EU state aid law and rules in Germany during Covid-19

Introduction

Germany has already applied for several programmes by the EU Commission and has been granted approval for these.

In the following we will provide a brief overview of the most important possibilities. These include newly created programmes as well as existing possibilities.

EU State aid law context

National State aid schemes (programs) introduced by EU Member States and individual aid granted by national instances must comply with the applicable EU State aid law. Member States may e.g. notify new programs based on the EU Commission’s Temporary Framework, introduce new programmes or grant aid in individual cases based on the provisions of the Treaty (Art. 107 para 2 TFEU) on aid to recover the damage caused by exceptional occurrences or grant aid to firms in difficulty under the Guidelines for Rescue and Restructuring aid. Please refer to the EU chapter for more details.

Economy Stabilisation Fund (ESF) for Germany

Who is eligible for the aid?

Undertakings in the real economy

  • which fulfil at least two of the following three characteristics: (i) balance sheet total of more than EUR 43 million, (ii) turnover of more than EUR 50 million and (iii) more than 249 employees on the basis of an annual average. Exceptions are possible in sectors important for German security (e.g. critical infrastructure or producers of pharmaceuticals)
  • which must not have been in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not a UID) on 31 December 2019.
  • whose continued existence would have a considerable impact on the economy, technological sovereignty, security of supply, critical infrastructures or the labour market.
  • which offer the guarantee of a sound and prudent business policy and have an independent continuation perspective after the pandemic.
  • which have no other support programmes and financing possibilities for a viable solution.

What does the aid consist of?

The ESF offers two combinable stabilisation instruments:

  • Guarantees to secure loans and
  • Recapitalisations to strengthen equity capital.

Guarantees include warranties in any appropriate form for unsubordinated debt instruments and other liabilities:

  • The term of the guarantees and the liabilities to be hedged may not exceed 60 months and the liabilities must amount to at least EUR 5 million.
  • The guarantee level is up to 90%, or more if approved by the Commission.
  • The undertaking must provide adequate remuneration, with certain minimum premiums (for SMEs, 0.25% for a term of up to one year, 0.5% from the second year of the term and 1.0% from the fourth year of the term. For large undertakings, 0.5%, 1.0% and 2.0% apply respectively).
  • Guarantees with a term beyond 31 December 2020 can only be granted up to the amount of twice the annual payroll of the enterprise or in the amount of 25% of the total turnover, in each case in relation to the year 2019. In justified cases, the amount can also be based on the liquidity requirement for the next 12 months (18 months for SMEs).
  • Conditions and requirements which are intended to provide incentives for speedy termination of the measure are possible.
  • In the case of guarantees exceeding a guarantee amount of EUR 100 million, there is a ban on bonus payments and other comparable remuneration components for board members and managing directors, a ban on special payments and severance payments not legally required, a ban on dividends and - in the case of undertakings belonging to a multinational group of undertakings - the obligation to disclose their actual ownership of all parts of the undertaking.
  • The ESF is to be granted contractual rights, including the right of the Federal Audit Office to conduct surveys and general information rights.
  • If there is a high probability of a claim being made against the Confederation, no guarantee may be given.
  • In the future, guarantees for subordinated debt instruments will also be possible, whereby special rules - such as a limit on the amount or a higher minimum premium - will apply.

Recapitalisation aid includes, among others, subordinated loans, silent participations, the acquisition of shares in undertakings or the acquisition of other components of equity. Different provisions apply depending on whether the recapitalisation aid constitutes participations without voting rights as well as hybrid financial instruments (e.g. silent participations), or participations with full voting rights.

A recapitalisation should only be carried out if there is an important interest for the Federal Government and it is not possible to ensure the continued existence of the undertaking through borrowed capital. If necessary, the shareholders may have to make additional contributions of their own.

The following rules apply to non-voting participations and hybrid financial instruments:

  • Appropriate remuneration is required, which takes precedence over the profit-sharing rights of the other shareholders. Market criteria are to be applied in the assessment, whereby certain minimum remunerations apply.
  • Advance payments may be made.

The following regulations apply to participations with full voting rights:

  • The measure shall only be taken if the market's confidence in continuation of the business cannot otherwise be established.
  • The participation is to be effected through the subscription of new shares in the undertaking and is not to last longer than necessary for the stabilisation.
  • In the case of listed undertakings, the base value for the issue amount should be closely oriented to the stock market price at the time the measure becomes known. In the case of non-listed undertakings, an expert opinion shall be obtained. In both cases, a discount of at least 50% of the base value is to be applied.

The following rules apply to all recapitalisation measures with regard to the requirements and conditions to be observed:

  • There is a ban on bonus payments and other comparable remuneration components for members of executive bodies and managing directors, and a ban on special payments and severance payments not required by law. Until at least 75% of the measure has been repaid, the remuneration of members of the executive board is limited and may not exceed the basic remuneration of the respective member as of 31 December 2019.
  • There is a ban on dividends and a ban on buying back own shares. Undertakings belonging to a multinational group of undertakings are obliged to disclose their ownership structure. Deviations from the German Corporate Governance Codex are only possible with the consent of the ESF.
  • Among other things, the review of the business policy and its economic sustainability as well as restrictions on remuneration, also for lower management levels, are required.
  • If distortions of competition are to be feared, conditions for doing business can be imposed on the undertaking.
  • The support of the ESF must not be advertised.
  • Until at least 75% of the recapitalisation has been repaid, large undertakings may not acquire stakes of more than 10% in competitors or other undertakings in the business segment, including upstream and downstream business activities. Exceptions are possible to preserve the profitability of the undertaking or the target undertaking if no other buyer is available and the EU Commission approves the acquisition.
  • The ESF is to be granted contractual rights, including the right of the Federal Audit Office (Bundesrechnungshof) to conduct surveys and general information rights.
  • Recapitalisation measures are to be terminated after 6 years, at the latest after 10 years; a longer continuation is only possible if the termination would be uneconomical.
  • The undertaking must submit a repayment plan no later than 12 months after the recapitalisation measure has been granted; if after 6 years the recapitalisation measure has not been repaid to a value of less than 15% of equity, a restructuring plan must be submitted to the EU Commission.

Standardised conditions apply for guarantees and recapitalisation measures up to a volume of EUR 100 million. Three products are offered: "Guarantees for bank loans", "Guarantees for bonds" and "Silent partnership up to EUR 100 million".

Where to apply for the aid?

Applications must be submitted to the Federal Ministry of Economics and Energy (BMWi). The contractual implementation is carried out by the Federal Republic of Germany - Finance Agency GmbH on behalf of the ESF.

Several federal states have developed their own programmes for recapitalising undertakings. These programmes are based on the Federal Recapitalisation Scheme and Subordinated Debt 2020.

Is a notification to the EU Commission necessary?

No, the ESF has been approved by the EU Commission. Exceptions apply to recapitalisation measures exceeding the threshold of EUR 250 billion – these must be notified individually. State aid on the basis of the ESF can be granted until 31 December 2021.

Further remarks

None.

Fourth Amended Federal Small Grants Scheme 2020

Who is eligible for the aid?

Undertakings which were not in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not UID) on 31 December 2019 are eligible to apply. The exclusion does not apply to small and micro enterprises, ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million.  provided that these enterprises are not subject to insolvency proceedings and they have not received rescue or restructuring aid.

What does the aid consist of?

The aid scheme allows for aid in the following forms: direct and repayable grants, tax benefits or concessions in relation to other payments, loans, mezzanine financing, guarantees, counter-guarantees and equity.

The total nominal amount of this small aid may not exceed the maximum amount of EUR 1,8 million per undertaking. For undertakings in the fisheries and aquaculture sector, the maximum is EUR 270,000, and for enterprises in the primary production of agricultural products, the maximum is EUR 225,000. Aid granted and reimbursed under this scheme is not taken into account in determining whether the maximum in question is exceeded.

Aid in the form of repayable instruments can be converted into other forms, e.g. grants, until 31 December 2022.

Where to apply for the aid?

Aid may be granted by public bodies.

The following support programmes, for example, are based on the aid scheme:

  • KfW Rapid Loan (Schnellkredit) 2020. You can find more information here.
  • November aid (Novemberhilfe) (if applicable, in conjunction with the maximum amount of the de minimis regulation). You can find more information here.
  • December aid (Dezemberhilfe) (if applicable, in combination with the maximum amount of the de minimis regulation). You can find more information here.
  • Bridging aid (Überbrückungshilfe) (if applicable, in conjunction with the maximum amount of the de minimis regulation). You can find more information here.

Further information on Kreditanstalt für Wiederaufbau (KfW's) services can be found here.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission. The aid scheme is in principle valid until 31 December 2021. If the aid is granted in the form of a tax advantage, the revelant tax liability must have arisen no later than 31 December 2021.

Further remarks

None.

Federal Scheme Low-Interest Loans 2020

Who is eligible for the aid?

Undertakings which were not yet in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not UID) on 31 December 2019. The exclusion does not apply to small and micro enterprises, ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million.  provided that these enterprises are not subject to insolvency proceedings and they have not received rescue or restructuring aid.

What does the aid consist of?

On the basis of the aid scheme, aid can be granted in the form of loans or subordinated loans at reduced interest rates.

  • The interest rates shall be at least equal to the base rate applicable on 1 January 2020 (min. 10 bps) plus a credit risk margin: The credit risk margin shall be 25 basis points ("bps") for SMEs and 50 bps for large undertakings for the first year of the term. For the second and third year, 50 bps for SMEs and 100 bps for large undertakings apply. For the fourth to sixth year, the credit risk margin is set at 100 bps for SMEs and 200 bps for large undertakings. For subordinated loans, an additional premium of 150 bps for SMEs and 200 bps for large undertakings must be applied.
  • The term of the loan is limited to a maximum of 6 years. Interest-free and redemption-free years are possible within the framework of surcharges in the subsequent years that ensure the specified minimum interest rates.
  • For loans with a term beyond 30 June 2021, the loan amount may not exceed the following values: (i) twice the annual payroll or (ii) 25% of the annual turnover, both generally based on the year 2019. In the case of subordinated loans, the loan amount may not exceed one third or, for SMEs, half of the above amounts. In duly justified cases, the loan amount may be increased by the liquidity requirement for the next 12 months (18 months for SMEs). This does not apply to subordinated loans.
  • For loans with a maturity date of 30 June 2020, the amount of the loan principal may be higher if duly justified and proportionate.
  • Loans and subordinated loans can be used for investments as well as for working capital.
  • In the case of a loan or subordinated loan granted by credit institutions or other financial intermediaries, up to 90% of the risk of the loan or subordinated loan may be assumed by the aid granting body. In the case of a syndicated loan, up to 80% of the risk may be assumed.
  • Cumulation of aid for different loans or with other aid is possible under certain conditions.

Where to apply for the aid?

The aid may be granted by the federal authorities and regional authorities, the German Promotional Bank (""KfW"") and regional promotional banks. Aid in the form of low-interest loans can be granted through credit institutions and other financial institutions as financial intermediaries as "passed-through" loans:

  • Direct participation for syndicated financing. You can find more information here.
  • KfW Entrepreneur Loan. You can find more information here.
  • ERP Start-up Loan - Universal. You can find more information here.

Further information on the services offered by KfW is available here.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 31 December 2021.

Further remarks

None.

Second Amended Federal Scheme State Guarantees 2020

Who is eligible for the aid?

Undertakings which were not yet in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not UID) on 31 December 2019 are eligible to apply. The exclusion does not apply to small and micro enterprises, ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million.  provided that these enterprises are not subject to insolvency proceedings and they have not received rescue or restructuring aid.

What does the aid consist of?

The aid scheme allows aid in the form of guarantees, counter-guarantees and guarantees to secure loans.

  • The annual guarantee fee is equal to 25 basis points ("bps") for SMEs and 50 bps for large undertakings as credit risk margin for the first year. For the second and third year, 50 bps for SMEs and 100 bps for large undertakings apply. For the fourth to sixth year, 100 bps is set for SMEs and 200 bps for large undertakings. In the case of guarantees for subordinated debt instruments, an additional guarantee fee of 150 bps for SMEs and 200 bps for large undertakings applies.
  • The maximum term of the guarantees is 6 years.
  • For guaranteed loans with a maturity beyond 31 December 2021, the maximum loan amount shall not exceed the following: (i) twice the annual payroll or (ii) 25% of the annual turnover, both related to the year 2019. In justified cases, the loan amount may be increased to the specific liquidity needs of the beneficiary for the next 12 months (18 months for SMEs).
  • For loans maturing on 31 December 2021, the amount of the loan may be higher if justified and proportionate.
  • The guarantee can be granted to secure both investment and working capital loans.
  • The maximum guarantee amount is (i) 90% of the loan amount if losses are borne proportionally and on equal terms by the credit institution and the state guarantor; or (ii) 35% of the loan amount if losses are first attributed to the state guarantor and only then to the credit institution (i.e. a first loss guarantee) and (iii) in both cases the guaranteed amount must decrease proportionally if the size of the loan decreases over time, e.g. because the loan is repaid.
  • In the case of guarantees for subordinated debt instruments, the amount of guaranteed subordinated debt financing may not exceed either (i) two-thirds of the undertaking's annual payroll (annual payroll for SMEs) or (ii) 8.4% of total turnover in 2019 (12.5% for SMEs).
  • Guarantees for subordinated debt instruments may not be granted as first loss guarantees.

Where to apply for the aid?

The aid may be granted by federal and regional authorities, the federal and regional promotional banks and the guarantee banks.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 31 December 2021.

Further remarks

None.

Federal Scheme Fixed Cost Aid 2020

Who is eligible for the aid?

Eligible to apply are undertakings that were not already in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not a UID) on 31 December 2019. The exclusion does not apply to small and micro enterprises, ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million.  provided that these undertakings are not subject to insolvency proceedings and they have not received rescue or restructuring aid.

Undertakings must have experienced a decrease in turnover of at least 30% in the period from 1 March 2020 to 31 December 2021 compared to the same period in 2019.

What does the aid consist of?

Aid may take the form of direct grants, loans or guarantees, counter-guarantees, tax benefits, discounts, repayable advances and equity.

The aid may be granted for uncovered fixed costs incurred or to be incurred during the period from 1 March 2020 to 31 December 2021 ('eligible period').

The amount of aid is based on a comparison of the turnover in a month in the eligible period with the turnover in the corresponding month in 2019. Relaxations are available for small and micro enterprises and certain medium-sized enterprises.

The aid must not exceed 70% of uncovered fixed costs, or 90% for small and micro enterprises.

According to the federal regulation, losses that undertakings report in their profit and loss accounts for the eligible period represent uncovered fixed costs, whereby one-off losses due to impairments are not taken into account. Other compensation, e.g. through insurance or other aid based on the Temporary Framework, must be taken into account.

The federal regulation is ambiguous with regard to the term fixed costs and describes it elsewhere more narrowly as only those costs that arise regardless of the output quantity.

Fixed cost subsidies may be granted on the basis of projected losses, whereby subsequent proof of actual uncovered fixed costs may be verified by, among others, knowledgeable third parties. It is necessary to ensure that there is no overcompensation.

The total amount of fixed cost aid per undertaking may not exceed EUR 10 million. Cumulation with aid for the same eligible costs is not permitted.

Where to apply for the aid?

Aid can be granted by public bodies. The federal scheme fixed cost aid is the basis of e.g. the "Bridging Aid II". The federal government is also planning "November Aid plus" and "December Aid Plus".

Is a notification to the EU Commission necessary?

No. The programme is based on a scheme already approved by the EU Commission and is valid until 31 December 2021.

Further remarks

None.

Federal Scheme State Aid for Research, Development and Investment

Who is eligible for the aid?

Only undertakings that were not already in difficulty* (not a UID) on 31 December 2019 are eligible to apply. The exclusion does not apply to small and micro enterprises, ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million.  provided that these undertakings are not subject to insolvency proceedings and have not received rescue or restructuring aid.

Aid to non-university research institutions as well as universities and higher education institutions are also possible, provided they are economically active.

What does the aid consist of?

The following aid may be granted in the form of direct grants, repayable advances and tax advantages:

  • R&D aid for COVID-19 relevant research and development projects. Support is possible for fundamental research, industrial research and experimental development and a wide scope of activities including clinical trials and validating and defending patents.

The maximum allowable aid intensity is 100% of the eligible costs for fundamental research, and 80% for industrial research and experimental development. A bonus of up to 15% is possible for industrial research and experimental development carried out in transnational cooperation with research organisations or other undertakings, or supported by more than one Member State. Eligible costs are, in principle, all costs incurred for the R&D project during its lifetime, although costs for assets, for example, are only eligible on a pro rata basis.

The aided undertaking must undertake to grant non-exclusive licences to third parties in the European Economic Area (EEA) on non-discriminatory market terms. The granting of aid to contractors of contract research is excluded.

  • Investment aid for the construction and upgrade of testing and upscaling infrastructures required to develop, test and upscale certain COVID-19 relevant products until their first commercial use before mass production.

The maximum allowable aid intensity is 75% of the eligible costs. A bonus of up to 15% may be granted if the project is completed within 2 months of the decision or the support is provided by more than one Member State of the European Union. Eligible costs are in principle the necessary investment costs, whereby e.g. assets that are not of the entire duration and not 100% attributable to the project are only eligible on a pro rata basis.

Within 6 months the investment project must be completed. If that deadline is not met, for reasons attributable to the undertaking, 25% of the aid granted in form of direct grants or tax advantages shall be reimbursed for each month of delay. Where the deadline is respected, aid in the form of repayable advances is transformed into direct grants. Otherwise, they must be repaid within 5 years.

The undertaking must in principle commit to grant open access to the infrastructure to several users based on non-discriminatory market terms and transparent conditions.

Investment aid to manufacture COVID-19 relevant products

The maximum allowable aid intensity is 80% of the eligible costs. A bonus of up to 15% is possible if the project is completed within two months of the granting of the aid or the support is provided by more than one Member State of the European Union. Eligible costs are in principle the necessary investment costs as well as the costs for test runs of the new production facilities, whereby e.g. assets that are not attributable to the entire duration and not 100% to the project are only eligible for aid on a pro rata basis.

Within 6 months, the investment project must be completed. If this deadline is not met for reasons attributable to the undertaking, 25% of the aid granted in the form of direct grants or tax concessions shall be reimbursed for each month of delay. Reimbursable grants will be converted into direct grants if the deadline is met. Otherwise, they must be repaid within 5 years.

Regarding the two investment measures, a loss cover guarantee may also be granted in addition to a direct grant, tax advantage or repayable advance, or as an independent aid measure. The amount of loss to be compensated is established five years after completion of the investment. The compensation amount is calculated as the difference between sum of investment costs, reasonable annual profit of 10% of the investment costs over 5 years and operating cost on the one hand, and the sum of the direct grant received, the income over the 5-year period and the final value of the project on the other hand. For all aid that may be granted under the scheme, one of the following conditions must be met: (i) the project has not yet started; or (ii) the project has started on or after 1 February 2020; or (iii) the project has started before 1 February 2020, but the aid is necessary to accelerate or extend the project. In the case of aid for COVID-19 related research and development, it is sufficient if the project has been awarded a label of excellence for its relevance to COVID-19 research.

Where to apply for the aid?

The aid may be granted by all public bodies.

Several programmes have already been created on the basis of the aid scheme, such as the guideline for federal funding of production facilities of point-of-care antigen tests for the detection of SARS-CoV-2 or the guideline for a special programme to accelerate research and development of urgently needed vaccines against SARS-CoV-2.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission. The aid scheme is in principle valid until 31 December 2021. If the aid is granted in the form of a tax advantage, the relevant tax liability must have arisen no later than 31 December 2021.

Further remarks

None.

General Federal Damage Compensation Scheme for COVID-19

Who is eligible for the aid?

Private undertakings, including non-profit organisations as well as self-employed persons and members of the liberal professions. Among others, public undertakings are excluded.

The beneficiary undertaking must have to cease its activities as a result of the closure orders or must achieve at least 80% of its turnover with undertakings whose activities are prohibited by the closure orders. In the case of several economic activities, the prohibited activity must account for at least 80% of the undertaking's turnover.

Also included are tour operators and travel agencies that have lost at least 80% of their turnover in relation to leisure travellers who have been banned or advised against travelling to certain destinations due to travel restrictions or travel warnings issued by the Federal Foreign Office.

Only undertakings that were not already in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not a UID) on 31 December 2019 are eligible to apply. The exclusion does not apply to small and micro enterprises ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million. , provided that these undertakings are not subject to insolvency proceedings and have not received rescue or restructuring aid. 

What does the aid consist of?

The aid scheme has not yet been published. So far, only the EU Commission's approval for the aid scheme is available. We will update this article as soon as further information is available. 

The aid scheme allows direct grants of up to 100% of the compensable damage in the period from 16 March 2020 to 31 December 2021. The government measures in force at the time are decisive.

Compensable are damages directly caused by closure orders or travel warnings. Eligible for compensation is the difference between the operating result of the prohibited activity in the period and the operating result achieved in the corresponding periods of 2019.

Overcompensation of the damage is prohibited. Avoided or saved expenses as well as other received benefits shall be deducted. In assessing the compensable damage, only the result of the operation's activity directly affected by the lockdown decisions shall be taken into account. Increased profitability of other economic activities that were not affected by the lockdown shall be taken into account.

For periods from 1 July 2020 onwards, deductions of 5% shall be made on the calculated damage. The reason for this is that damages caused by the general pandemic-related economic downturn should not be compensated. In the case of sector-specific factors, the discount must be increased. If the average monthly compensation exceeds EUR 4 million, the effects of the general decline in demand must be calculated individually.

Aid may be granted on the basis of the projected damage. The final aid amount will be determined on the basis of an ex-post assessment and evidence.

Cumulation with other aid to compensate for damage and with aid under the Temporary Framework is possible for up to 100% of the compensable damage.

Where to apply for the aid?

The aid may be granted by all public bodies, whereby the federal states are to make individual regulations. Applications can be submitted until 31 December 2021.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 31 December 2021.

Further remarks

None.

Federal November Aid/December Aid Scheme-Compensation for Damages

Who is eligible for the aid?

Private and public undertakings including charitable organisations, self-employed persons and self-employed members of the liberal professions, who:

  • carry out their activities from a permanent domestic business establishment or a domestic place of the undertakings management and are registered at a German tax authority,
  • were affected in their economic activity by the lockdown from 2 November to 31 December 2020 as follows: (i) they had to cease their economic activity due to a decree on the basis of the lockdown decision of 28 October 2020 or (ii) they generated at least 80%of their turnover with companies directly affected by the aforementioned measures. Affectedness by the lockdown ended when the respective decree was repealed.
  • started their business activities before 1 November 2019 (November aid) or 1 December 2019 (December aid) and have not permanently ceased their business activities before 31 October 2020.
  • were not already in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not a UID) on 31 December 2019.

What does the aid consist of?

The aid scheme allows for direct grants to compensate for damages resulting from the lockdown up to a maximum of 75% of the turnover from November or December 2019. "Lockdown" in this context means the measures adopted on the basis of the decision taken on 28 October 2020 by the German Chancellor and the heads of government of the federal states. The decision was extended on 25 November 2020 and 2 December 2020 and thus covers the period from 2 November 2020 to 31 December 2020.

The damage is the difference in the operating result in the months affected by the lockdown compared to the operating result in the corresponding month of 2019. The amount of damage can be determined on the basis of all periods affected by a lockdown between 1 March 2020 and 31 December 2020. 

The actual damage incurred in the months affected by the lockdown, calculated to the day in each case, has to be calculated by an ex post approach. Corresponding evidence must be provided. Overcompensation of the damage is prohibited. Avoided or saved expenses as well as other received benefits are therefore to be deducted. 

When assessing the compensable damage, only the result of the undertaking's activities directly affected by the lockdown decisions shall be taken into account. Increased profitability of other economic activities that were not affected by the lockdown shall be taken into account.

However, damages due to the general pandemic-related decline in demand in 2020, e.g. as a result of the general hygiene measures (including capacity restrictions and distance measures), are not compensable. This must be factored out when comparing the operating results. To simplify this, a general deduction of 5% can be made from the calculated damage.

Cumulation with other aid is possible up to a limit of 100% of the calculated damages.

Where to apply for the aid?

The aid may be granted by all public bodies. Applications can be submitted until 30 June 2021.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 30 June 2021.

Further remarks

None.

Federal Framework Scheme State Aid for Trade Fairs

Who is eligible for the aid?

Private and public undertakings that:

  • as owners, operate infrastructures specifically directed at the organisation of trade fairs or congresses and provide services associated with the operation of trade fairs and congresses, as well as 
  • holding undertakings that lease trade fair or congress infrastructures to an operating undertaking and have agreed a revenue-based lease in return, and
  • undertakings paying rent and operating infrastructure directed at the organisation of trade fairs or congresses and providing services associated with the operation of trade fairs and congresses.

What does the aid consist of?

The aid scheme allows for direct grants to compensate up to 100% of compensable damage incurred in the period from 1 March 2020 to 31 December 2020.

Eligible for compensation are losses of income resulting from the operation of trade fairs or congresses, including the rental and holding of events, insofar as, due to the COVID-19 pandemic, it is impossible to hold the planned events because (i) a complete ban on events was in force or (ii) events with the planned number of persons were partially prohibited due to a cap on the permissible number of persons (or persons per square metre).

Damages are generally calculated by way of an ex-post assessment. In exceptional cases, a preliminary application based on forecasts is possible.

The calculation of the damage is basically made by the difference between the earnings in the reference period (1 March to 31 December in 2018 and 2019) and the actual earnings in the same period in 2020. A damage reduction obligation applies. Expenses which were avoided or saved (e.g. personnel expenses, repair and maintenance expenses or marketing expenses) as well as benefits received on another basis will be deducted.

It is necessary to ensure that there is no overcompensation. This applies in particular to loss of income that occurred irrespective of bans and requirements, for example if the actual number of visitors was below the permitted number of visitors.

Where to apply for the aid?

The aid can be granted by all aid granting agencies. Applications can be submitted until 31 May 2021.

Is a notification with the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 30 June 2021

Further remarks

None.

Federal Framework Scheme State Aid for Local Public Transportation

Who is eligible for the aid?

Public and private transportation undertakings that provide transport services in public transportation or local rail transportation.

What does the aid consist of?

Direct financial contributions to compensate up to 100% of the damage directly caused by the Corona pandemic in the period from 1 March 2020 to 31 August 2020. Compensable damage includes, for example, lower compensation payments due to reduced transport services, lower fare income or increased expenses for infection protection. 

The reference period of the previous year shall be used to calculate the expected damage (1 March 2019 to 31 August 2019), taking into account changes in key parameters such as fuel prices. The actual damage incurred must be proven by 30 September 2021.

Where to apply for the aid?

The federal states determine the respective granting agencies. Applications can be submitted until 30 September 2020.

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission. The aid must be granted by 31 December 2020.

Further remarks

None.

Amended Federal Framework Scheme State Aid for Airports

Who is eligible for the aid?

Operators of airfields on which public air traffic takes place in the territory of the Federal Republic of Germany.

The undertaking must not have already been in difficulty * For example, a private limited undertaking is, inter alia, an undertaking in difficulty (UID) if more than half of its subscribed share capital has been lost as a result of losses. If the Ltd is a SME, special rules apply. (not a UID) on 31 December 2019. This exclusion does not apply to small and micro enterprises ** These are undertakings which employ fewer than 50 persons and which do not have an annual turnover or annual balance sheet total exceeding EUR 10 million. , provided that these enterprises are not subject to insolvency proceedings and they have not received rescue or restructuring aid. This exclusion does not apply to grants to compensate for damage caused by the COVID 19 pandemic between 4 March 2020 and 30 June 2020 (see below).

What does the aid consist of?

Grants to compensate up to 100% of the damage directly caused by the COVID-19 pandemic in the period from 4 March 2020 to 30 June 2020. Compensable damages include loss of revenue from airfield charges and from rent, revenue sharing, parking, refuelling, advertising or other participations. The reference period for the previous year (4 March 2019 to 30 June 2019) is used to measure the loss. Changes in key parameters, such as fuel prices, as well as savings shall be taken into account.

In addition, tax benefits and deferrals of fees to bridge a liquidity bottleneck are also possible.

Further State aid, for example in the form of direct grants for uncovered fixed costs, low-interest loans and guarantees, are possible through other aid schemes and under the respective conditions there (see above).

Where to apply for the aid?

Federal, state and local authorities granting aid according to the ownership structure. Applications can be submitted until 31 March 2021.

Is a notification with the EU Commission necessary?

No. The scheme has been approved by the EU Commission and is valid until 30 June 2021.

Further remarks

None.

State Guarantee Scheme for Trade Credit Insurance

Who is eligible for the aid?

Undertakings active in the field of trade credit insurance.

What does the aid consist of?

The state assumes a guarantee of up to EUR 30 billion for indemnification payments by credit insurers beyond 30 June 2021. The credit insurers contribute 10% to the claims payments. In addition, they give 60 percent of the premium income for the first half of 2021 to the federal government. 

Where to apply for the aid?

The Federal Ministry of Finance is responsible for the measure and concluding the necessary individual agreements with the credit insurers. 

Is a notification to the EU Commission necessary?

No. The scheme has been approved by the EU Commission. The measure is valid until 30 June 2021.

Further remarks

None.

Further programmes

Who is eligible for 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. 

Where to apply for 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. CMS has compiled a special overview of funding programmes here.

Is a notification to the EU Commission necessary?

This may depend on the program.

Further remarks

None.

Portrait of Michael Bauer
Dr. Michael Bauer
Partner
Brussels - EU Law Office
Portrait of Helmer Krane
Helmer Krane
Associate
Brussels - EU Law Office