[Updated 28 April 2020, originally published 22 March 2020]
In addition to drastic interest rate cuts, central banks and governments across the globe have taken action, predominantly in the form of fiscal spending (e.g., tax cuts and holidays) and large lending schemes, to help businesses weather the COVID-19 storm.
This paper provides an overview of the measures taken by central banks and governments in Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden, Switzerland, the UK and the EU. Governments are having to be reactive as the full impact of COVID-19 continues to unfold and we will update this alert periodically to capture new developments.
Cash is king and we continue to help clients identify how these government measures can reduce their expenses and bolster their cash position.
No international cap
To date, no ‘unified’ approach has been taken by governments in different jurisdictions, and the key thing for corporate groups to note is that there is no international cap on government aid. Corporate groups should have a plan in place to access what they can where they can.
We continue to receive queries about the EU’s State aid regime, which has traditionally restricted the form and quantity of financial assistance provided by Member States. The COVID-19 measures put in place by Member States and the UK will need to adhere to EU State aid rules and, for good order, we recommend that clients check that any government support they are considering accepting in light of COVID-19 is compliant with these rules. The European Commission (the executive branch of the EU) is fast tracking all necessary approvals and, on 19 March 2020, the European Commission adopted a Temporary Framework to enable Member States to use the full flexibility foreseen under State aid rules to support the economy in the context of the COVID-19 outbreak. On 3 April 2020, the European Commission extended the Temporary Framework to allow for government support of COVID-19 related R&D, the construction and upgrading of testing facilities and the production of products relevant to tackle the COVID-19 outbreak. The European Commission is currently consulting Member States on a further extension of the Temporary Framework to enable governments to recapitalise companies in need in return for equity and to grant subordinated loans. In light of these actions, we do not expect State aid rules to be an impediment to COVID-19 financial assistance from Member States and the UK.
Interaction with other legal obligations
COVID-19 caught governments by surprise and little thought has been given to the practical implications of a company accessing state-backed lending programmes. This means each company should carefully consider how government relief interplays with its existing financing arrangements, as waivers or consents to access the funding may be required. A general overview of how COVID-19 may impact a company’s obligations under financing agreements is available here, and we continue to assist clients with thinking about how best to access any government loan schemes, e.g., at the holdco level with any debt flowing into the banking group as equity.
Adherence to directors’ duties
In these unprecedented times, directors of companies will need to be well-prepared by having a solid understanding of directors’ duties and the insolvency framework in the jurisdictions within which their businesses operate. Some jurisdictions have already taken steps to adapt insolvency law in light of COVID-19 by, for example, suspending the obligation to file for insolvency until later this year and to introduce new laws to permit company-specific bailouts. We continue to monitor these types of legal developments in order to assist clients during this difficult period.
See the following links for individual government responses or download the entire document here.