COVID-19— Review of State-Sponsored Help for European Companies

28 August 2020
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For more information regarding the coronavirus, please visit our Coronavirus Resource Center.

Key takeaways:
  • Governments in Europe are launching significant measures – ranging from tax forbearance to access to finance and grants – to stem the negative economic effects of COVID 19;
  • Most of these measures are open to any commercial undertaking operating (and/or employing workers) in the relevant country.

Across Europe, lockdown measures have been lifted. In the post-lockdown world, a significant proportion of commercial undertakings will have to navigate the phased reopening and implement commercial strategies to navigate the “new normal” of living with COVID-19. This transitional phase, whilst a relief to many Europeans, has caused fears of a second wave of infections and further lockdowns. It is clear that there might be rough seas ahead for businesses operating across Europe.

Governments across Europe have indicated that the unprecedented state-sponsored packages currently in place will continue and be supplemented to aid businesses. For many businesses, quantifying the long term economic impact of COVID-19 will take time. However, the depth and scale of the economic shock caused by the pandemic on economies across Europe  is becoming clearer with many countries across the continent on the brink of deep recessions.

The vast majority of existing measures are open to any company with domestic employees and impose relatively few restrictions based on the size or nationality of the ultimate beneficial owner. This means that help is on hand for multinational companies or PE-owned portfolio companies with operations in Europe. The measures are heterogeneous in nature, ranging from tax forbearance to State-subsidised temporary staff layoffs.

The procedures for applying for and receiving the different reliefs vary, and we can help guide you through them.

Measures in the main European economies


The European institutions have launched a number of measures, which include:

  • A €37 billion investment package aimed at supporting Member States’ responses to the pandemic, SMEs, healthcare operators and companies in the most affected sectors (including hospitality and tourism); this package will also be funded by relinquishing the Commission’s obligation to request refunding of unspent pre-financing for European structural and investment funds currently held by Member States to quickly direct €25 billion to deal with the fallout of the crisis. Most of these funds will be deployed directly by the relevant Member States;
  • Sector-specific adjustments to EU policies and interpretation of EU laws, including a relaxation of the State-aid rules and the slot regulation affecting airlines, as well as additional support for agriculture, agri-food and fishing; and
  • A relaxation of prudential rules for the banking system aimed at increasing access to credit for firms in need.

As regards the State-aid rules, the Commission has already turned words into actions. On 12 March 2020, the Commission approved a Danish State-aid scheme within 24 hours of its adoption to compensate for damages caused by the COVID-19 outbreak. The Commission has since continued to approve State-aid schemes notified to it in a swift and expedited manner, benefitting from its experience gained during the financial crisis in 2008 and moving faster than it did then as a result. The average length of time it takes for a State-aid scheme to be approved is 24–48 hours. In the past weeks, all 27 Member States, as well as the United Kingdom, have received approvals for State-aid schemes. The Commission has also reassigned additional staff to its State-aid units to help during this initial crisis period.

On 19 March 2020, the Commission adopted a “Temporary Framework” (the “Framework”) for State aid that allows Member States to provide five types of aid to support the economy: (i) direct grants, selective tax advantages and advance payments (up to €800,000 per company), (ii) State guarantees for loans taken by companies, (iii) subsidised public loans to companies, (iv) safeguards for banks that channel State aid to the real economy and (v) flexibility to enable short-term export credit insurance. This was supplemented with the first amendment to the Framework on 3 April 2020. The first amendment extends the Framework and allows Member States to give zero-interest loans and guarantees on loans that cover 100% of the risk or to provide equity. Member States are permitted to provide such direct aid up to the nominal value of €800,000 per company.

The amendment also includes five additional types of aid measures: (i) targeted deferrals of tax or suspension of social security contributions, (ii) targeted support in the form of wage subsidies for employees, (iii) support for COVID-19 research and development, (iv) support for the construction and upscaling of testing facilities and (v) support for the production of products relevant to tackling the COVID-19 outbreak.

On 8 May 2020, almost a month after it was initially proposed, the Commission adopted a second amendment to the Framework. The second amendment extends the Framework to allow Member States to provide subordinated debt and recapitalisation aid to companies in need—as a last resort—in return for equity. As this is intended to be a measure of last resort, the amendment sets out a number of safeguards to avoid the distortion of competition. This includes: (i) conditions on the necessity, appropriateness and size of intervention, (ii) conditions on the Member State’s entry in the capital of the company and remuneration, (iii) conditions regarding the exit (including time limits) of the Member State from the capital of the company, (iv) governance conditions and (v) the prohibition of cross-subsidisation and acquisitions. In order to maintain transparency, Member States must publish the identity of recipients of recapitalisation aid within three months. The second amendment is an important development as it will allow national governments to buy stakes in companies in trouble (e.g., in the airline sector) as they did during the 2008 financial crisis. Italy has already indicated it will renationalise Alitalia, and Germany has confirmed that it will take a stake in Lufthansa.

The Commission has so far approved over 170 national measures, amounting to over €1.9 trillion in State aid to the EU economy. The amended Framework will continue to apply to measures put in place between 1 February and 31 December 2020. However, the Commission has decided to extend the recapitalisation measures until the end of June 2021 to ensure legal certainty.

On 29 June 2020, the Commission adopted a third amendment to the Framework. The amendment extends the scope of the Framework to support small enterprises (including start-ups) that were already in difficulty before 31 December 2019. This means that support is now available to all micro and small companies unless the company is in insolvency proceedings, has already received rescue aid that has not been repaid or is subject to a restructuring plan under the State-aid rules. The amendment also provides incentives for private investors to participate in recapitalisation measures. If a private investor contributes at least 30% of the new equity (at the same conditions as the State) then some of the recapitalisation restrictions applicable under the Framework are relaxed. For example, the acquisition ban and the cap on remuneration of the management are limited to three years and the dividend ban is lifted for certain shareholders. The third amendment is another important development for the Commission because the Framework had previously been criticised for allowing start-ups and small high-growth companies to “fall through the gaps”. However, following the adoption of the third amendment, many small companies who previously did not qualify for support will now be able to access aid under the Framework.

For the first time, the Commission has proposed a new instrument to mitigate unemployment risks and has temporarily implemented the Support to Mitigate Unemployment Risks in an Emergency (“SURE”). SURE is a short-time work scheme designed to reduce the working hours of employees while at the same time providing them with income support for hours not worked. SURE aims to avoid redundancies and ensure readiness of personnel once the economy is recovering from the pandemic. Under SURE, the Commission grants Member States €100 billion in the form of loans on favourable terms so that they can create or extend their national short-time work schemes and implement similar measures for those who are self-employed. To finance these loans, the Commission will borrow on financial markets, and the Member States will therefore benefit from the Commission’s strong credit rating and low borrowing costs. SURE will start working once the Member States have provided guarantees of €25 million. This is expected to be completed shortly. In August 2020, the Commission presented its proposals for decisions to grant financial support of €81.4 billion to 15 Member States under the SURE instrument. The Commission has also put forward a proposal to support Portugal separately and is expected to do the same for Hungary.

The new EU framework for the monitoring of foreign investment in the EU is due to come into force in October 2020, but the COVID-19 outbreak has forced the Commission to publish interim guidance encouraging Member States to either adopt or vigorously enforce screening mechanisms during this time to protect European companies from opportunistic acquirers. EU governments are also being urged to start “informal” cooperation with the Commission before the bloc-wide monitoring system comes into force—in order to prevent predatory takeovers of key European companies struggling during the pandemic. This proposal has found support from all Member State governments, with France, Germany, Italy and Spain in particular arguing for closer cooperation and information sharing between countries.

Further, on 17 June 2020, the Commission adopted a White Paper regarding the distortive effects caused by foreign subsidies in the Single Market. The White Paper sets out three modules that set out solutions to prevent distortion from: (i) companies in the EU benefiting from foreign subsidies, (ii) foreign subsidies facilitating the acquisition of EU companies and (iii) the effect of foreign subsidies on EU public procurement procedures. The White Paper is open for public consultation until 23 September 2020.

On 27 May 2020, the Commission proposed a new Solvency Support Instrument (the “SSI”) to help kick-start the European economy and prevent otherwise healthy companies from going insolvent because of the pandemic. The SSI builds upon the existing European Fund for Strategic Investments and proposes the use of up to €300 billion of the EU budget to support equity investments in companies which have solvency problems. The SSI is a temporary measure that will have an investment period that runs until the end of 2024. The Commission intends that the SSI will help to create a level playing field in the Single Market by targeting companies that operate in Member States and sectors that have been particularly impacted by the pandemic.

On 2 July 2020, the Commission announced that it will extend certain State-aid rules, which were due to expire in 2020, in order to provide legal certainty. The Commission simultaneously announced its intention to temporarily amend the State-aid rules in direct response to the COVID-19 pandemic. The General Block Exemption Regulation will be amended to allow companies to receive aid, even if they are regarded as an “undertaking in difficulty” between 1 January 2020 and 30 June 2021, provided that they were not “in difficulty” on 31 December 2019. A further amendment will also be made to ensure that companies who have previously given relocation commitments when receiving regional aid will not be deemed to have breached those commitments if they have had to lay off staff as a result of COVID-19. The amendments will come into effect on 27 July 2020.


The UK government has announced an unprecedented package of measures including:

  • A scheme providing government grants to UK businesses to pay 80% of the wages of each of their employees who have been designated as furloughed employees, up to £2,500 a month per employee (reducing to £2,187.50 in September 2020 and £1,875 in October 2020, with employers required to contribute payments to top up the reduced amounts and to pay national insurance and pension contributions on the full 100% of wages that a furloughed employee would receive from August 2020). The “Coronavirus Job Retention Scheme”, which launched on 20 April 2020, is also accessible by companies in administration (subject to certain conditions) and has been extended until the end of October 2020 but was closed to new entrants from 30 June 2020. From the start of July, furloughed employees have been able to return to work part time while still being able to claim the Coronavirus Job Retention Scheme grant for the hours not worked. From February 2021, the UK government will pay businesses a further £1,000 for each employee who returns to work from furlough and remains employed as at the end of January 2021;
  • A relaxation of annual leave rules that will allow up to four weeks of unused statutory annual leave to be carried over for two years;
  • A deferral of VAT payments by businesses for one quarter. On 8 July 2020, the UK government announced a VAT rates cut from 20% to 5% for the hospitality and tourism sectors. The temporary cut will be in place for six months;
  • Increases to the universal credit standard allowance and extension of universal credit to the self-employed;
  • A deferral of individual self-assessment tax payments to January 2021 and the ability to apply to postpone filing annual audited accounts by three months;
  • A waiver of business rates (e., taxes on occupancy of commercial properties) for one year for retail, hospitality and leisure businesses. Also available are cash grants administered by local authorities for the same types of businesses;
  • A temporary ban on landlords evicting commercial tenants for unpaid rent that started on 23 March 2020 and is anticipated to end on 30 September 2020. Commercial tenants will remain liable for rent due, and it is intended that a landlord’s right to forfeiture will be reinstated at the end of the period;
  • A business interruption loan scheme managed by the British Business Bank (the “CBILS”), which launched on 23 March 2020, allowing SMEs with an annual turnover of less than £45 million to borrow up to £5 million with a government guarantee covering 80% of the loan. The loan will only be available from accredited lenders, and the initial year will be interest free;
  • A large business interruption loan scheme (the “CLBILS”), which launched on 20April 2020, to provide government guarantees of 80% of the loan amount. Under the scheme, companies with a turnover of between £45 million and £250 million can borrow up to £25 million, and companies with a turnover in excess of £250 million may borrow up to £50 million. The loans will be provided only through accredited lenders to businesses that have been unable to secure regular commercial financing and will be offered at commercial rates of interest. The UK government has announced changes to this scheme taking effect from 26 May 2020. More details of the proposed changes are set out below;
  • A one-year government guarantee on all commercial paper issued by undertakings making a material contribution to the UK economy that had an investment-grade rating prior to the crisis;
  • A scheme which launched on 20 May 2020 to issue convertible government loans to start-ups. Unlisted UK-registered companies which have raised at least £250,000 in the last five years in aggregate from private third-party investors will be eligible through the “Future Fund” for loans of up to £5 million;
  • The “Bounce Back Loan”, an admin-light scheme allowing SMEs affected by the pandemic to receive loans of up to 25% of their annual turnover (with a cap of £50,000) from accredited lenders. These loans will have a term of up to six years and will benefit from a payment holiday during the first year. The UK government will guarantee the amounts provided under these loans, and borrowers will not have to pay any fees or interest during the first 12 months;
  • Measures aimed at increasing the provision of U.S.-dollar liquidity;
  • Additional flexibility to agree to additional time to settle outstanding tax bills;
  • The ability for SMEs (up to 250 employees) to reclaim up to two weeks of statutory sick pay paid for coronavirus-related sick leave;
  • Measures to safeguard commercial tenants against aggressive debt-recovery actions by landlords, including (i) voidance of statutory demands and winding-up petitions against tenants and (ii) changes to the use of Commercial Rent Arrears Recovery;
  • The Corporate Insolvency and Governance Act came into force on 26 June 2020. The legislation will provide significant changes to the UK insolvency framework, including introducing new corporate restructuring tools to the insolvency regime, temporary suspension of the existing insolvency regime and temporary easements on filing requirements and flexibility on the holding of Annual General Meetings. The restructuring tools include a “company moratorium” allowing companies to establish a rescue plan for 20 business days (extendable to 40 business days) without creditors being able to take legal action, a new restructuring plan mechanism which would allow the UK courts to sanction a rescue plan which would bind dissenting creditors and a change to restrict the suppliers of goods or services to an insolvent company from terminating contracts to aid in its rescue;
  • A temporary suspension of wrongful trading laws (which impose personal liability on directors found liable for a company’s wrongful trading) to give company directors greater confidence in using their best endeavours to continue to trade during the pandemic; and
  • Changes to the Enterprise Act 2002 have been introduced into Parliament on 22 May 2020. The changes, which are not yet in force, are set to increase the UK government’s powers to scrutinise and, if necessary, intervene in foreign investment transactions to ensure they do not threaten the UK’s ability to combat a public health emergency. In addition, these changes will expand the UK government’s powers to scrutinise and intervene in mergers in three sectors of the UK economy central to national security: artificial intelligence, cryptographic authentication technology and advanced materials.

On 19 May 2020, the UK government announced changes to the CLBILS. Under the revised rules, companies with a turnover in excess of £250 million will be able to borrow up to 25% of turnover and up to a maximum amount of £200 million. Companies borrowing under the revamped CLBILS will be subject to: (i) a ban from making any dividend payments other than those that have already been declared; (ii) a ban on share buybacks; and (iii) a restriction on paying cash bonuses or any pay raises to senior management unless certain terms have been met.

The Bank of England (the “BoE”) has also stepped in. It has promised increased support for banks lending to the “real economy” and is due to unveil new incentives for banks to increase their lending to SMEs. In particular, under the term funding scheme for SMEs (“TFSME”), the BoE is offering four-year collateralised loans to cover “at least 10% of … real economy lending at interest rates at, or very close to, Bank Rate” and “additional funding” to banks that increase lending to SMEs.

The BoE announced plans to inject a further £200 billion into the UK economy by increasing their holdings in UK government bonds and sterling nonfinancial investment-grade corporate bonds. The BoE recently announced an increase of £100 billion to its bond-buying programme, taking the total commitment to £745 billion.

In a further measure aimed at stimulating the economy, it has reduced the Bank Rate to an all-time low of 0.1%.

In addition, the size of the “Ways and Means” banking facility of the UK government at the BoE has been increased. This will allow the UK government to finance itself through the BoE without recourse to the bond markets as was the case during the 2008 financial crisis.

Note that any support granted by the UK government will need to comply with the EU State-aid rules during the Brexit transition period.

Although the UK government has dismissed the prospect of state bailouts of companies or state rescue plans, the Government has indicated it will aid companies strategically important to the UK economy regardless of their sector in “exceptionally rare” circumstances under a plan dubbed “Project Birch”. The Chancellor has indicated that viable companies that have exhausted all other options including the CBILS and CLBILS and whose failure would disproportionately harm the economy could apply for assistance.

On 8 July 2020, the UK government outlined a series of aid packages specific to certain hard-hit sectors such as tourism, hospitality and education. One such scheme is the “Eat out to Help Out Scheme” which encourages British citizens to return to the hospitality sector by subsidising the bill by up to £10 per person at participating cafes and restaurants on certain days of the week.

On 29 July 2020, the UK government announced a relaxation of the criteria businesses need to meet to be eligible for the Coronavirus Business Interruption Loan Scheme (CBILS). From 30 July 2020, businesses classed as “undertakings in difficulty” will be able to access the CBILS, provided that they have: (i) fewer than 50 employees; and (ii) a turnover of £9 million or less.


The German government has launched a number of measures aimed at helping companies in financial difficulties due to the pandemic, including:

  • A far-reaching stimulus package with a total volume of €130 billion. The package is inter alia geared towards climate protection and promotion of future technologies. €50 billion of the package is earmarked to support the development of quantum computing and artificial intelligence as well as supporting an increased use of electric vehicles and hydrogen energy;
  • Special subsidies are available to companies and organisations of all sizes (subject to certain exceptions) which had to discontinue all or a substantial part of their business activities as a result of the pandemic and thus suffered from a loss of sales amounting to at least 60% in April and May 2020 on average compared to the same period in 2019. Companies which do not meet this requirement but suffered severe losses in 2020 and generally face strong seasonal fluctuations due to the nature of their businesses may be eligible as well. Subject to further conditions, applicants may receive a non-repayable operating grant for the months June, July and August 2020 (if the activities of an applying company are not discontinued by August 2020). The calculation will be made separately for each month and the exact amount is calculated on the basis of the expected drop in sales in the months of June, July and August 2020 in relation to the respective reference months in 2019. The maximum amount available per month is capped at €50,000. The programme is worth €25 billion in total and applications may be made until 30 September 2020 only by tax consultants, auditors, certified accountants or lawyers via an online portal;
  • The KfW, the German development bank, has launched a “Special Programme 2020” available until the end of 2020. The programme’s funds are unlimited and available to SMEs as well as large enterprises. Companies may take out KfW-backed loans at very low interest rates through their house banks. Loans of up to €3 million will be assessed by KfW directly. Loans between €3 million and €10 million will benefit from a simplified risk assessment by the borrower’s house bank. In addition, the KfW assumes up to 90% (for SMEs) or 80% (for large companies) of the credit default risks. Companies may apply for loans of up to €100 million per company group subject to further conditions. KfW loans are available only for companies which were not in financial difficulty on 31 December 2019;
  • In addition, for projects in Germany, the KfW offers syndicated large-scale financing for investments and working capital for domestic and foreign medium-sized enterprises and large companies which are mainly privately owned. The scheme assumes up to 80% of the credit risk of the financing but no more than 50% of the applying company’s total debt;
  • A KfW “instant loan” (KfW-Schnellkredit) is available to mainly privately owned medium-sized companies based in Germany (i) with more than 10 employees and (ii) that have been active on the market since at least 1 January 2019. The maximum credit amount available per company is up to three monthly turnovers in 2019. This amount is further capped at a maximum of €500,000 for companies with up to 50 employees and a maximum of €800,000 for companies with more than 50 employees. Eligible companies must not have been in financial difficulty as of 31 December 2019 and must have reported profits in 2019 or on average over the last three years. The KfW covers 100% of the credit risk of the applicant’s house bank;
  • The German government supports venture capital (“VC”) financing for German start-ups with a package worth €2 billion. VC funds will receive additional public funding by means of a “Corona Matching Facility” (“CMF”) which is backed by the European Investment Fund (“EIF”) and KfW Capital, the KfW VC subsidiary. The CMF aims at providing necessary liquidity to German-based start-ups and young companies in the portfolio of professional private VC funds that have faced liquidity problems in the wake of the crisis. VC funds audited by KfW Capital or EIF are eligible to apply. Start-ups and smaller companies not eligible under the CMF may receive mezzanine or venture capital funding through promotional institutes of the German federal states (Bundesländer);
  • The German government has also set up the Economic Stabilisation Fund (the “ESF”), an extensive rescue package providing additional support in particular for larger companies if such companies (i) have found no other alternative for funding to cope with the pandemic and (ii) have a clear continuity plan in place to overcome their challenges. Grants are approved by the Federal Ministry of Economics. Where necessary, the ESF may participate in the recapitalisation of companies by means of subordinated debt instruments, hybrid bonds, profit participation certificates, silent partnerships, convertible bonds or even corporate shares. The ESF has a volume of approximately €600 billion in total (€400 billion has been earmarked to provide loan guarantees to companies, €100 billion for investments and recapitalisation and up to €100 billion to refinance the KfW Special Programme 2020). Fund resources are available to larger companies in the “real economy” (Realwirtschaft), e., commercial enterprises that are neither companies in the financial sector nor credit institutions and which meet two of the following three criteria: (i) a balance sheet total of more than €43 million, (ii) turnover of more than €50 million and (iii) at least 250 employees per annum. Irrespective of these criteria, access to the fund is also available for companies active in critical infrastructure sectors;
  • Companies may also use guarantee schemes through their house banks. Under those schemes, guarantees are provided by special German guarantee banks (Bürgschaftsbanken) which receive counter-guarantees from the federal government and the German federal states (Bundesländer). For companies that had sustainable business models until the crisis, guarantees may be provided for working capital and investment financing. Up to an amount of €2.5 million, these are processed by the guarantee banks directly; above €2.5 million, the federal states or their development institutions are responsible. The maximum guarantee that guarantee banks can issue is being doubled to €2.5 million. The government is now also opening up its Large Guarantee Programme beyond structurally weak regions to provide guarantees for surety requirements upwards of €50 million (within structurally weak regions still upwards of €20 million, as before);
  • For a limited period of time until 31 December 2020, export transactions may also be covered by official export credit guarantees of the federal government (“Hermesdeckungen”) on short payment terms of up to 24 months within the EU and in certain OECD countries. With immediate effect, guarantees are available for transactions in the field of renewable energies that include up to 70% foreign-sourced goods or services. Usually, the share of foreign-sourced goods and services is capped at 49%;
  • The government, in coordination with credit insurers, has rolled out a protective shield to safeguard German businesses’ supplier credits. The government will guarantee €30 billion worth of compensation payments by credit insurers from March to the end of 2020. In return, credit insurers commit to maintaining their current level of coverage of roughly €400 billion worth of credit lines. On top of that, credit insurers will cover losses of up to €500 million themselves, bear the default risks in excess of the government guarantees and transfer two-thirds of total premiums for 2020 to the government;
  • Extended access to the Kurzarbeit, a State-subsidised scheme that allows companies to reduce the working hours of their employees without having to terminate their employment. Under this scheme, employees receive 60% (67% in case of parenthood) of their lost net salary from the State, which might be increased to up to 80% (87% in the case of parenthood) if short-time work is necessary for a longer period. As many employers are topping up their employees’ salary under the scheme to mitigate social hardship, the German government recently decided that the top-ups will remain tax-free up to a level of 80% of the employee’s (gross) salary and will not be regarded as taxable income until 31 December 2020;
  • The ability to defer tax payments in order to support taxpayers’ liquidity. Tax authorities are able to defer income and corporate taxes as well as VAT if their collection would lead to significant hardship for the taxpayer. The tax authorities are instructed not to impose strict conditions in this respect. If companies are unable to make tax payments that are due this year as an economic consequence of the COVID‑19 pandemic, then such payments shall be deferred upon request for a limited period of time and without interest. Companies may file a respective application until 31 December 2020. Enforcement measures related to tax payments and late-payment penalties will be waived until 31 December 2020 if the debtor of a pending tax payment is directly affected by COVID-19. Similar measures apply to insurance taxes as well as energy and aviation taxes. The measures do not directly apply to payroll taxes, withholding taxes or local taxes such as property taxes;
  • It has also been made easier to reduce tax pre-payments (income, corporate and business taxes) due in 2020 on the condition that a taxpayer’s income in the current year is projected to be lower than in the previous year. On the basis of a lump-sum loss carryback, the advance payments for 2019 may also be reduced retroactively if the taxpayer makes a corresponding claim for reimbursement of payments. The government recently adopted further tax measures providing inter alia for a loss carry-back and a VAT reduction (from 19% to 16% for the regular VAT rate and from 7% to 5% for the so-called “reduced VAT rate”). The measures also include improved depreciation options for operating assets in 2020 and 2021. In addition, a reform of corporate income tax is being planned; and
  • The Federal Act to Mitigate the Consequences of the COVID-19 Pandemic in Civil, Insolvency and Criminal Proceedings (COVID-19 Mitigation Act, the “Mitigation Act”), passed by the German legislative bodies in March 2020, contains a number of support measures for companies and citizens who are currently unable to meet payment obligations as a result of the COVID-19 pandemic. This includes, for example, restrictions on the right to terminate leases, payment/performance moratoriums and deferrals of loan payments. The obligation to file for insolvency has been suspended until 30 September 2020 on the precondition that there is a prospect of the illiquidity being resolved. Moreover, the right of creditors to apply for the opening of insolvency proceedings will be suspended for a three-month transition period. This applies retroactively as of 1 March 2020 and, if required, the Mitigation Act provides for the possibility to extend the suspension period until 31 March 2021.
  • In the future, companies or consumers in debt shall further be able to exit (private) insolvency proceedings after a maximum of three years (as opposed to five and six years respectively). Settling the claims of a minimum quota of creditors (35%) and/or paying the costs of the proceedings will no longer be a precondition to exit proceedings prematurely. The new rulesshall apply to all insolvency filings made as of 1 October 2020. For insolvency proceedings filed between 17 December 2019 and 30 September 2020, a transitional provision shall apply. In these cases, the current regular period of six years before discharge of residual debt will be reduced by the number of full months between the underlying EU directive (2019/1023, effective as of 16 July 2019) and the respective insolvency filing.


Following President Macron’s speeches on the crisis, the French government has deployed or will deploy an ambitious set of measures, including:

  • Tax forbearance (spanning both social contributions and income taxes);
  • Direct tax rebates for businesses facing important economic difficulties;
  • The possibility for deferred payment of rent and electricity and fuel supply invoices for small businesses;
  • Lump payments of €1,500 for the self-employed or very small companies; eligible businesses are those which have, inter alia, a turnover of less than €1 million or are subject to mandatory closure and have experienced a decrease of turnover of at least 50% in March, April or May 2020 (compared to the same month in the previous year). Businesses facing the biggest financial difficulties may benefit from additional aid of up to €5,000;
  • State-assisted refinancing of existing debt and access to new lines of credit from the French development bank;
  • A State guarantee of up to €300 billion for bank credits to nonfinancial businesses of all sizes (certain real estate companies are, however, not eligible). Subject to certain exceptions, the guaranteed loan shall not exceed 25% of the latest annual turnover. The State guarantee will cover a percentage of the capital, interest and accessories of the loan set at: (i) 90% for businesses that have less than 5,000 employees and a turnover of less than €1.5 billion, (ii) 80% for other businesses with a turnover between €1.5 and €5 billion or (iii) 70% for remaining businesses;
  • Support from the French development bank in negotiating a rescheduling of bank loans;
  • Simplified and reinforced short-time working arrangements to maintain employment (French equivalent of the Kurzarbeit);
  • Support for the handling of disputes between customers and suppliers by an official ombudsman appointed by the French State;
  • For those undertaking work as contractors or suppliers for the French State, a state of force majeure for all public contracts that disapplies all penalties for late delivery/performance; and
  • Exceptional financial aid for craftsmen and business owners corresponding to the amount of the supplementary pension contribution paid on the basis of their income in 2018 that may amount up to €1,250.

A special emergency plan for start-ups has also been announced: start-ups will benefit, inter alia, under certain conditions, from a short-term refinancing scheme through bond issues and specific conditions for State guarantees for bank credits.

A special support plan for exportation companies has been enforced (including a State guarantee for pre-financing export schemes to reinforce cash flow, extension of prospection insurance for an additional year and additional capacity of €2 billion for export credit insurance).

A ban on payment of dividends or repurchase of shares by large companies (i.e., those employing at least 5,000 employees in France and with a turnover of at least €1.5 billion in France) that benefit from State-aid guarantees or tax forbearance was announced on 27 March 2020.

A special support plan for the automotive sector was set up on 26 May 2020. With over €8 billion of aid, direct investments and loans, the French government seeks to make the French car industry greener and more competitive. It will increase its subsidies for the purchase of electric and hybrid cars by private individuals and companies, as well as accelerate the renewal of public vehicle fleets and expand the network of electric charging stations. Additionally, the creation of a €1 billion Future Fund will support the modernisation of production lines and boost innovation in the sector.

A special support plan for tech companies was set up on 5 June 2020 with the creation of a special investment fund named “French Tech Souveraineté” benefitting future-oriented companies (e.g., cybersecurity, AI, health, etc.) with business activity in France or start-ups. This fund will hold €150 million at first, with the option of reaching €500 million in 2021. This special plan also includes measures like additional financing through public investment funds, State aid and loan offers for start-ups which cannot benefit from State-guaranteed loans. Pre-existing start-up funds such as “French Tech Bridge” and PSIM are also being refuelled with €80 million and €120 million respectively.

A special support plan for the aeronautical industry was announced on 9 June 2020. This plan includes a moratorium on principal repayments of export credits for 12 months starting from the end of March 2020 (as a counterpart, airlines are subject to a ban on payment of dividends or others to their shareholders), a temporary easing of the repayment terms for new aircraft purchases and an increase of financial support through a public export insurance company. To support French aircraft manufacturing, the government decided on the creation of a €1 billion aeronautical investment fund to support small and medium-sized businesses in their R&D and automation (€500 million available already in July 2020). On top of that, France supports the green transition of aircraft manufacturing with a €300 million fund over a three-year period.

The French government has also announced a specific investment plan for certain large listed companies facing difficulties and has adapted the French legal framework and implemented specific interim modifications to labour law, business and company law and the functioning of the French justice system (for further details see our update here).


Italy has been the country worst affected by the pandemic so far. Its government has issued an initial decree (named the “Cure Italy Decree”), which was followed by a second one and a third one. These decrees have introduced support measures for businesses that largely mirror the German and French ones, including:

  • Direct capital injections from the State either: (i) through unilateral funding from the Italian State investment bank (the “Cassa Depositi e Prestiti”) for businesses with a turnover of over €50 million or (ii) with State funding matching any capital injection by private investors for businesses with a turnover between €10 million and €50 million. Businesses using this scheme will be subject to certain conditions including a bar on dividends;
  • Grants for smaller businesses with a turnover of up to €5 million. These grants will be proportional to the difference in turnover between April 2020 and April 2019;
  • Cancellation of the June instalment of the IRAP tax (e., a regional tax on turnover) for all companies with a turnover of up to €250 million and autonomous workers;
  • Suspension of the local real estate tax (e., “IMU”) for hotels;
  • Deferral of tax payments until 16 September 2020 and the possibility for companies to convert deferred tax assets into tax credits;
  • Enhanced access to the Cassa Integrazione, the Italian equivalent of the Kurzarbeit, until October 2020;
  • Reduction of utility bills for small and medium enterprises;
  • Prohibitions on the revocation of credit to SMEs until 30 September 2020 (known as the “Extraordinary Moratorium”);
  • Government-guaranteed loans at advantageous rates for companies in need of liquidity. The loans will be guaranteed by the government in the following percentages:
  • 100% for loans of up to €800,000; and
  • 90% for loans of up to €5 million;
  • An extension of the sectors in which the government can restrict direct foreign investment into Italian companies; and
  • An additional €400 million in State-guaranteed loans (through the Italian government’s investment bank) to struggling companies (details of the scheme remain to be determined).

Local governments (including regional and municipal ones) are also deploying their own relief measures aimed at businesses.