1999/250/EC: Commission Decision of 14 October 1998 on measures to assist cooperatives taken by Italy under Law 49/85 (notified under document number C(1998) 2857) (Text with EEA relevance)
Date: 1998-10-14
Institutions: European Commission
Subjects: Italy, State aid, control of State aid, cooperative, share capital, shareholding

L 96/26

EN

Official Journal of the European Communities

10. 4. 1999

COMMISSION

COMMISSION DECISION

of 14 October 1998

on measures to assist cooperatives taken by Italy under Law 49/85

(notified under document number C(1998) 2857)

(Only the Italian text is authentic)

(Text with EEA relevance)

(1999/250/EC)

THE COMMISSION OF THE EUROPEAN COMMUNITIES,

Having regard to the Treaty establishing the European
Community, and in particular the first subparagraph of
Article 93(2) thereof,

Having regard to the Agreement on the European
Economic Area, and in particular Article 62(1)(a) thereof,

Having given the other Member States and parties
concerned notice to submit their comments, in accord-
ance with those Articles (1),

parties and asking them to submit any observations
within one month of the date of publication of the
notice.

(3)

No other Member State or interested third party
submitted observations. The Italian Government
submitted observations in several letters, dated 31
July 1997 and 21 January, 6 March, 13 May and 16
June 1998.

Whereas:

II

I

(4)

In its letter of 31 July 1997 the Italian Government
informed the Commission as follows:

(1)

that

By letter of 11 June 1997 the Commission
informed the Italian Government
it had
decided to initiate proceedings under Article 93(2)
of the Treaty in respect of fresh funding provided
for in Laws 538/93 and 644/94 and Decree-law
416/95 to finance certain provisions of Law 49/85
on measures to assist cooperatives; the Commission
asked the Italian Government
its
comments within one month of the date of the
letter.

to submit

(2)

The Commission also published a notice in the
Official Journal of the European Communities (2)
informing other Member States and interested

(1) OJ C 309, 7.10.1997, p. 3.
(2) See footnote 1.

(a) Law 49/85 had been repealed, and no aid had
been granted out of the funding notified to the
Commission;

(b) the aid had been replaced by a new scheme,
which would be notified under Article 92(3) of
the Treaty;

(c) one of the schemes provided for in the old law,
namely the Special Fund, was nevertheless to
continue to apply on a transitional basis to
cooperatives set up before 31 December 1996;
there were 21 cases, involving a total of ITL 40
billion and affecting 795 workers.

10. 4. 1999

EN

Official Journal of the European Communities

L 96/27

(5)

The new scheme has since been notified to the
Commission, and the Commission has approved it,
taking the view that
in principle it does not
comprise State aid within the meaning of Article
92(1) of the Treaty (3). The holdings which may be
taken under the new scheme are holdings in enter-
prises classified as small and medium-sized enter-
prises in accordance with the Community defini-
tion, and one of the conditions is that the public
investors be given special rights in respect of the
distribution of profits (2 % in the event that the
annual accounts show a profit, guaranteed even if
the general meeting decides not to pay a dividend
to the private members).

(6)

The proceedings which the Commission had
initiated now served no further purpose, except
with regard to the transitional application of the
Special Fund scheme in the 21 cases referred to.

III

(7)

(8)

The Special Fund is intended to provide one-off,
non-repayable financing for cooperatives to be set
up by unemployed production workers. The co-
operatives may purchase,
lease or manage firms
which previously employed the workers concerned,
and may undertake new business activities.

The financing provided takes the form of holdings
in the capital of the cooperative through cooper-
ative finance societies. The size of the holding may
not exceed three times the capital subscribed by
the worker members of the cooperative, or 75 % of
the equity of the cooperative. On the boards of the
cooperatives the finance societies have no more
than five votes out of 14. There is provision for
shares subscribed by the finance societies to be
redeemed by the workers at par value.

(9) When it initiated the proceedings, therefore, the
Commission took the view that to acquire these
holdings was not the behaviour of an investor in a
market economy, which meant that they consti-
tuted State aid within the meaning of Article 92(1)
of the Treaty. The aid might well be given to
enterprises in difficulty, as the takeover of old firms
in difficulty was expressly provided for. The
Community guidelines on State aid for rescuing
and restructuring firms in difficulty (4) had not been
complied with, so that the aid could not be consid-
ered compatible with the common market. The

(3) State aid measure N 26/98; letter to the Italian Government

No 6278 of 24 July 1998.
(4) OJ C 368, 23.12.1994, p. 12.

Commission also concluded that the measures were
incompatible even if intended for new enterprises,
as they could not be quantified in terms of invest-
ment or new jobs.

IV

(10) According to the documentation supplied, out of
the 21 cooperatives referred to in Section II four
carry on business in which there is no trade
between Member States. They are rather small-scale
operations on local markets,
in funeral services,
catering, school building management and the
military sector.

(11)

(12)

The others are all small enterprises, except for two
which have more than 100 employees and con-
sequently fall into the category of medium-sized
enterprises. The Italian Government has given
assurances that
the clause allowing the private
members to redeem the public holdings in these
societies at par value will not be applied. The
public holdings will thus be sold at their market
value. The Italian authorities have also stated that
of the equity in these cooperatives the majority or
at least a large stake in the neighbourhood of 50 %
will be held by private parties. The Italian Govern-
ment declares that in all of these cases the enter-
prise is a new one.

V

The Community guidelines on public authorities’
holdings in company capital state that the acquisi-
tion of a holding by the authorities does not consti-
tute State aid within the meaning of Article 92(1) of
the Treaty if the public investor’s conduct is that of
a private investor operating under normal market
economy conditions (5). To satisfy itself that this is
so, the Commission has to establish that there will
be a normal return on the capital invested, looking
at such factors as risk,
the rules governing the
distribution of profits, and the terms on which the
holding may be sold.

(13)

In the cases at issue the private stake is significant,
at around 50 %, which is a guarantee that the
transaction is reasonable and profitable. As for the
terms of sale of the public holding, the possibility
of redemption at par value has been excluded. The
Commission takes it, therefore, that sales will be on
market terms.

(5) Bull. 9/1984.

L 96/28

EN

Official Journal of the European Communities

10. 4. 1999

nent in the financial transfer involved here; but the
Commission has to conclude that there is not. The
extent of the stake held by private investors, who
are to contribute some 50 % of the equity, along
with the assurance provided by the mechanism
guaranteeing a
capital
invested, would be enough to show that the meas-
ures did indeed comply with the private investor
principle.

return on the public

concluded,

If the public holdings had had the characteristics
referred to in recital 16, the Commission would
have
the
Community guidelines on public authorities’ hold-
ings in company capital, that in principle they did
not constitute State aid within the meaning of
Article 92(1) of the Treaty,

accordance with

in

(18)

HAS ADOPTED THIS DECISION:

Article 1

The transitional application to the 17 cooperatives
referred to above of aid in the form of the Special Fund
capital holdings provided for in Italian Law 49/85 consti-
tutes State aid for purposes of Article 92(1) of the Treaty
which is incompatible with the common market and
which must be abolished.

Article 2

Italy shall take all the measures necessary to comply with
Article 1, and shall
inform the Commission thereof
within two months of the date of notification of this
Decision.

Article 3

This Decision is addressed to the Italian Republic.

Done at Brussels, 14 October 1998.

For the Commission

Karel VAN MIERT

Member of the Commission

(14)

(15)

Turning to the rules governing the return on the
holdings, it clearly cannot be said that the public
member of the cooperative can expect a normal
return on the capital invested, given the restrictions
on the distribution of profits and on voting rights
at general meetings, where the public member will
have no more than five votes out of 14. The worker
members will be free to decide not to declare a
dividend, and to distribute the profits in some
other way, for example by increasing wages.
In view of the rules governing the return on hold-
ings, therefore, the Commission must find that the
measures constitute State aid within the meaning of
Article 92(1). The Commission confirms that the
measures are incompatible with Articles 92 and 93,
being operating aid which will not fall over time
and which is not subject to a time-limit, contrary to
the relevant Community rules. The aid is therefore
incompatible with the common market, and must
be abolished.

(16) Despite the restrictions referred to in recital 14, the
return on capital might have been considered to be
on market terms if the public holding had carried a
special right to profits higher than those distributed
to the worker members, along the lines of what is
done in the new law on measures to assit co-
operatives, which the Commission has recently
approved (6). Such guarantees would have counter-
balanced the restrictions on voting rights and on
the distribution of dividends, and given the favour-
able approach which is taken to SMEs in the
Community guidelines on public authorities’ hold-
ings in company capital they would have provided
grounds for concluding that the public investor was
acting as a private investor would in a market
economy.
In circumstances of that kind, the Commission
takes the view that the question whether the reci-
pient enterprises are in difficulty is irrelevant, for
the following reasons. First, the Italian authorities
have ruled out that possibility. Second, a capital
injection into an enterprise in financial difficulties
may indeed comprise State aid, as is made clear in
the Community guidelines on State
aid for
rescuing and restructuring firms in difficulty, so
that there might conceivably be a State aid compo-

(17)

(6) See footnote 3.