On 8 May 2020, the European Commission widened its Temporary Framework for State aid measures to support the economy in the Covid-19 outbreak. Member States are now able to provide so-called recapitalisation aid by providing equity to companies that have found themselves in crisis due to the pandemic. Instruments that can now be used included the acquisition of subordinated loans, hybrid loans, profit-participation rights, the provision of dormant equity, convertible bonds, and the acquisition of shares.
The approval of recapitalisation aid also means that the Federal Economic Stabilisation Fund will soon be able to operate. The Federal Government had notified this instrument to the European Commission on 24 March 2020. Talks for its approval under the state aid rules are still ongoing, but are expected to be completed shortly.
: “The widened framework presented by the European Commission is another important step providing for additional flexibility for financial aid to industry. The pandemic has pushed many companies into crisis without any fault on their part. Whilst the lockdown is being gradually eased, we may need to provide additional equity to our companies to safeguard the substance of our economy. Our goal is to go full throttle after the crisis.”