Undertaking in difficulty

Here you can find the European Commission’s definition of when a company is considered ‘in difficulty’ and accordingly cannot receive subsidy under EU’s General block exemption regulation.

According to EU’s state aid regulation under the General block exemption regulation, Innovation Fund Denmark cannot provide subsidy to so-called ‘undertakings in difficulty’. Here you can find the European Commission’s definition of when an undertaking is considered ‘in difficulty’. This can be found in article 2, no. 18 of COMMISSION REGULATION (EU) No 651/2014 of 17 June 2014.

‘Undertaking in difficulty’ means an undertaking in respect of which at least one of the following circumstances occurs:

a)

In the case of a limited liability company (other than an SME that has been in existence for less than three years or, for the purposes of eligibility for risk finance aid, an SME within 7 years from its first commercial sale that qualifies for risk finance investments following due diligence by the selected financial intermediary), where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital. For the purposes of this provision, ‘limited liability company’ refers in particular to the types of company mentioned in Annex I of Directive 2013/34/EU (1) and ‘share capital’ includes, where relevant, any share premium.

b)

In the case of a company where at least some members have unlimited liability for the debt of the company (other than an SME that has been in existence for less than three years or, for the purposes of eligibility for risk finance aid, an SMEwithin 7 years from its first commercial sale that qualifies for risk finance investments following due diligence by the selected financial intermediary), where more than half of its capital as shown in the company accounts has disappeared as a result of accumulated losses. For the purposes of this provision, ‘a company where at least some members have unlimited liability for the debt of the company’ refers in particular to the types of company mentioned in Annex IIof Directive 2013/34/EU.

c)

Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.

d)

Where the undertaking has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, or has received restructuring aid and is still subject to a restructuring plan.

e)

In the case of an undertaking that is not an SME, where, for the past two years:

1) the undertaking’s book debt to equity ratio has been greater than 7,5 and

2) the undertaking’s EBITDA interest coverage ratio has been below 1,0.

[1] The European Parliament’s and Council’s directive 2013/34/EU of 26 June 2013 on annual financial reports, consolidated financial reports and associated accounts for certain company types, on adjustment of the European Parliament and Council’s directive 2006/43/EC and on nullification of the Council’s directive 78/660/EEC and 83/349/EEC (EUT L 182 of 6.29.2013, p. 19)