either approved or is exempted from notification to the EC.

The EC proved that it can react extremely fast in this context, by approving a COVID-19 support measure required by a Member State in 24 hours (similar to the fast-track pace during the 2008 crisis).

Basically, the following public support measures may be accessed:

Aid currently available for SMEs

The Romanian Government approved certain support measures for SMEs on 21 March 2020 via an amendment to the Programme for Supporting Small and Medium-sized Enterprises (IMM Invest Romania). These measures have been adopted through Government Emergency Ordinance No. 29/2020 ("GEO 29/2020"):

The Ministry of Finance will manage the process. We anticipate that it will need to provide additional information on the operational implementation of these measures.

Below we summarise who can benefit and what type of measures are currently available:

Only SMEs can benefit. Companies that have (a) less than 250 employees and (b) net annual turnover of up to EUR 50m or total assets (i.e. fixed assets + current assets + upfront expenses) not exceeding EUR 43m according to the latest approved financial statements can apply and benefit from these support measures.

Additional requirement for eligibility. To the extent the SME (as potential beneficiary) has outstanding tax obligations or debts towards the state, it must commit to pay these obligations from the loan or credit line granted by the Romanian State for working capital (there is no information, however, if such a commitment would be applicable for investment loans as well).

Public support measures available. The following measures are currently available, based on GEO 29/2020:

  • Secured loans for investments and/or working capital

The State will guarantee up to 80 % of the financed value (less interest, commissions and bank charges) for investment and/or working capital loans and up to RON 10m per beneficiary.

The maximum value for working capital loans will be calculated by reference to the average working capital expenses incurred during the last two financial years and capped at RON 5m. For investment loans, this value will be capped at RON 10m.

  • Loan guarantees for working capital financing of micro and small enterprises

These guarantees are attached to state-secured loans for financing working capital needs and aim to secure up to 90 % of the loans granted to micro enterprises (up to RON 500,000) or a small enterprise (up to RON 1m). The maximum value of each loan granted to a beneficiary may not exceed the average working capital expenses incurred during the last two financial years.

  • Subsidies and administrative fees

Interest on these two types of loans will be fully subsidised by the Romanian State until 31 March 2021, based on a dedicated de minimis state aid scheme. This subsidy will be reassessed and, to the extent the economic growth forecast is below the one estimated for 2020, will be extended for another year. In any case, the subsidy will continue to be applied in line with state aid legislation.

The Romanian State will also fully subsidise the administrative fee according to the same terms as the subsidy of the interest. After the grace period set out in the dedicated de minimis scheme lapses, loans will bear interest and administrative fees.

Beneficiaries will not owe and pay any guarantee premium (risk commission + administrative fee).

  • Maximum duration of financing

The maximum duration of the financing available according to the above is (i) 120 months for investment loans, and (ii) 36 months (with a potential extension for up to 36 months) for working capital loans.

Potential aid that may become available

EU state aid legislation allows Member States to grant aid under specific conditions, which we have summarised below:

  • Immediate aid

Certain support measures could be granted immediately, such as: (i) generally available aid (available to all companies without discrimination/selectivity, such as tax relief or salary subsidies); (ii) aid aimed at supporting/reimbursing consumers or aid for the healthcare system (hospitals, clinics that need medical equipment or supplies); (iii) other loans or guarantees, but at market rates (based on the market investor principle); and (iv) de minimis aid (not to exceed EUR 200,000 for three years in most sectors).

  • Support for companies in distress (rescue and restructuring aid)

SMEs can benefit from loans and guarantees covering cash-flow shortfalls for up to 18 months, with no need to notify the EC in advance.

Large companies could also benefit from this type of aid, but the EC would need to be notified by the State in advance.

There is also another requirement that companies must meet: not to have received rescue and restructuring aid during the previous 10-year period (the EC can waive this, however, based on a case-by-case assessment).

  • Compensations directly linked to COVID-19 damages

Companies proving a direct causal link between the COVID-19 outbreak and related damage, not covered by insurance or recoverable via litigation or commercial negotiations (i.e. losses in income or operating losses) could benefit from compensatory aid. The EC would need to be notified in advance.

Sectors that could see this type of aid during the outbreak may include: tourism, HoReCa, transport, entertainment (particularly event organisers), banks, etc.

Denmark was the first country to request aid for event organisers that have faced damages due to mass cancellation of events. The EC approved the aid within 24 hours.

  • Temporary measures to remedy the serious disruption of the national economy

A set of temporary measures have been recently approved by the EC and are addressing viable companies. In other words, companies facing financial distress before 2020 are not eligible.

These measures may include: (i) liquidity schemes up to EUR 800,000 per company; (ii) subsidised guarantees on bank loans; (iii) subsidised public loans; and (iv) safeguards for aid channelled through banks. The EC needs to be notified in advance.

authors: Georgiana Bădescu, Mona Banu