General Information
A key formal requirement for the approval of funding is the compliance with the provisions of the General Block Exemption Regulation (GBER) – Commission Regulation (EU) No 651/2014 of 17 June 2014.
Pursuant to Article 2(18) GBER, funding is excluded if a company qualifies as a “undertaking in difficulties” (UiD). This applies to companies that have existed for more than three years. The relevant reference date for the assessment is the date of registration in the Commercial Register.
The classification as a UiD is based on the most recent finalized annual financial statements.
A company is considered a “undertaking in difficulties” if at least one of the following criteria is met:
- Limited liability companies – insufficient equity
The (positive) equity capital is less than half of the subscribed share capital, including share premium. This is the case if more than half of the subscribed share capital has been lost due to accumulated losses.
- Partnerships – insufficient equity
The (positive) equity capital is less than half of the reported general partner’s capital / equity.
- Insolvency proceedings pending or imminent
The conditions for the opening of insolvency proceedings are met (illiquidity and/or over-indebtedness), or insolvency proceedings are already pending.
- Receipt of rescue or restructuring aid
The company has received rescue and/or restructuring aid and is still subject to the corresponding restructuring plan.
- Additional criteria for large enterprises (non-SMEs)
In the case of a large enterprise, it is considered a undertaking in difficulties over the last two years if both of the following indicators apply:
- The book-value-based debt-to-equity ratio exceeded 7.5, and
- The interest coverage ratio calculated on the basis of EBITDA was below 1.0.
Notes on the interpretation of the GBER criteria
- For the calculation the full subscribed share capital is used, regardless of the amount actually paid in. This also applies to privileged-startup limited liability companies.
- In companies where at least one partner has unlimited liability for the company’s debts (e.g., limited partnerships, general partnerships, GmbH & Co KG, or comparable partnerships), a company is seen as “in difficulties” if more than 50% of the equity shown in the balance sheet has been lost due to accumulated losses.
- The three-year rule (duration of existence) does not apply to large enterprises. For these companies, the UiD criteria apply from the date of registration in the Commercial Register.
- The UiD criteria cannot be replaced by a positive “going concern prognosis".
Are there any relief measures for certain companies?
Yes. Certain companies are exempt from the equity criteria (criteria 1 and 2).
The following are exempt from the review of the equity requirements:
- Sole proprietorships
- SMEs that are less than three years old (the relevant date is the date of registration in the Commercial Register or the date of establishment; this also applies to privileged-startup limited liability companies), and
- Cash-based accounting businesses (income–expenditure accounting).
For these companies, the criteria relating to insufficient equity (loss of more than half of the subscribed share capital or reported equity) do not apply.