16 March 2020
The Corona Crisis poses existential challenges for many companies. Customers stay away, orders are cancelled. At the same time, the demand from abroad declines and international supply chains are in-terrupted. Meanwhile the costs continue. Wages for employees, rents and loans etc. must continue to be paid. The consequences are liquidity shortages and even insolvency. The German Federal Gov-ernment has reacted to this situation with a "protective shield for employees and companies". The aim is to provide companies and businesses with sufficient liquidity to enable them to get unscathed through the crisis. The European Commission has announced a "Corona Response Initiative" with a volume of EUR 37 billion. Almost all measures are subject to EU State aid rules and national subsidy regulations. These must be followed even in times of crises. Failure to do so could have serious con-sequences, including criminal prosecution. Below you will find the most important information at a glance.
In addition to tax relief and the flexibilization of short-time work compensation, the German Govern-ment has initially adopted the following measures:
At KfW and the guarantee banks of the federal states, if necessary directly at the federal government (large enterprises). The BMWi has set up a corona promotion hotline: 0301 8615 8000 (Monday to Thursdays 9:00 am until 04:00 pm).
In principle, all State aid to companies is subject to the rules of EU State aid Law (Article 107 of the Treaty on the Functioning of the European Union - TFEU). State aid is generally prohibited and may only be approved if there is an appropriate legal basis. Aid must be notified to the Commission and may only be granted after it has been approved. However, State aid law contains a provision by means of which the European Union can give the Member States leeway to support companies that have run into economic problems as a result of the Corona crisis. Under Article 107(2)(b) TFEU, aid to make good the damage caused by natural disasters or exceptional occurrences is compatible with the inter-nal market. Since there is little knowledge about the spread of the novel corona virus recognized as a pandemic and about the possibilities of combating it, it can be classified as such an exceptional event. In the course of the Corona Crisis, the Commission has already approved initial measures by the Member States on the basis of Article 107 (2)(b) TFEU at very short notice. In addition, there are ex-plicit rules for so-called rescue and restructuring aid. On March 19, the EU Commission also recog-nized in a so-called temporary framework for the application of state aid law that the economic life of the entire EU is "seriously disturbed" by the corona virus within the meaning of Art. 107 (3) (b) TFEU. To remedy this disturbance, the Temporary Framework provides for five types of aid, namely grants/tax concessions, state guarantees for bank loans, subsidised loans and guarantees for banks. National law also contains regulations for subsidies and grants. Violations may be punishable as subsi-dy fraud (Section 264 German Criminal Code (StGB)).
Aid programs are usually notified by the Federal Government. This is also the case with most of the protective shield measures now announced. In the case of individual measures, there is in principle a notification requirement if the measure is not otherwise exempted (e.g. by the General Block Exemp-tion Regulation). A notification requirement exists, for example, in the case of so-called rescue and restructuring aid for firms in difficulty. In principle, the body granting the subsidy is responsible for notification. Nevertheless, companies should keep in mind whether the subsidy or program has been notified to the Commission, approved or otherwise exempted. This is because subsidies that do not comply with State aid law may have consequences such as early reclaim.
It is essential to ensure that accurate information is provided even in times of crisis. Otherwise there is a risk of early and full reclaim. Incorrect statements can be punishable as subsidy fraud (Section 264 German Criminal Code (StGB)) with a prison sentence of up to 10 years and can result in exclusion from public contracts.
We have compiled on our website comprehensive information and recommendations for action in response to the legal implications arising from the coronavirus pandemic: Coronavirus - legal issues
by multiple authors