State aid available to businesses in Germany during the Coronavirus Crisis

Germany

During the coronavirus crisis, State aid is a way for businesses to obtain liquidity. State aid can be granted by all national public sector bodies, including local authorities. There is no direct aid available from the EU Commission.

Individual grants of State aid and State aid programmes must be notified and approved by the EU Commission as a matter of principle. At the present time, Germany has already applied for and received approval for four programmes . The approvals are based on the Temporary Framework adopted by the EU Commission on 19 March 2020.

This article provides a brief overview of the most important options available. These include newly created programmes as well as existing options for businesses which are experiencing difficulties.

Temporary Framework of the EU Commission

  • Who can receive the aid?

  • Undertakings which are not in difficulties* (not UID) or which only became a UID after 31 December 2019 owing to the coronavirus can apply.

  • What does the aid consist of?

  • The Temporary Framework adopted by the Commission allows the following, among other things:

    • Direct subsidies, tax relief, etc. in the sum of up to EUR 800,000. 

    • Guarantees (max. term of 6 years, max. cover 90% of the loan amount) for bank loans with specific guarantee premiums

    • Low-interest loans (max. term of 6 years) with an interest rate on the basis of 1-year IBOR (as at 1 January 2020) plus specific risk premiums.

  • From whom can companies receive the aid?

  • In general, all public bodies can be providers of State aid based on the Framework.

  • Are notifications to the EU Commission necessary?

  • Germany must notify any State aid it intends to grant on this basis to the Commission. It may not be granted prior to the Commission's approval.

    Germany already notified several State aid programmes to the Commission which were approved within days (see below). To the extent aid is granted based on these approved programmes, no further approval by the EU Commission is necessary

Which programmes already exist in Germany?

Economic stabilisation fund (ESF) for Germany

  • Who can receive the aid?

  • Undertakings which

    • were not undertakings in difficulty* (not UID) on 31 December 2019 and

    • which have at least two of the three following characteristics:a balance sheet total of EUR 43 million, turnover of EUR 50 million and more than 249 employees on average over the course of the year.

    Whether or not the aid is granted depends, among other things, on the significance of the undertaking concerned for Germany's economy.

  • What does the aid consist of?

  • The fund serves to support the real economy and offers two instruments:

    • The assumption of guarantees for debt instruments and trade payables of undertakings.

    • The possibility of participating in the recapitalisation of undertakings by, among other things, acquiring shares (see the investment of the federal government in Commerzbank during the financial crisis).

    Further requirements and conditions will be attached to the payments. Details of the programme need to be regulated by a specific government regulation.

  • From whom can companies receive the aid?

  • Applications must be made to the Federal Ministry for Economic Affairs and Energy. A decision on the application will be made jointly by the Federal Ministry of Finance and the Federal Ministry for Economic Affairs and Energy. The decision can be assigned to the German Development Bank (Kreditanstalt für Wiederaufbau – KfW).

  • Are notifications to the EU Commission necessary?

    The establishment of the fund has not yet been qualified as an aid scheme. The government may introduce programmes (or framework regulations) which will set out the requirements of support provided under the fund and/or grant aid in individual cases. Both programmes/framework regulations and individual aid require approval by the EU Commission. No State aid may be granted prior to the Commission's approval. It is to be expected that e.g. any takeover of equity will require an individual approval by the Commission

Special programmes by the German Development Bank (KfW)

  • Who can receive the aid? 

  • Undertakings which are not in difficulties* (not UID) or which only got into difficulties after 31 December 2019 owing to the coronavirus crisis can apply.

  • What does the aid consist of?

    • New loan programme with a low interest rate. KfW will take over up to 90% of a loan provided by a bank to a beneficiary, provided that:

    • The loan amount is less than EUR 1 billion per beneficiary and limited to one of the following: twice the annual wage bill for 2019, 25% of the annual turnover 2019, or the specific liquidity needs of a beneficiary for the next 12 months (18 months for SMEs). In addition, for loans above EUR 25 million, the loan amount may not exceed 50% of the total debt volume on the beneficiary’s balance sheet;

      The duration of the loan is limited to a maximum of 5 years.

    • New loan programme with low interest whereby the KfW provides loans in conjunction with other banks, provided that:

    • KfW does not assume more than 80% of the risk of any given loan and not more than 50% of the total debt volume on the beneficiary’s balance sheet;

      The loan amount is less than twice the annual wage bill for 2019, 25% of the annual turnover 2019, or the specific liquidity needs of a beneficiary for the next 12 months (18 months for SMEs) based on appropriate justification and self-certification of the beneficiary;

      The duration of the loan is limited to a maximum of 6 years.

    • Additionally, the KfW Loan for Growth was expanded and made more flexible. The share of risk taken by the KfW amounts to at least EUR 25 million.

    • Further information is available here.

  • From whom can companies receive the aid?

  • The KfW loans must be applied for through the main bank.

  • Are notifications to the EU Commission necessary?

  • No.

Federal scheme State Guarantees 2020

  • Who can receive the aid?

    Undertakings which are not in difficulties* (not UID) or which only got into difficulties after 31 December 2019 owing to the coronavirus crisis can apply.

  • What does the aid consist of?

  • New (extended) loan guarantee scheme:

    • The annual guarantee premiums are set at 25 basis points ("bps") for SMEs and 50 bps for large undertakings for the first year. For the years two and three, they are set at 50 bps for SMEs and 100 bps for large undertakings. For the years four to six, they are set at 100 bps for SMEs and 200 bps for larger undertakings.

    • The maximum duration of the guarantees is 6 years.

    • For guaranteed loans with a maturity beyond 31 December 2020 the loan amount is limited to either twice the annual wage bill for 2019, 25% of the annual turnover 2019 or the specific liquidity needs of the beneficiary for the next 12 months (18 months for SMEs) based on appropriate justification and self-certification by the beneficiary of its liquidity needs.

    • For guaranteed loans with a maturity until 31 December 2020, the amount of the loan principal may be higher with appropriate justification and proportionality of the aid.

    • The public guarantee may not exceed: (i) 90% of the loan principal where losses are sustained proportionally by the credit institutions and the State or (ii) 35% of the loan principle where losses are first attributed to the State and only then to credit institutions and (iii) for both cases where the loan decreases over time, the guaranteed amount has to decrease proportionally

  • From whom can companies receive the aid?

  • This programme has already been approved by the Commission. The aid may be granted by public bodies, such as federal authorities and regional authorities or the guarantee banks.

  • Are notifications to the EU Commission necessary?

  • No.

Further programmes

  • Who can receive the aid

  • The federal government and many federal states (Länder) have introduced further subsidy programmes which are mostly aimed at solopreneurs and small businesses.

  • What does the aid consist of?

  • Usually these programmes offer subsidies between EUR 15,000 and EUR 50,000 per undertaking.

  • From whom can companies receive the aid?

  • An overview of the subsidisation programmes of the federal government, the federal states and the European Union can be found at www.foerderdatenbank.de.

Which further State aid options are possible beyond the existing subsidy programmes?

Rescue and restructuring aid

  • Who can receive the aid?

  • Undertakings in difficulty* (UID) or (to a limited extent) undertakings with an acute liquidity need on grounds of exceptional circumstances (e.g. as a result of the coronavirus crisis) are eligible.

    NOTE: This would be interesting e.g. for all undertakings were already in difficulty before 31 December 2019 (and hence are not eligible for the other programmes)

  • What does the aid consist of?

  • Short-term rescue aid in the form of a loan or a loan guarantee plus long-term restructuring aid (the form of which is free as a matter of principle) is possible.

    In the case of undertakings in difficulty, a restructuring plan must be submitted within 6 months which also provides for a reduction of certain business activities. This does not apply if the loan has been paid back by this time or the guarantee has expired.

  • From whom can companies receive the aid?

  • All public bodies can be providers of state aid.

  • Are notifications to the EU Commission necessary?

  • Germany must notify State aid on this basis to the EU Commission.

State aid to rectify damage caused by exceptional occurrences

  • Who can receive the aid?

  • All undertakings meeting the necessary criteria.

  • What does the aid consist of?

  • State aid to compensate for damage caused by the coronavirus can be granted. In the view of the Commission, the transport, tourism, hospitality industry and retail sectors would be suitable in particular.

  • From whom can companies receive the aid?

  • All public bodies can be providers of such State aid.

  • Are notifications to the EU Commission necessary?

  • Germany must notify State aid on this basis to the Commission. While other countries have already introduced State aid schemes on this basis, the federal government is not planning to provide this type of State aid at the moment.

    The EU Commission already announced that as far as the transport sector is concerned, they intend to perform a more in-depth review (e.g. turnover reduction, cost savings, comparison with reference period).

Measures which do not constitute State aid in the sense of EU law. 

  • Measures by state shareholders

  • Measures by state shareholders are not State aid in the sense of EU law if a private investor would also act in that way (referred to as the "Private Investor Test", e.g. recently the measure concerning the German public bank Nord/LB by the Federal State of Lower Saxony and others).

    This is also possible if the beneficiary is an undertaking in difficulty*. However, in this case it will likely be necessary to also test the measure against a scenario whereby the undertaking would be wound up.

  • Purely local matters

  • Measures of all public bodies which concern purely local matters do not constitute State aid in the sense of EU law either. For this the support must relate to an economic activity which is aimed at a purely regional customer structure, i.e. not also at customers from other Members States. This can, for example, be the case where a local authority grants a relatively small local hotel a subsidy.

  • Other measures which do not need to be notified

  • State aid from all public bodies which do not exceed certain thresholds within three calendar years and meet further criteria (referred to as "de-minimis aid") are not subject to a duty of notification. Several grants of aid must be added together. The following values apply, among others, to cash contributions:

    • In general EUR 200,000

    • For undertakings in the commercial goods transport sector EUR 100,000.

    • For undertakings which provide services of general economic interest (SGEI) EUR 500,000.

Please feel free to contact one of our experts if you are interested or have any questions: Dr Michael Bauer, Helmer Krane LL.B., Daphne Brunkhorst, LL.B., Dr Hermann Müller, Florian Kuhlmann.