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

Introduction

The Romanian Government issued several state aid measures for SMEs as well as large companies to tackle the fallout from the coronavirus outbreak, further detailed in the below. The scheme for large companies was approved by the European Commission but the implementing measures are now in the process of being adopted by the Government. In addition to these measures however, companies could also benefit from other measures available at EU level, as further detailed in the EU section. 

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.

National Public Support

Ministry of Public Finance (MPF) state guarantees and grants

Who is eligible for the aid?

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

Pursuant to recent amendments it was clarified that the following entities can benefit from the scheme under the same conditions as SME’s:

  • Small mid-cap enterprises meaning an enterprise (together with enterprises controlled by it, as well as controlling enterprises) whose number of employees is equal to or exceeds 250 but does not exceed 499, the annual turnover of which does not exceed EUR 100 million or the annual balance sheet of which does not exceed EUR 86 million; 
  • Individuals/entities of liberal professions, provided that they meet the qualification criteria for SMEs or small mid-cap enterprises.

Companies active in the following areas cannot benefit: (i) gambling, (ii) production or sale of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, narcotics and psychotropic substances,  (iii) investigation and protection activities except for protection and guard activities, as well as services for the security systems; (iv) financial intermediation, except for the activities ancillary to the financial intermediation; (v) insurance, except for the activity of the insurance agents and brokers; (vi) real estate transactions, except for the real estate transactions as activity of real estate agencies; (vii) lease and leasing activities.

Furthermore, the applicants must meet additional conditions such as:

  • They were not in difficulties on 31 December 2019 (according to the regulations of the EU Commission) and now have difficulties due to the coronavirus crisis;
  • Don’t act as defendant in any pending court procedures with the Ministry of Public Finance or the credit institution ensuring financing;
  • Not in insolvency;
  • Do not appear registered with overdue loans in the Credit Risk Center at the date of submission of request for state aid (payment delays may not represent an impediment as long as these are registered under categories A, B and C in the Credit Risk Center):
  • Are not forbidden to issue checks as of the date of approval given for the financing and have not failed to honour promissory notes in the last 6 months prior to the request for financing;
  • Provide security to the credit institution and also meet further eligibility criteria;
  • No unpaid taxes (unless the applicant undertakes to pay the taxes with the financing);

What does the aid consist of?         

For small and medium-sized enterprises (SMEs), the MPF offers guarantees of up to 80% of the value of the financing within the following maximum limits of the loan: 

  • Working capital loans (including non-revolving loans) – a maximum amount equal to the average working capital of the respective SME in the last two fiscal years, but not more than RON 5 million
  • Investment loans – a maximum amount of the financing of RON 10 million

RON 10 million is the maximum cumulative value of state-guaranteed financing that can be granted to an SME for working capital and investments. 

For micro and/or small enterprises, the MPF offers guarantees of up to 90% of the value of  working capital loans (including non-revolving loans) within a maximum value of the financing of RON 500,000 for micro-enterprises and RON 1 million for small businesses.

Furthermore, the financings will be granted for a maximum of 36 or 72 months and are limited to the higher of (i) two times the annual employment cost for 2019, (ii) 25% of the 2019 turnover, or (iii) the specific liquidity need of the beneficiary for the following 18 months. 

The MPF will also subsidise 100% of the interest for the loans to be guaranteed, both for micro, small and medium-sized enterprises and those covered by state aid or a de minimis scheme associated with this programme. The subsidy will apply until 31 October 2021. Starting from 2021, the interest payment shall be granted on an annual basis, only if the estimated economic growth for the year will be lower than the economic growth recorded in 2020.

Undertakings that conclude the financing described above, can benefit from a grant to cover the risk commission charged in relation to the above.

The maximum amount of the grant is:

  • The aggregate of (i) the value of the risk commission, (ii) the administration commission, and (iii) the interest of the loans / credit lines; but
  • Maximum EUR 800,000.

For the agriculture, fish and aquaculture sectors, there are certain specific provisions, including a different maximum limit, as follows:

  • For undertakings operating in the fish and aquaculture sector, a maximum value of EUR 120,000;
  • For primary producers of agricultural products, a maximum value of EUR 100,000.

In addition, it should be noted that the state guarantees will be secured, as follows:

  • for investment loans with a legal mortgage over the immovable/movable assets funded by the loans; and
  • for working capital loans, with a legal mortgage over all bank accounts opened by the beneficiaries with the credit institution.

Where to apply for the aid?

At national level via the online platform provided by the Romanian authorities for submitting applications: www.imminvest.ro. Undertakings must submit an online request to the National Fund for SMEs (FNGCIMM), which will assess the eligibility criteria provided for in the state aid scheme and will issue an approval in principle accordingly. FNGCIMM must provide its response on whether an agreement will be granted within maximum 14 calendar days as of registration of the request. If affirmative, the above-mentioned agreement will then be submitted by the FNGCIMM to the relevant credit institution which will provide the financing, requesting the FNGCIMM to grant the state guarantee in accordance with the provisions of the state aid scheme.

After the request is submitted by the credit institution, the FNGCIMM will provide to the credit institution the financing agreement along with the guarantee contract to be signed by the parties FNGCIMM will publish monthly lists with the registered beneficiaries.

Is a notification to the EU Commission necessary?          

No. The scheme was cleared by the Commission.

Further remarks

The total volume of guarantees granted by the MPF amounts to RON 20 billion for 2020, equivalent to approx. EUR 4.1 billion.

The initial total value of the grant provided to the companies contracting financing amounts to RON 1,106 million, equivalent of approx. EUR 282,42 million.

The initial budget was extended for direct grants by RON 726 million (approximately EUR 149 million), i.e. from the previously increased amount of RON 1 106 million (approximately EUR 227 million) to RON 1832 million (approximately EUR 376 million).

State aid under this scheme may be granted until 30 June 2021.


Ministry of European Funds (MEF) aid

Who is eligible for the aid?

The following entities whose activities (i) have been affected by the coronavirus crisis or (ii) were stopped through military ordinances during the state of emergency, or (iii) restricted during the state of alert, can apply and benefit from these support measures:

  • Small and medium-sized enterprises (SMEs), companies that have (i) less than 250 employees and (ii) net annual turnover of up to EUR 50 million or a balance sheet total  (i.e. fixed assets + current assets + upfront expenses) not exceeding EUR 43 million according to the latest approved financial statements;
  • Authorized self-employed person (ASP), i.e. an undertaking, without legal personality, organized by an individual who uses, mainly, his labour force to provide services;
  • Personal medical office (PMO), i.e. undertaking, with or without legal personality, provider of public or private, preventive, curative, recovery and emergency medical services, coordinated by a head doctor, with doctors or authorized medical staff employees or collaborators;
  • Non-governmental organizations (NGOs) which carry out economic activities.

Companies active in gambling, production of weapons, tobacco or alcohol cannot benefit from the aid.

The applicants must meet general conditions such as (i) not in difficulties on 31 December 2019 (according to the regulations of the EU Commission regulations) and now have difficulties due to the coronavirus crisis, (ii) no decisions have been issued for recovery of state aid which were not fully recovered; and (iii) not being subject to preventive reorganisation, liquidation, insolvency or bankruptcy procedures.

What does the aid consist of?

MEF offers three types of grants, as follows:

1. Micro-grants for working capital from non-reimbursable external funds

Such grants amount to EUR 2,000 per undertaking are available to SMEs, ASPs and PMOs, .

In addition to the general conditions, mentioned in the section ‘Who is eligible for the aid?’ above, the applicants must meet specific conditions, such as:

  • SMEs which did not have any employees on 31 December 2019;
  • ASPs and NGOs operating in certain fields (e.g., printing, media, editing, IT and telecommunications, leasing, education, sports etc.);
  • ASPs and PMOs involved in the provision of transport, equipment, evaluation, diagnosis and treatment of patients diagnosed with coronavirus and did not receive any medical incentive;
  • Carried out activities for at least one year prior to submitting the application (except for the ASPs and PMOs where it is sufficient if they started their activity as of 1 February 2020),
  • Had a turnover of at least EUR 5,000 in the year prior to the submission of the application (except for eligible ASPs, NGOs and PMOs)
  • Still carry out activities for at least 6 months from the date the micro-grant is received.

Micro-grants can be used for expenses related to inventories or operational activities, current debts, rents, service and repair services for basic current activities, medical protection equipment, the acquisition of inventory objects, equipment, machines, installations, technologies and other independent facilities required for resuming economic activities or payment of tax to the state budget (except for consultancy or studies related services or other similar indirect services).

2. Grants for working capital

Such grants available to SMEs and NGOs, as a fixed amount or percentage based on the 2019 turnover, as follows:

  • EUR 2,000 for a turnover between EUR 5,000 and EUR 13,500;
  • 15% of the turnover if the turnover was between EUR 13,501 and EUR 1,000,000, but only up to EUR 150,000;
  • EUR 150,000 for a turnover amounting over EUR 1,000,000;
  • If several affiliated entities apply, the aggregated value of the grant cannot exceed EUR 250,000. However, if one affiliate is not an SME, the maximum value of the grant is EUR 150,000, provided that one application has been submitted.

In addition to the general conditions, mentioned in the section ‘Who is eligible for the aid?’ above, all applicants must meet specific conditions, such as:

  • SMEs shall carry out activities in certain fields (e.g. food industry, printing, transportation, storage, hotels, editing, media, telecommunications, leasing, sports, culture etc.);
  • NGOs operating in the education sector;
  • Hold an emergency certificate;
  • Had an operational profit in at least one of the previous two financial years;
  • Co-finance at least 15% of the grant received to the working capital requirements;
  • Maintain, or supplement, the number of employees for a period of at least 6 months starting from the date the grant was received.

Grants for working capital can be used for expenses related to inventories or operational activities, current debts, rents, service and repair services for basic current activities, medical protection equipment, the acquisition of inventory objects, equipment, machines, installations, technologies and other independent features required for resuming economic activities or payment of tax to the state budget (except for consultancy or studies related services or other similar indirect services).

3. Investment grants

Such grants are available to SMEs, and range between EUR 50,000 to EUR 200,000 based on the investment requirements of the projects submitted.

In addition to the general conditions, mentioned in the section ‘Who is eligible for the aid?’ above, the applicants must meet specific conditions, such as:

  • The beneficiaries carry out activities in certain fields (e.g. food industry, drinks production, production of clothes, production of paper printing, metallic constructions industry, production of electrical equipment, production of transportation vehicles, energy production, transportation, education, sports etc.);
  • Operate in one of the above-mentioned fields for at least 1 year before the submission of the application;
  • Had an operational profit in at least one of the previous two financial years;
  • Carry out the business for at least three years after the investment implemented;
  • At least 50% of the estimated revenues (as per the submitted business plan) is achieved in the first two years, and the remainder by the end of the third year;
  • Co-finance at least 15% of the value of the investment for the less developed regions and 30% for Bucharest – Ilfov region.

Investment grants can be used for investments related to (i) construction of new buildings or acquisition of new buildings, acquisition of equipment, software etc., (ii) stocks of medical equipment, (iii) the set-up, extension, upgrade of production/services unit.

A beneficiary can apply for all three forms of aid, but the total state aid does not exceed EUR 800,000.

For the agriculture, fish and aquaculture sectors, the maximum limits are as follows:

  • For undertakings operating in the fish and aquaculture sector, a maximum value of EUR 120,000;
  • For primary producers of agricultural products, a maximum value of EUR 100,000.

Where to apply for the aid?

At national level through the online platform provided by the Romanian authorities for submitting the request is https://granturi.imm.gov.ro. Undertakings must submit an online request to the Project Implementation Unit (“UIP”), created within the Ministry of Economy, Energy and Business Environment (MEEMA) in association with the Agency for SMEs, Attracting Investment and Promoting Export (AIMMAIPE) which will assess the eligibility criteria provided by the State Aid Scheme and, will issue the financing agreement, in electronic form. The above-mentioned agreement will then be signed by the applicant, with electronic signature, and uploaded in the platform within 5 days from receiving the agreement (together with the proof of payment of the co-financing requirements, for grants for working capital and investment grants). After the agreement is also signed by the Tertiary Ordinator Officer and uploaded in the platform, the partner credit institution selected by the applicant will be electronically notified that payment can be executed.

For investment grants, the financing agreements shall be concluded until 31 December 2020.

Is a notification to the EU Commission necessary?

No. The scheme was approved by the EU Commission.

Further remarks

The budget for the measure is as follows:

  • For micro grants for working capital from non-reimbursable external funds, the total value amounts to EUR 100 million;
  • For grants for working capital, the total value amounts to EUR 350 million;
  • For investment grants, the total value amounts to EUR 550 million and the budget is split between regions Romania.

State aid scheme for SMEs and large companies

Who is eligible for the aid?

The following entities can benefit from the aid:

  • Small and medium-sized enterprises (SMEs) (i.e. companies that have (i) less than 250 employees and (ii) net annual turnover of up to EUR 50 million or a balance sheet total (i.e. fixed assets + current assets + upfront expenses) not exceeding EUR 43 million according to the latest approved financial statements) with a turnover exceeding RON 20 million (approximately EUR 4 million) in 2019; and
  • Large enterprises, i.e. entities which have employees, turnover or assets higher than the thresholds for SMEs

Companies active in the following areas cannot benefit: (i) gambling, (ii) production or sale of weapons, ammunition, explosives, tobacco, alcohol, substances under national control, narcotics and psychotropic substances, (iii)  investigation and protection activities, (iv) financial intermediation and insurance, (v) real estate transactions (building or acquiring real estate for developing rental/selling activities).

Furthermore, the applicants must meet additional conditions such as:

  • They are not subject to State aid recovery decisions;
  • Not in insolvency;
  • Present debt service type A, B or C starting with 1 December 2019 as per the Credit Risk Center (this condition is considered fulfilled if a different debt service type is registered after the date of declaring the state of emergency on the Romanian territory (16 March 2020) and is caused by the difficulties generated by the COVID-19 pandemic according to a declaration on the beneficiary's own responsibility);
  • They were not in difficulties on 31 December 2019 (according to the regulations of the EU Commission) and now have difficulties due to the coronavirus crisis;
  • They have settled any debt towards the State budget (in case of working capital loans, before the first drawdown of the loan);
  • They are not parties in litigation against EximBank nor involved as defendants in litigation with the MPF.

What does the aid consist of?         

Loan guarantees for an amount of up to 90% of the loan principal for new loans or up to 50% of the principal for existing loans (but not non-performing loans) granted prior to the implementation of this scheme provided certain conditions are met, e.g.:

  • For new loans, the minimum level of the interest rate cannot fall below 2.35% p.a. during the entire credit period; and
  • For existing loans, the guarantees will be granted where (i) the financing bank amends the loan agreement (increase in value, extending maturity etc.) or (ii) if there would be a loss of value of collateral, the financing bank commits to at least maintain the original conditions of the loan (e.g. not to decrease the amount of the loan).

Subsidised interest rates for loans provided that the annual interest rate meets certain thresholds (to be confirmed once the measure is implemented).

General conditions applicable to both measures:

  • The state aid provides support for (i) investment loans with a maximum maturity of six years, or (ii) working capital loans with a maximum maturity of four years;
  • The maximum amount of the loans granted under the measure must not exceed:
    • double the annual cost with employees (including social contributions and cost with subcontractors) for 2019 or for the last year available. For undertakings incorporated on or after 1 January 2019, the maximum loan must not exceed the estimated annual costs with employees for the first two years in operation; or
    • 25% of the beneficiary’s total turnover in 2019; or
    • based on a statement of the beneficiary, the amount of the loan may be increased to cover the liquidity needs from the moment of granting for a period of 18 months for SMEs and 12 months for large undertakings. This is applicable where an undertaking, active in a particular sector or due to the specific nature of its activity, can justify why the limits provided under the thresholds described at (i) and (ii) are not appropriate to forecast their liquidity needs for the next months.
  • The expenses which can be financed under each measure/type of loan are as follows:
    • Investment loans can be used for investments related to (i) construction of new buildings or acquisition of new buildings, acquisition of equipment, software etc., (ii) the set-up, extension, upgrade of production/services unit, (iii) consultancy services, (iv) other expenses for the implementation of the investment project;
    • Working capital loans can be used for expenses incurred in the day to day business (i) in relation to commercial contracts/orders (e.g., acquisition of raw material and/or materials for supply, production, distribution etc.), and (ii) general expenses in the current business (including payment of debts towards the state budget).
  • Both measures are envisaged to apply only to nonrevolving cash facility type loans (including syndicated loans), however these cannot be used for refinancing other loans or expenses already incurred by the beneficiaries, for the payment of dividends or for the repayment of shareholders loans.
  • Applicants aiming to obtain support for investment loans must contribute at least 10% of the value of the investment project. Furthermore, the beneficiary must provide first ranking guarantees and security which shall cover at least (i) 100% of the loan principal in respect of the subsidised interest rates for loans or (ii) 10% of the principal for new loans and 50% of the principal for existing loans, in respect of the state loan guarantees.

These support measures may not be cumulated in respect of the same loan, cumulation being however allowed for separate loans, as long as the aggregate value of such loans does not exceed the maximum loan amount calculated according to the criteria set forth in the clearance decision from the European Commission.

Where to apply for the aid?

In principle the measures will be implemented by the development branch of the Import Export Bank of Romania EximBank SA (“EximBank”), which will act on behalf of the Romanian state. Aid will be granted either directly by EximBank or by credit institutions and other financial institutions which could act as financial intermediaries.

With a view to the application of the scheme, EximBank shall issue procedures which are subject to the approval of the Interministerial Committee for Finance, Guarantee and Insurance. Applications must be submitted before 31 May 2021 (which could be extended), either by uploading scanned copies on a dedicated platform provided by EximBank or by delivering the wet-ink originals to the headquarters of EximBank. The signing of the financing documentation and the granting of state aid must be completed by 30 June 2021 at the latest.

Is a notification to the EU Commission necessary?          

No. The scheme was approved by the Commission.

Further remarks

The aggregated budget for the measure is approx. EUR 800 million (EUR 400 million per measure).


COVID-19: Guarantees on factoring 

Who is eligible for the aid?

The beneficiaries of the measure are small and medium enterprises (SMEs) active in Romania. Financial institutions are excluded as beneficiaries.

Aid may be granted under the scheme to SMEs that on the date of application cumulatively meet the eligibility criteria, including:

  • are not in dispute, as a defendant, with the Ministry of Public Finance and/or the factoring provider (factor);
  • do not appear with overdue loans in the last 6 months or if they register arrears in the database of the Romanian Credit Risk Center, those are classified in categories A, B and C of the Credit Risk Bureau;
  • are not prohibited from issuing checks and do not appear with major incidents with promissory notes in the last 6 months in the database of the Romanian Payment Incidents Bureau;
  • are eligible according to the internal regulations of the factor;
  • do not register active or suspended seizures on bank accounts;
  • do not register outstanding fiscal obligations and other outstanding budgetary receivables administered by the central fiscal body;
  • absence of links with non-cooperative jurisdictions;
  • no decisions have been issued against the SMEs to recover state aid or if such decisions have been issued, they have already been executed;
  • are not in difficulty, within the meaning of the General Block Exemption Regulation (“GBER”), the Agricultural Block Exemption Regulation (“ABER”) or the Fisheries Block Exemption Regulation (“FIBER”) on 31 December 2019.

Aid is granted under the measure through factors as financial intermediaries. Credit institutions and other financial institutions may act as factors.

The measure is open to all sectors except the financial sector, insurance, the real estate sector, gambling and betting activities, production or sale of weapons, ammunition, explosives, tobacco, alcohol (excluding wine and beer), nationally controlled substances, narcotic and psychotropic plants, substances and preparations, rental and leasing activities, investigation and protection activities.

What does the aid consist of?

The aid consists of:

  1.    guarantees on factoring products with recourse against the seller; and
  2.    direct grants to cover fees related to the guaranteed factoring product.

within the scheme named “Programme IMM FACTOR - Commercial credit guarantee product and State aid scheme to support the activity of SMEs associated to the Programme”, (“the measure”) under the Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (the “Temporary Framework”).

The estimated budget  for the guarantees under the measure is of RON 1 billion, approximately EUR 206.83 million, while the estimated budget for the direct grants is RON 43 million, approximately EUR 8.89 million.

The maximum threshold for guarantees per beneficiary is RON 5 million (approximately EUR 1 million), and the maximum value of a guarantee for a factoring facility, awarded to a beneficiary per assigned debtor, is maximum RON 750,000 (EUR 150,000).

Through the direct grants, 50% of the interest value are subsidised over a period of 8 months from the approval of financing, and the guarantee costs, the administration commission and the risk commission are supported by the state budget for the entire duration of the factoring financing.

Where to apply for the aid?

The Romanian Ministry of Public Finance is the granting authority and the National Credit Guarantee Fund for SMEs (Fondul Național de Garantare a Creditelor pentru Întreprinderile Mici și Mijlocii, “FNGCIMM”) is responsible for administering the measure.

Is a notification to the EU Commission necessary?

No. The scheme was approved by the European Commission under the Temporary Framework.

Further remarks

Newly offered factoring products between 26 August 2020 and 30 June 2021 can be eligible under the measure.

Portrait of Horea Popescu
Horea Popescu
Managing Partner
Bucharest
Portrait of Cristina Popescu
Cristina Popescu
Senior Counsel and Head of CEE Insurance Practice Group
Bucharest
Portrait of Claudia Nagy
Claudia Nagy
Senior Associate
Bucharest