Communication from the Commission — Community guidelines on State aid for rescuing and restructuring firms in difficulty
Date: 2004-10-01
Institutions: European Commission
Subjects: State aid, aid system, aid to undertakings, application of EU law, industrial restructuring

C 244/2

EN

Official Journal of the European Union

1.10.2004

COMMUNICATION FROM THE COMMISSION

COMMUNITY GUIDELINES ON STATE AID FOR RESCUING AND RESTRUCTURING FIRMS IN
DIFFICULTY

(2004/C 244/02)

(Text with EEA relevance)

1.

INTRODUCTION

cases in the past and is among the most distortive types
of State aid. Hence, the general principle of the prohibi-
tion of State aid as laid down in the Treaty should remain
the rule and derogation from that rule should be limited.

1. The Commission adopted its original Community Guide-
lines on State aid for rescuing and restructuring firms in
difficulty (1)
in 1994. In 1997, the Commission added
specific rules for agriculture (2). A new version of the
guidelines was adopted in 1999 (3) and will expire on
9 October 2004.

5. The ‘one time, last time’ principle is further reinforced, to
avoid the use of repeated rescue or restructuring aids to
keep firms artificially alive.

2. The Commission wishes through this version of

the
Guidelines, the text of which builds on previous versions,
to make certain changes and clarifications prompted by a
number of factors.

3. First, in the light of conclusions of the meetings of the
European Councils of Stockholm on 23 and 24 March
2001 and of Barcelona on 15 and 16 March 2002,
which called on Member States to continue to reduce
State aid as a percentage of gross domestic product while
towards more horizontal objectives of
redirecting it
common interest
including cohesion objectives, closer
scrutiny of the distortion created by allowing aid for
rescue and restructuring operations seems warranted.
This is also consistent with the conclusions of the Euro-
pean Council held in Lisbon on 23 and 24 March 2000
aimed at increasing the competitiveness of the European
economy.

the market.

4. The exit of inefficient firms is a normal part of the opera-
It cannot be the norm that a
tion of
company which gets into difficulties is rescued by the
State. Aid for rescue and restructuring operations has
given rise to some of the most controversial State aid

(1) OJ C 368, 23.12.1994, p. 12.
(2) OJ C 283, 19.9.1997, p. 2. See also the footnote relating to the

heading of Chapter 5.
(3) OJ C 288, 9.10.1999, p. 2.

In principle,

6. The 1999 guidelines made a distinction between rescue
aid and restructuring aid, whereby rescue aid was defined
as temporary assistance to keep an ailing firm afloat for
the time needed to work out a restructuring and/or a
liquidation plan.
restructuring measures
financed through State aid could not be undertaken
during this phase. However,
such strict distinction
between rescue and restructuring has given rise to diffi-
culties. Firms in difficulty may already need to take
certain urgent structural measures to halt or reduce a
worsening of the financial situation in the rescue phase.
These guidelines therefore widen the concept of ‘rescue
aid’ in order to allow the beneficiary to undertake urgent
measures, even of a structural nature,
such as an
immediate closure of a branch or other form of abandon-
ment of loss-making activities. Given the urgent character
of such aids, the Member States should be given the
opportunity to opt for a simplified procedure to obtain
their approval.

7. As

aids,

regards

building

restructuring

on
the 1994 guidelines, the 1999 guidelines continued to
require a substantial contribution from the beneficiary to
the restructuring. Within this revision, it is appropriate to
reaffirm with greater clarity the principle that this contri-
bution must be real and free of aid. The beneficiary's
contribution has a twofold purpose: on the one hand, it
will demonstrate that
the markets (owners, creditors)
believe in the feasibility of the return to viability within a
reasonable time period. On the other hand, it will ensure
that restructuring aid is limited to the minimum required
to restore viability while limiting distortion of competi-
tion. In this respect the Commission will also request
compensatory measures to minimise the effect on com-
petitors.

1.10.2004

EN

Official Journal of the European Union

C 244/3

8. The provision of rescue or restructuring aid to firms in
difficulty may only be regarded as legitimate subject to
certain conditions. It may be justified, for instance, by
social or regional policy considerations, by the need to
take into account the beneficial role played by small and
medium-sized enterprises (SMEs)
in the economy or,
exceptionally, by the desirability of maintaining a com-
petitive market structure when the demise of firms could
lead to a monopoly or to a tight oligopolistic situation.
On the other hand, it would not be justified to keep a
firm artificially alive in a sector with long-term structural
overcapacity or when it can only survive as a result of
repeated State interventions.

2. DEFINITIONS AND SCOPE OF THE GUIDELINES AND

LINKS WITH OTHER TEXTS ON STATE AID

2.1. Meaning of ‘a firm in difficulty’

9. There is no Community definition of what constitutes ‘a
firm in difficulty’. However, for the purposes of these
Guidelines, the Commission regards a firm as being in
difficulty where it is unable, whether through its own
resources or with the funds it is able to obtain from its
owner/shareholders or creditors, to stem losses which,
without outside intervention by the public authorities,
will almost certainly condemn it to going out of business
in the short or medium term.

11. Even when none of the circumstances set out in point 10
are present, a firm may still be considered to be in diffi-
culties, in particular where the usual signs of a firm being
in difficulty are present, such as increasing losses, dimin-
ishing turnover, growing stock inventories, excess capa-
city, declining cash flow, mounting debt, rising interest
charges and falling or nil net asset value. In acute cases
the firm may already have become insolvent or may be
the subject of collective insolvency proceedings brought
under domestic law. In the latter case, these Guidelines
apply to any aid granted in the context of such proceed-
ings which leads to the firm's continuing in business. In
any event, a firm in difficulty is eligible only where,
demonstrably,
through its own
resources or with the funds it obtains from its owners/
shareholders or from market sources.

recover

cannot

it

12. For the purposes of these Guidelines, a newly created
firm is not eligible for rescue or restructuring aid even if
its initial financial position is insecure. This is the case,
for instance, where a new firm emerges from the liquida-
tion of a previous firm or merely takes over such firm's
assets. A firm will in principle be considered as newly
created for the first three years following the start of
operations in the relevant field of activity. Only after that
period will it become eligible for rescue or restructuring
aid, provided that:

10. In particular, a firm is, in principle and irrespective of its
size, regarded as being in difficulty for the purposes of
these Guidelines in the following circumstances:

(a) it qualifies as a firm in difficulty within the meaning

of these Guidelines, and

(a) in the case of a limited liability company (1), where
more than half of its registered capital has disap-
peared (2) and more than one quarter of that capital
has been lost over the preceding 12 months;

(b) in the case of a company where at

least some
members have unlimited liability for the debt of the
company (3), where more than half of its capital as
shown in the company accounts has disappeared and
more than one quarter of that capital has been lost
over the preceding 12 months;

(c) whatever the type of company concerned, where it
fulfils the criteria under its domestic law for being the
subject of collective insolvency proceedings.

(1) This refers in particular to the types of company mentioned in the
first subparagraph of Article 1(1) of Council Directive 78/660/EEC
(OJ L 222, 14.8.1978, p. 11) as last amended by Directive 2003/51/
EC of
(OJ
L 178, 17.7.2003, p. 16).

the European Parliament

the Council

and of

(b) it does not form part of a larger business group (4)
except under the conditions laid down in point 13.

13. A firm belonging to or being taken over by a larger busi-
ness group is not normally eligible for rescue or restruc-
turing aid, except where it can be demonstrated that the
firm's difficulties are intrinsic and are not the result of an
arbitrary allocation of costs within the group, and that
the difficulties are too serious to be dealt with by the
group itself. Where a firm in difficulty creates a
subsidiary, the subsidiary, together with the firm in diffi-
culty controlling it, will be regarded as a group and may
receive aid under the conditions laid down in this point.

(2) By analogy with the provisions of Article 17 of Council Directive 77/
91/EEC (OJ L 26, 30.1.1977, p. 1) as last amended by the 2003 Act
of Accession.

(3) This refers in particular to the types of company mentioned in the
second subparagraph of Article 1(1) of Council Directive 78/660/
EEC.

(4) To determine whether a company is independent or forms part of a
group, the criteria laid down in Annex I to Commission Regulation
(EC) No 68/2001 (OJ L 10, 13.1.2001, p. 20), as amended by Regu-
lation (EC) No 363/2004 (OJ L 63, 28.2.2004, p. 20) will be taken
into account.

C 244/4

EN

Official Journal of the European Union

1.10.2004

2.2. Definition of ‘rescue and restructuring aid’

14. Rescue aid and restructuring aid are covered by the same
set of guidelines, because in both cases the public author-
ities are faced with a firm in difficulty and the rescue and
restructuring are often two parts of a single operation,
even if they involve different processes.

15. Rescue aid is by nature temporary and reversible assist-
ance. Its primary objective is to make it possible to keep
an ailing firm afloat for the time needed to work out a
restructuring or liquidation plan. The general principle is
that rescue aid makes it possible temporarily to support a
company confronted with an important deterioration of
its financial situation reflected by an acute liquidity crisis
or technical insolvency. Such temporary support should
allow time to analyse the circumstances which gave rise
to the difficulties and to develop an appropriate plan to
remedy those difficulties. Moreover, the rescue aid must
be limited to the minimum necessary. In other words,
rescue aid offers a short
respite, not exceeding six
months, to a firm in difficulty. The aid must consist of
reversible liquidity support in the form of loan guarantees
or loans, with an interest rate at least comparable to
those observed for loans to healthy firms and in particu-
lar the reference rates adopted by the Commission. Struc-
tural measures which do not require immediate action,
such as, the irremediable and automatic participation of
the State in the own funds of
the firm, cannot be
financed through rescue aid.

16. Once a restructuring or liquidation plan for which aid
has been requested has been established and is being
implemented, all further aid will be considered as restruc-
turing aid. Measures which need to be implemented
immediately to stem losses, including structural measures
(for example, immediate withdrawal from a loss-making
field of activity), can be undertaken with the rescue aid,
subject to the conditions mentioned in Section 3.1 for
individual aids and section 4.3 for aid schemes. Except
where use is made of the simplified procedure set out in
section 3.1.2, a Member State will need to demonstrate
that such structural measures must be undertaken imme-
diately. Rescue aid cannot normally be granted for finan-
cial restructuring.

long-term viability. Restructuring usually involves one or
more of the following elements: the reorganisation and
rationalisation of the firm's activities on to a more effi-
cient basis, typically involving the withdrawal from loss-
making activities, the restructuring of those existing activ-
ities that can be made competitive again and, possibly,
diversification in the direction of new and viable activ-
ities. Financial
injections, debt
restructuring (capital
reduction) usually has to accompany the physical restruc-
turing. Restructuring operations within the scope of these
Guidelines cannot, however, be limited to financial aid
designed to make good past losses without tackling the
reasons for those losses.

2.3. Scope

18. These Guidelines apply to firms in all sectors, except to
those operating in the coal (1) or steel sector (2), without
prejudice to any specific rules relating to firms in diffi-
culty in the sector concerned (3). With the exception of
point 79 (4), they apply to the fisheries and aquaculture
sector, subject to compliance with the specific rules laid
down in the Guidelines for the examination of State aid
to fisheries and aquaculture (5). Chapter 5 contains some
additional rules for agriculture.

2.4. Compatibility with the common market

19. Article 87(2) and (3) of the Treaty provide for the possi-
bility that aid falling within the scope of Article 87(1)
will be regarded as compatible with the common market.
Apart from cases of aid envisaged by Article 87(2), in
particular aid to make good the damage caused by
natural disasters or exceptional occurrences, which are
not covered here, the only basis on which aid for firms in
difficulty can be deemed compatible is Article 87(3)(c).
Under that provision the Commission has the power to
authorise ‘aid to facilitate the development of certain
economic activities (...) where such aid does not adversely
affect trading conditions to an extent contrary to the
common interest.’ In particular, this could be the case
where the aid is necessary to correct disparities caused by
market failures or to ensure economic and social cohe-
sion.

(1) Article 3 of Council Regulation (EC) No 1407/2002 (OJ
L 205, 2.8.2002, p. 1), as amended by the 2003 Act of Accession.
(2) Point 19 of the Communication from the Commission concerning
certain aspects of the treatment of competition cases resulting from
the expiry of the ECSC Treaty (OJ C 152, 26.6.2002, p. 5). Point 1 of
the communication from the Commission on rescue and restruc-
turing aid and closure aid for the steel sector (OJ C 70, 19.3.2002,
p. 21). Appropriate measures adopted in the context of the Multi-
sectoral Framework on regional aid for large investment projects
(OJ C 70, 19.3.2002, p. 8).

17. Restructuring, on the other hand, will be based on a
feasible, coherent and far-reaching plan to restore a firm's

(4) In other words, awards of aid to SMEs that do not fulfil the condi-
tions set out in this point 0 may nevertheless be exempted from
individual notification.
(5) OJ C 19, 20.1.2001, p. 7.

(3) Specific rules of

this nature exist

for the aviation sector (OJ

C 350, 10.12.1994, p. 5).

1.10.2004

EN

Official Journal of the European Union

C 244/5

20. Given that its very existence is in danger, a firm in diffi-
culty cannot be considered an appropriate vehicle for
promoting other public policy objectives until such time
as its viability is assured. Consequently, the Commission
considers that aid to firms in difficulty may contribute to
the development of economic activities without adversely
affecting trade to an extent contrary to the Community
interest only if the conditions set out in these Guidelines
are met. Where the firms which are to receive rescue or
restructuring aid are located in assisted areas,
the
Commission will take the regional considerations referred
to in Article 87(3)(a) and (c) of the Treaty into account as
described in points 55 and 56.

21. The Commission will pay particular attention to the need
to prevent the use of these Guidelines to circumvent the
principles laid down in existing frameworks and Guide-
lines.

22. The assessment of rescue or restructuring aid should not
be affected by changes in the ownership of the business
aided.

2.5. Recipients of previous unlawful aid

23. Where unlawful aid has previously been granted to the
firm in difficulty, in respect of which the Commission has
adopted a negative decision with a recovery order, and
where no such recovery has taken place in compliance
with Article 14 of Council Regulation (EC) No 659/1999
of 22 March 1999 laying down detailed rules for the
application of Article 93 of the EC Treaty (1), the assess-
ment of any rescue and restructuring aid to be granted to
the same undertaking shall take into account, first, the
cumulative effect of the old aid and of the new aid and,
secondly, the fact that the old aid has not been repaid (2).

3. GENERAL CONDITIONS

FOR THE AUTHORISATION
OF RESCUE AND/OR RESTRUCTURING AID NOTIFIED
INDIVIDUALLY TO THE COMMISSION

24. This Chapter deals exclusively with aid measures that are
notified individually to the Commission. Under certain
conditions,
the Commission may authorise rescue or
restructuring aid schemes: those conditions are set out in
Chapter 4.

(1) OJ L 83, 27.3.1999, p. 1. Regulation as amended by the 2003 Act

of Accession.

(2) Case C-355/95 P, Textilwerke Deggendorf v Commission and

others. [1997] ECR I-2549.

3.1. Rescue aid

3.1.1. Condi t i ons

25. In order to be approved by the Commission, rescue aid

as defined in point 15 must:

(a) consist of liquidity support in the form of loan guar-
antees or loans (3); in both cases, the loan must be
granted at an interest rate at least comparable to
those observed for loans to healthy firms, and in par-
ticular the reference rates adopted by the Commis-
sion; any loan must be reimbursed and any guarantee
must come to an end within a period of not more
than six months after the disbursement of the first
instalment to the firm;

(b) be warranted on the grounds of serious social difficul-
ties and have no unduly adverse spillover effects on
other Member States;

(c) be accompanied, on notification, by an undertaking
given by the Member State concerned to communi-
cate to the Commission, not later than six months
after the rescue aid measure has been authorised, a
restructuring plan or a liquidation plan or proof that
the loan has been reimbursed in full and/or that the
guarantee has been terminated; in the case of non-
notified aid the Member State must communicate, no
later than six months after the first implementation
of a rescue aid measure, a restructuring plan or a
liquidation plan or proof that the loan has been reim-
bursed in full and /or that the guarantee has been
terminated;

structural measures

(d) be restricted to the amount needed to keep the firm
in business for the period during which the aid is
authorised; such an amount may include aid for
in accordance with
urgent
point 16; the amount necessary should be based on
the liquidity needs of the company stemming from
losses; in determining that amount regard will be had
to the outcome of the application of the formula set
out in the Annex; any rescue aid exceeding the result
of that calculation will need to be duly explained;

(e) respect the condition set out in section 3.3 (one time,

last time).

in order to enable the credit

(3) An exception may be made in the case of rescue aid in the banking
sector,
institution in question to
continue temporarily carrying on its banking business in accordance
with the prudential legislation in force (Directive 2000/12/EC of the
European Parliament and of the Council, OJ L 126, 26.5.2000, p. 1).
At any rate, aid granted in a form other than loan guarantees or
loans fulfilling the conditions set out in point (a), should fulfil the
general principles of rescue aid and cannot consist in structural
financial measures related to the bank's own funds. Any aid granted
in a form other than loan guarantees or loans fulfilling the condi-
tions set out in point(a), will be taken into account when any
compensatory measures under a restructuring plan are examined in
accordance with points 38 to 42.

C 244/6

EN

Official Journal of the European Union

1.10.2004

26. Where the Member State has submitted a restructuring
plan within six months of the date of authorisation or, in
the case of non-notified aid, of implementation of the
measure, the deadline for reimbursing the loan or for
putting an end to the guarantee is extended until the
Commission reaches its decision on the plan, unless the
Commission decides that such an extension is not justi-
fied.

27. Without prejudice to Article 23 of Regulation (EC)
No 659/1999 and to the possibility of an action before
the Court of Justice, in accordance with the second sub-
paragraph of Article 88 (2) of the Treaty, the Commis-
sion will initiate proceedings under Article 88(2) of the
Treaty if the Member State fails to communicate:

(a) a credible and substantiated restructuring plan or a

liquidation plan, or

(b) proof that the loan has been reimbursed in full and/
or that the guarantee has been terminated before the
six-month deadline has expired,

28. In any event, the Commission may decide to initiate such
proceedings, without prejudice to Article 23 of Regu-
lation (EC) No 659/1999 and to the possibility of an
action before the Court of Justice in accordance with the
second subparagraph of Article 88(2) of the Treaty, if it
considers
the guarantee has been
misused, or
the six-month deadline has
expired, the failure to reimburse the aid is no longer justi-
fied.

the loan or

that, after

that

structural adjustment and the attendant
social and
economic problems onto other producers who are man-
aging without aid, and to other Member States. The
general principle should therefore be to allow the grant
of restructuring aid only in circumstances in which it can
be demonstrated that it does not run counter to the Com-
munity interest. This will only be possible if strict criteria
are met, and if it is certain that any distortions of compe-
tition will be offset by the benefits flowing from the
firm's survival (for instance, where it is clear that the net
effect of redundancies resulting from the firm's going out
of business, combined with the effects on its suppliers,
would exacerbate employment problems or, exception-
ally, where the firm's disappearance would result in a
monopoly or tight oligopolistic situation) and that,
in
principle, there are adequate compensatory measures in
favour of competitors.

3.2.2. Condi t i ons for th e a u th or i sa ti on of a i d

32. Subject to the special provisions for assisted areas, SMEs
and the agricultural sector (see points 55, 56, 57, 59 and
Chapter 5), the Commission will approve aid only under
the following conditions:

29. The approval of rescue aid does not necessarily mean
that aid under a restructuring plan will subsequently be
approved; such aid will have to be assessed on its own
merits.

Eligibility of the firm

33. The firm must qualify as a firm in difficulty within the

meaning of these Guidelines (see points 9 to 13).

3.1.2. Si mp li fi e d p r oce du r e

30. The Commission will as far as possible endeavour to take
a decision within a period of one month in respect of
rescue aids fulfilling all conditions set out in section 3.1.1
and the following cumulative requirements:

(a) the firm concerned satisfies at least one of the three

criteria set out in point 10;

(b) the rescue aid is limited to the amount resulting from
the application of the formula set out in the Annex
and does not exceed EUR 10 million.

3.2. Restructuring aid

3.2.1. B a si c p r i nci p le

31. Aid for

competition
concerns as it can shift an unfair share of the burden of

raises particular

restructuring

Restoration of long-term viability

34. The grant of the aid must be conditional on implementa-
tion of the restructuring plan which must be endorsed by
the Commission in all cases of individual aid, except in
the case of SMEs, as laid down in section 3.2.5.

35. The restructuring plan, the duration of which must be as
short as possible, must restore the long-term viability of
the firm within a reasonable timescale and on the basis of
realistic assumptions as to future operating conditions.
Restructuring aid must therefore be linked to a viable
restructuring plan to which the Member State concerned
commits itself. The plan must be submitted in all relevant
in particular, a
detail to the Commission and include,
market survey. The improvement in viability must derive
mainly from internal measures contained in the restruc-
turing plan; it may be based on external factors such as
variations in prices and demand over which the company
has no great influence, but only if the market assump-
tions made are generally acknowledged. Restructuring
must involve the abandonment of activities which would
remain structurally loss-making even after restructuring.

1.10.2004

EN

Official Journal of the European Union

C 244/7

36. The restructuring plan must describe the circumstances
that led to the company's difficulties, thereby providing a
basis for assessing whether the proposed measures are
appropriate. It must take account, inter alia, of the present
state of and future prospects for supply and demand on
the relevant product market, with scenarios reflecting
best-case, worst-case and intermediate assumptions and
the firm's specific strengths and weaknesses.
It must
enable the firm to progress towards a new structure that
offers it prospects for long-term viability and enables it to
stand on its own feet.

37. The plan must provide for a turnaround that will enable
the company, after completing its restructuring, to cover
all its costs including depreciation and financial charges.
The expected return on capital must be enough to enable
the restructured firm to compete in the marketplace on
its own merits. Where the firm's difficulties stem from
flaws in its corporate governance system, appropriate
adaptations will have to be introduced.

Avoidance of undue distortions of competition

38. In order to ensure that the adverse effects on trading
conditions are minimized as much as possible, so that the
positive effects pursued outweigh the adverse ones,
compensatory measures must be taken. Otherwise, the
aid will be regarded as ‘contrary to the common interest’
and therefore incompatible with the common market.
The Commission will have regard to the objective of
restoring the long-term viability in determining the
adequacy of the compensatory measures.

39. These measures may comprise divestment of assets,
reductions in capacity or market presence and reduction
of entry barriers on the markets concerned. When asses-
sing whether the compensatory measures are appropriate
the Commission will take account of the market structure
and the conditions of competition to ensure that any
such measure does not lead to a deterioration in the
structure of
for example by having the
indirect effect of creating a monopoly or a tight oligopo-
listic situation. If a Member State is able to prove that
such a situation would arise, the compensatory measures
should be construed in such a way to avoid this situation.

the market,

40. The measures must be in proportion to the distortive
effects of the aid and, in particular, to the size (1) and the
relative importance of the firm on its market or markets.
They should take place in particular in the market(s)
where the firm will have a significant market position

(1) In this respect the Commission may also take into account whether
the company in question is a medium-sized enterprise or a large
one.

after restructuring. The degree of reduction must be
established on a case-by-case basis. The Commission will
determine the extent of the measures necessary on the
basis of the market survey attached to the restructuring
plan and, where appropriate on the basis of any other
information at the disposal of the Commission including
that supplied by interested parties. The reduction must be
an integral part of the restructuring as laid down in the
restructuring plan. This principle applies irrespective of
whether the divestitures take place before or after the
granting of the State aid, as long as they are part of the
same restructuring. Write-offs and closure of loss-making
activities which would at any rate be necessary to restore
viability will not be considered reduction of capacity or
market presence for the purpose of the assessment of the
compensatory measures. Such an assessment will take
account of any rescue aid granted beforehand.

41. However, this condition will not normally apply to small
enterprises, since it can be assumed that ad hoc aid to
small enterprises does not normally distort competition
to an extent contrary to the common interest, except
where otherwise provided by rules on State aid in a par-
ticular sector or when the beneficiary is active in a
market suffering from long-term overcapacity.

42. When the beneficiary is active in a market suffering from
long-term structural overcapacity, as defined in the
context of the Multisectoral framework on regional aid
for large investments (2), the reduction in the company's
capacity or market presence may have to be as high as
100 % (3).

Aid limited to the minimum: real contribution, free of aid

43. The amount and intensity of the aid must be limited to
the strict minimum of the restructuring costs necessary
to enable restructuring to be undertaken in the light of
the existing financial resources of the company, its share-
holders or the business group to which it belongs. Such
assessment will take account of any rescue aid granted
beforehand. Aid beneficiaries will be expected to make a
significant contribution to the restructuring plan from
their own resources, including the sale of assets that are
not essential to the firm's survival, or from external finan-
cing at market conditions. Such contribution is a sign
that the markets believe in the feasibility of the return to
i.e., actual,
viability. Such contribution must be real,
excluding all future expected profits such as cash flow,
and must be as high as possible.

(2) OJ C 70, 19.3.2002, p. 8.
(3) In such cases, the Commission will only allow aid to alleviate the
social costs of the restructuring, in line with section 3.2.6 and envir-
onmental aid to clean up polluted sites which might otherwise be
abandoned.

C 244/8

EN

Official Journal of the European Union

1.10.2004

44. The Commission will normally consider the following
contributions (1) to the restructuring to be appropriate: at
least 25 % in the case of small enterprises, at least 40 %,
for medium-sized enterprises and at least 50 % for large
firms. In exceptional circumstances and in cases of par-
ticular hardship, which must be demonstrated by the
Member State,
the Commission may accept a lower
contribution.

45. To limit the distortive effect, the amount of the aid or the
form in which it is granted must be such as to avoid
providing the company with surplus cash which could be
used for aggressive, market-distorting activities not linked
to the restructuring process. The Commission will accord-
ingly examine the level of
the firm's liabilities after
restructuring, including the situation after any postpone-
ment or reduction of its debts, particularly in the context
of its continuation in business following collective insol-
vency proceedings brought against
it under national
law (2). None of the aid should go to finance new invest-
ment that is not essential for restoring the firm's viability.

No 659/1999 and to the possibility of an action before
the Court of Justice in accordance with the second sub-
paragraph of Article 88(2) of the Treaty.

48. Where restructuring operations cover several years and
involve substantial amounts of aid, the Commission may
require payment of the restructuring aid to be split into
instalments and may make payment of each instalment
subject to:

(i) confirmation, prior to each payment, of the satisfac-
tory implementation of each stage in the restructuring
plan, in accordance with the planned timetable; or

(ii) its approval, prior to each payment, after verification
that the plan is being satisfactorily implemented.

Specific conditions attached to the authorisation of aid

46. In addition to the compensatory measures described in
points 38 to 42, the Commission may impose any condi-
tions and obligations it considers necessary in order to
ensure that the aid does not distort competition to an
extent contrary to the common interest, in the event that
the Member State concerned has not given a commitment
that it will adopt such provisions. For example, it may
require the Member State:

(a) to take certain measures itself (for example, to open
up certain markets directly or indirectly linked to the
company's activities to other Community operators
with due respect to Community law);

(b) to impose certain obligations on the recipient firm;

(c) to refrain from granting other types of aid to the reci-

pient firm during the restructuring period.

implementation of

Full
conditions

restructuring plan and observance

of

47. The company must

fully implement

the restructuring
plan and must discharge any other obligations laid down
in the Commission decision authorising the aid. The
Commission will regard any failure to implement the
plan or to fulfil the other obligations as misuse of the aid,
without prejudice to Article 23 of Regulation (EC)

Monitoring and annual report

49. The Commission must be put in a position to make
certain that the restructuring plan is being implemented
properly, through regular detailed reports communicated
by the Member State concerned.

later than six months after approval of

50. In the case of aid to large firms, the first of these reports
will normally have to be submitted to the Commission
not
the aid.
Reports will subsequently have to be sent to the Commis-
sion at least once a year, at a fixed date, until the object-
ives of the restructuring plan can be deemed to have
been achieved. They must contain all the information the
Commission needs in order to be able to monitor the
implementation of
the
timetable for payments to the company and its financial
position and the observance of any conditions or obliga-
tions laid down in the decision approving the aid. They
must in particular include all relevant information on any
aid for any purpose which the company has received,
either on an individual basis or under a general scheme,
during the restructuring period (see points 68 to 71).
Where the Commission needs prompt confirmation of
certain key items of information, for example, on closures
or capacity reductions,
it may require more frequent
reports.

the restructuring programme,

(1) See point 7. This minimum contribution must not contain any aid.
This is not the case, for instance, where a loan carries an interest-
rate subsidy or is backed by government guarantees containing
elements of aid.
(2) See point 10(c).

51. In the case of aid to SMEs, transmission each year of a
copy of the recipient firm's balance sheet and profit-and-
loss account will normally be sufficient, except where
stricter conditions have been laid down in the decision
approving the aid.

1.10.2004

EN

Official Journal of the European Union

C 244/9

3.2.3. A me ndme nt of t h e r e str u c tu r i ng p la n

52. Where restructuring aid has been approved, the Member
State concerned may, during the restructuring period, ask
the Commission to agree to changes to the restructuring
plan and the amount of the aid. The Commission may
allow such changes where they meet the following condi-
tions:

(a) the revised plan must still show a return to viability

within a reasonable time scale;

(b) if the amount of the aid is increased, any requisite
compensatory measures must be more extensive than
those initially imposed;

(c) if the proposed compensatory measures are smaller
than those initially planned, the amount of the aid
must be correspondingly reduced;

(d) the new timetable for implementation of the compen-
satory measures may be delayed with respect to the
timetable initially adopted only for reasons outside
the company's or the Member State's control: if that
is not the case, the amount of the aid must be corres-
pondingly reduced.

53. If the conditions imposed by the Commission or the
commitments given by the Member State are relaxed, the
amount of aid must be correspondingly reduced or other
conditions may be imposed.

54. Should the Member State introduce changes

to an
approved restructuring plan without duly informing the
Commission, the Commission will
initiate proceedings
under Article 88(2) of the Treaty, as provided for by
Article 16 of Regulation (EC) No 659/1999 (misuse of
aid), without prejudice to Article 23 of Regulation (EC)
No 659/1999 and to the possibility of an action before
the Court of Justice in accordance with the second sub-
paragraph of Article 88(2) of the Treaty.

3.2.4. R e str u ctu r i ng a i d i n a ssi ste d a r e a s

55. Economic and social cohesion being a priority objective
of the Community under Article 158 of the Treaty and
other policies being required to contribute to this object-
ive under Article 159 (1), the Commission must take the
needs of regional development into account when asses-
sing restructuring aid in assisted areas. The fact that an

ailing firm is located in an assisted area does not,
however, justify a permissive approach to aid for restruc-
turing: in the medium to long term it does not help a
region to prop up companies artificially. Furthermore, in
order to promote regional development
is in the
regions own best
to apply its resources to
develop as soon as possible activities that are viable and
sustainable. Finally, distortions of competition must be
minimised even in the case of aid to firms in assisted
areas. In this context, regard must also be had to possible
harmful spill-over effects which could take place in the
area concerned and other assisted areas.

interest

it

56. Thus, the criteria listed in points 32 to 54 are equally
applicable to assisted areas, even when the needs of
regional development are considered. In assisted areas,
however, and unless otherwise stipulated in rules on State
aid in a particular sector, the conditions for authorising
aid may be less stringent as regards the implementation
of compensatory measures and the size of the benefi-
If needs of regional development
ciary's contribution.
in cases in which a reduction of capacity or
justify it,
market presence appear
to be the most appropriate
measure to avoid undue distortions of competition, the
required reduction will be smaller in assisted areas than
in non-assisted areas. In those cases, which need to be
demonstrated by the Member State concerned, a distinc-
tion will be drawn between areas eligible for regional aid
under Article 87(3)(a) of the Treaty and those eligible
under Article 87(3)(c) so as to take account of the greater
severity of the regional problems in the former areas.

3.2.5. A i d for r e str u ct u r i ng S M E s

57. Aid to small enterprises (2) tends to affect trading condi-
tions less than that granted to medium-sized and large
firms. This also applies to aid to help restructuring, so
that the conditions laid down in points 32 to 54 are
applied less strictly in the following respects:

(a) the grant of restructuring aid to small enterprises will
not usually be linked to compensatory measures (see
point 41), unless this is otherwise stipulated in rules
on State aid in a particular sector.

(b) the requirements regarding the content of reports will
be less stringent for SMEs (see points 49, 50 and 51).

(1) Article 159 of the EC Treaty provides, inter alia, that ‘the formula-
tion and implementation of the Community's policies and actions
and the implementation of
take into
account the objectives set out in Article 158 and shall contribute to
their achievement’.

the internal market shall

(2) As defined in the Commission Recommendation 2003/361/EC (OJ
L 124, 20.5.2003, p. 36). Until 31 December 2004, the relevant
definition is to be found in the Commission Recommendation 96/
280/EC (OJ L 107, 30.4.1996, p. 4).

C 244/10

EN

Official Journal of the European Union

1.10.2004

58. However, the ‘one time, last time’ principle (section 3.3)

applies in full to SMEs.

59. For SMEs the restructuring plan does not need to be
endorsed by the Commission. However, the plan must
meet the requirements laid down in points 35, 36 and 37
and be approved by the Member State concerned and
communicated to the Commission. The grant of aid must
be conditional on full implementation of the restructuring
plan. The obligation to verify that these conditions are
fulfilled lies with the Member State.

3.2.6. A i d to c ove r th e soci a l cost s of r e str u c tu r i ng

60. Restructuring plans normally entail reductions in or aban-
donment of the affected activities. Such retrenchments
are often necessary in the interests of rationalisation and
efficiency, quite apart from any capacity reductions that
may be required as a condition for granting aid. What-
ever the reason for them, such measures will generally
lead to reductions in the company's workforce.

61. Member States' labour legislation may comprise general
social security schemes under which redundancy benefits
and early retirement pensions are paid direct to redun-
dant employees. Such schemes are not to be regarded as
State aid falling within the scope of Article 87(1) of the
Treaty.

62. Besides direct redundancy benefit and early retirement
provision for employees, general social support schemes
frequently provide for the government to cover the cost
of benefits which the company grants to redundant
workers and which go beyond its statutory or contractual
obligations. Where such schemes are available generally
without sectoral limitations to any worker meeting prede-
fined and automatic eligibility conditions, they are not
for firms
deemed to involve aid under Article 87(1)
the
if
undertaking restructuring. On the other hand,
schemes are used to support restructuring in particular
industries,
the
they may well
selective way in which they are used (1).

involve aid because of

63. The obligations a company itself bears under employ-
legislation or collective agreements with trade
to provide redundancy benefits and/or early

ment
unions,

(Kimberly Clark Sopalin),

(1) In its judgment in Case C-241/94, (France v Commission [1996]
ECR I-4551),
Justice
confirmed that the system of financing on a discretionary basis by
the French authorities, through the National Employment Fund, was
liable to place certain firms in a more favourable situation than
others and thus to qualify as aid within the meaning of Article 87(1)
of the Treaty. (The Court's judgment did not call into question the
Commission's conclusion that
the aid was compatible with the
common market).

the Court of

to meet

retirement pensions are part of the normal costs of a
business which a firm has
from its own
resources. That being so, any contribution by the State to
these costs must be counted as aid. This is true regardless
of whether the payments are made direct to the firm or
are administered through a government agency to the
employees.

64. The Commission has no a priori objection to such aid
when it is granted to firms in difficulty, for it brings
economic benefits above and beyond the interests of the
firm concerned, facilitating structural change and redu-
cing hardship.

65. Besides meeting the cost of redundancy payments and
early retirement, aid is commonly provided in connection
with a particular restructuring scheme for training, coun-
selling and practical help with finding alternative employ-
ment, assistance with relocation, and professional training
and assistance for employees wishing to start new busi-
nesses. The Commission consistently takes a favourable
view of such aid when it is granted to firms in difficulty.

66. The type of aid described in points 62 to 65 must be
clearly identified in the restructuring plan, since aid for
social measures exclusively for the benefit of redundant
employees is disregarded for the purposes of determining
the extent of the compensatory measures referred to in
points 38 to 42.

67. In the common interest, the Commission will ensure in
the context of the restructuring plan that social effects of
the restructuring in Member States other than the one
granting aid are kept to the minimum.

3.2.7. N e e d to i n for m t h e Commi ssi on of a n y a i d
t h e

fi r m du r i ng

r e c i p i e nt

g r a nte d to th e
r e str u c tu r i ng p e r i od

68. Where restructuring aid received by a large or medium-
sized enterprise is examined under these Guidelines, the
grant of any other aid during the restructuring period,
even in accordance with a scheme that has already been
authorised, is liable to influence the Commission's assess-
ment of
the compensatory measures
required.

the extent of

1.10.2004

EN

Official Journal of the European Union

C 244/11

69. Notifications of aid for restructuring a large or medium-
sized enterprise must indicate all other aid of any kind
which is planned to be granted to the recipient firm
during the restructuring period, unless it is covered by
the de minimis rule or by exemption regulations. The
Commission shall take such aid into account when asses-
sing the restructuring aid.

70. Any aid actually granted to a large or medium-sized
enterprise during the restructuring period, including aid
granted in accordance with an approved scheme, must be
notified individually to the Commission to the extent that
the latter was not informed thereof at the time of its deci-
sion on the restructuring aid.

71. The Commission shall ensure that the grant of aid under
approved schemes is not liable to circumvent the require-
ments of these Guidelines.

restructuring plan has been halted (whichever
is the
latest), the Commission will not allow further rescue or
restructuring aid. Exceptions to that rule are permitted in
the following cases:

(a) where restructuring aid follows the granting of rescue

aid as part of a single restructuring operation;

(b) where rescue aid has been granted in accordance with
the conditions in section 0, and this aid was not
followed by a State supported restructuring, if:

(i) the firm could reasonably be believed to be viable
in the long-term following the granting of rescue
aid, and

(ii) new rescue or restructuring aid becomes neces-
sary after at least five years due to unforeseeable
circumstances (2) for which the company is not
responsible;

3.3.

‘One time, last time’

(c) in exceptional and unforeseeable circumstances for

which the company is not responsible.

72. Rescue aid is a one-off operation primarily designed to
keep a company in business for a limited period, during
which its future can be assessed. It should not be possible
to allow repeated granting of rescue aids that would
merely maintain the status quo, postpone the inevitable
and in the meantime shift economic and social problems
on to other, more efficient producers or other Member
States. Hence, rescue aid should be granted only once
last time condition). In accordance with the
(one time,
same principle,
in order to prevent firms from being
unfairly assisted when they can only survive thanks to
repeated State support,
restructuring aid should be
granted once only. Finally, if rescue aid is granted to a
firm that has already received restructuring aid, it can be
considered that the beneficiary's difficulties are of a recur-
rent nature and that repeated State interventions give rise
to distortions of competition that are contrary to the
common interest. Such repeated State interventions
should not be permitted.

73. When planned rescue or restructuring aid is notified to
the Commission, the Member State must specify whether
the firm concerned has already received rescue or restruc-
turing aid in the past,
including any such aid granted
before the date of application of these Guidelines and any
unnotified aid (1). If so, and where less than 10 years have
elapsed since the rescue aid was granted or the restruc-
turing period came to an end or implementation of the

In the cases set out in points (b) and (c), the simplified
procedure mentioned in section 3.1.2 cannot be used.

74. The application of this rule will in no way be affected by
any changes in ownership of the recipient firm following
the grant of aid or by any judicial or administrative
procedure which has the effect of putting its balance
sheet on a sounder footing, reducing its liabilities or
wiping out its previous debts where it is the same firm
that is continuing in business.

75. Where a business group has received rescue or restruc-
turing aid,
the Commission will normally not allow
further rescue or restructuring aid to the group itself or
any of the entities belonging to the group unless 10 years
have elapsed since the rescue aid was granted or the
restructuring period came to an end or implementation
of the restructuring plan has been halted, whichever is
the latest. Where an entity belonging to a business group
has received rescue or restructuring aid, the group as a
whole as well as the other entities of the group remain
eligible for rescue or restructuring aid (subject to compli-
ance with the other provisions of these Guidelines), with
the exception of
the aid.
Member States must ensure that no aid will be passed on
from the group or other group entities to the earlier
beneficiary of the aid.

the earlier beneficiary of

(1) With regard to unnotified aid, the Commission will take account in
its appraisal of the possibility that the aid could have been declared
compatible with the common market other than as rescue or
restructuring aid.

(2) An unforeseeable circumstance is one which could in no way be
anticipated by the company's management when the restructuring
plan was drawn up and which is not due to negligence or errors of
the company's management or decisions of the group to which it
belongs.

C 244/12

EN

Official Journal of the European Union

1.10.2004

76. Where a firm takes over assets of another firm, and in
particular one that has been the subject of one of the
procedures referred to in point 74 or of collective insol-
vency proceedings brought under national law and has
already received rescue or restructuring aid, the purchaser
is not subject to the ‘one time,
last time’ requirement,
provided that the following cumulative conditions are
met:

(a) the purchaser is clearly separate from the old firm;

(b) the purchaser has acquired the old firm's assets at

market prices;

(c) the winding-up or court-supervised administration
and purchase of the old company are not merely
devices aimed at evading application of the ‘one time,
last time’ principle: the Commission may determine
that this was the case if, for example, the difficulties
encountered by the purchaser were clearly foreseeable
when it took over the assets of the old company.

so that it can assess whether they qualify as firms in diffi-
culty. Aid to enterprises active in a market suffering from
long-term structural overcapacity, irrespective of the size
of the beneficiary, must also be notified individually to
the Commission so that it can assess the application of
point 42.

4.3. Conditions

for

the authorisation of

rescue aid

schemes

80. In order to be approved by the Commission, rescue aid
schemes must satisfy the conditions set out in points (a),
(b), (d) and (e) of point 25. Furthermore, rescue aid may
not be granted for more than six months, during which
time an analysis must be made of the firm's position.
Before the end of that period the Member State must
either approve a restructuring plan or a liquidation plan,
or demand reimbursement of the loan and the aid corres-
ponding to the risk premium from the beneficiary.

77. It should, however, be stressed here that, since it consti-
tutes aid for initial investment, aid for the purchase of the
assets cannot be authorised under these Guidelines.

81. Any rescue aid granted for longer than six months or not
reimbursed after six months must be individually notified
to the Commission.

4. AID SCHEMES FOR SMES

4.1. General principles

78. The Commission will authorise schemes for providing
rescue and/or restructuring aid to small or medium-sized
enterprises in difficulty only where the firms concerned
correspond to the Community definition of SMEs. Subject
to the following specific provisions, the compatibility of
such schemes will be assessed in the light of the condi-
tions set out in Chapters 2 and 3, with the exception of
Section 3.1.2 which does not apply to aid schemes. Any
aid which is granted under a scheme but does not meet
any of those conditions must be notified individually and
approved in advance by the Commission.

4.2. Eligibility

79. Unless otherwise stipulated in rules on State aid in a par-
ticular sector, awards of aid under schemes authorised
from the date of application of these Guidelines, to small
or medium-sized enterprises will be exempted from indi-
vidual notification only where the enterprise concerned
meets at least one of the three criteria set out in point 10.
Aid to enterprises that do not meet any of those three
criteria must be notified individually to the Commission

4.4. Conditions for the authorisation of restructuring aid

schemes

82. The Commission will authorise restructuring aid schemes
only if the grant of aid is conditional on full implementa-
tion by the recipient of a restructuring plan that has been
approved by the Member State concerned and meets the
following conditions:

(a) restoration of viability: the criteria set out in points

34 to 37 apply;

(b) avoidance of undue distortions of competition: since
aid to small enterprises tends to distort competition
less, the principle set out in points 38 to 42 does not
apply unless it is otherwise stipulated in rules on
State aid in a particular sector; schemes should never-
theless provide that recipient firms must not increase
their capacity during the restructuring; for medium-
sized enterprises points 38 to 42 apply;

(c) aid limited to the minimum necessary: the principles

set out in points 43, 44 and 45 apply;

(d) amendment of the restructuring plan: any changes to
the plan must comply with the rules set out in points
52, 53 and 54.

1.10.2004

EN

Official Journal of the European Union

C 244/13

4.5. Common conditions for the authorisation of rescue

(g) where appropriate, the form and the degree of the

and/or restructuring aid schemes

compensatory measures;

83. Schemes must specify the maximum amount of aid that
can be awarded to any one firm as part of an operation
to provide rescue and/or restructuring aid,
including
where the plan is modified. Any aid exceeding that
amount must be notified individually to the Commission.
The maximum amount of aid granted for the combined
rescue and restructuring aid of any one firm may not be
more than EUR 10 million, including any aid obtained
from other sources or under other schemes.

84. In addition, the ‘one time,

last time’ principle must be

respected. The rule laid down in section 3.3 applies.

85. Member States must also notify measures individually to
the Commission where one firm takes over assets of
another firm which has itself already received rescue or
restructuring aid.

4.6. Monitoring and annual reports

86. Points 49, 50 and 51 do not apply to aid schemes.
However, it will be a condition of approval that reports
are presented on the scheme's operation, normally on an
annual basis, containing the information specified in the
Commission's instructions on standardised reports (1). The
reports must also include a list of all beneficiary com-
panies, indicating for each of them:

(a) company name;

(b) the company's sectoral code, using the NACE (2)

three-digit sectoral classification codes;

(c) number of employees;

(d) annual turnover and balance sheet value;

(e) amount of aid granted;

(f) amount and form of the beneficiary's contribution;

to

aid)

(1) See Annex III. A and B (standardised reporting format for existing
State
794/
2004 of 21 April 2004 adopting provisions for the implementation
of Council Regulation (EC) No 659/1999 laying down detailed rules
for the application of Article 93 of the EC Treaty (OJ L 140,
30.4.2004, p. 1).

Commission

Regulation

(EC) No

(2) Statistical classification of economic activities in the European Com-
munity, published by the Statistical Office of the European Commu-
nities.

(h) where appropriate, any restructuring aid, or other
support treated as such, which it has received in the
past;

(i) whether or not the beneficiary company has been
wound up or subject to collective insolvency proceed-
ings before the end of the restructuring period.

5. PROVISIONS APPLICABLE TO AID FOR RESTRUCTURING

IN THE AGRICULTURAL SECTOR (3)

5.1. Compensatory measures

87. Points 38 to 42, and 57 and 82(b) provide that the
requirement for compensatory measures is not normally
applied in the case of small enterprises, unless otherwise
stipulated in sector-specific State aid rules. In the agri-
the Commission will normally require
cultural sector,
compensatory measures,
in accordance with the prin-
ciples set out in points 38 to 42, to be carried out by all
recipients of restructuring aid, whatever their size.

5.2. Definition of excess capacity

88. For the purposes of these Guidelines, structural excess
capacity in the agricultural sector will be defined by the
Commission on a case-by-case basis taking account in
particular of the extent and trend for the relevant product
category over the past three years, of market stabilisation
measures, especially export refunds and withdrawals from
the market, of development of world market prices, and
of the presence of sectoral limits in Community legisla-
tion.

5.3. Eligibility for rescue and restructuring aid schemes

89. By way of derogation from point 79, the Commission
may also exempt aid to SMEs from individual notification
if the SME concerned does not meet at least one of the
three criteria set out in point 10.

(3) This covers,

for the purpose of

these Guidelines, all operators
involved in the primary production of agricultural products of
Annex I to the Treaty (farming). Aid measures in favour of enter-
prises processing and marketing agricultural products are not
covered by this Chapter. Aid to processing and marketing com-
panies is to be assessed in line with the general rules of these Guide-
lines. Fisheries and aquaculture are not covered by this chapter.

C 244/14

EN

Official Journal of the European Union

1.10.2004

5.4. Capacity reductions

tion must be implemented no later than one year after
the aid has been granted.

90. Where there is a structural excess of production capacity,
the requirement of irreversibly reducing or closing capa-
city set out in points 38 to 42 applies. Open farmland
may be re-used after 15 years following effective capacity
closure. Until then, it has to be maintained in good agri-
cultural and environmental condition for land no longer
used for production purposes,
in accordance with
Article 5 of Council Regulation (EC) No 1782/2003 of
29 September 2003 establishing common rules for direct
support schemes under the common agricultural policy
and establishing certain support schemes for farmers (1),
and with the relevant implementation rules.

95. In order to ensure the effectiveness of the closure of capa-
city undertaken at the relevant market level, the Member
State must give a commitment not to grant State aid for
capacity increases in the sector concerned. This commit-
ment shall remain in force for a period of five years from
the date where the required capacity reduction actually
has been achieved.

96. In determining eligibility for and amounts of restruc-
turing aid, no account shall be taken of the burdens of
compliance with Community quota and related provi-
sions at the level of individual operators.

91. Where the aid measure is targeted on particular products
or operators,
the production capacity reduction must
attain at least 10 % of that for which the restructuring aid
is effectively granted. For measures not so targeted, the
production capacity reduction must attain at least 5 %.
For restructuring aid granted in less favoured areas (2), the
capacity reduction requirement will be reduced by two
percentage points. The Commission will waive these
capacity reduction requirements where the decisions to
grant restructuring aid taken in favour of beneficiaries in
a given sector over any consecutive 12-month period do
not together involve more than 1 % of the production
capacity of that sector in the Member State concerned.
This rule may be applied at regional level in the case of
an aid regime limited to a given region.

the relevant market

92. The requirement of irreversibly reducing capacity may be
achieved at
(not necessarily
involving reductions by the beneficiaries of the restruc-
turing aid). Subject to compliance with common agri-
cultural policy provisions, Member States may choose
whatever capacity reduction system they wish.

level

93. The Member State must demonstrate that the capacity
reduction would be supplementary to any reduction
which would be applied in the absence of the restruc-
turing aid.

94. Where the capacity reduction is not sought at the level of
the beneficiary of the aid, measures to achieve the reduc-

(1) OJ L 270, 21.10. 2003, p. 1. Regulation as last amended by Regu-

lation (EC) No 864/2004 (OJ L 161, 30.4.2004, p. 48).

(2) As defined in Articles 13 and following of Council Regulation (EC)
No 1257/1999 (OJ L 160, 26.6.1999, p. 80), as last amended by
Regulation (EC) No 583/2004 (OJ L 91, 30.3.2004, p. 1).

5.5.

‘One time, last time’ condition

97. The principle that rescue or restructuring aid should be
granted once only also applies to the agricultural sector.
However,
instead of the period of 10 years set out in
section 3.3 a five-year period will apply.

5.6. Monitoring and annual report

98. The rules set out in Chapters 3 and 4 apply to moni-
toring and annual reports in the agricultural sector,
except for the obligation to supply a list of all aid benefi-
ciaries and certain items of information on each of them
(see point 86) Where recourse has been had to the provi-
sions of points 90 to 96, the report must also include
data showing the production capacity which has effec-
tively benefited from restructuring aid and the capacity
reduction achieved.

6. APPROPRIATE MEASURES AS REFERRED TO IN

ARTICLE 88(1)

adopt

99. The Commission will propose, by separate

appropriate measures

letter,
pursuant to Article 88(1) of the Treaty, that the Member
States
in
points 100 and 101, with regard to their existing aid
schemes. The Commission will make authorisation of any
future scheme conditional on compliance with those
provisions.

set out

as

1.10.2004

EN

Official Journal of the European Union

C 244/15

100. Member States which have accepted the Commission's
proposal must adapt their existing aid schemes which are
to remain in operation after 9 October 2004 within six
months in order to bring them into line with these
Guidelines.

101. Member States must indicate their acceptance of these
appropriate measures within one month following receipt
of said letter proposing appropriate measures.

7. DATE OF APPLICATION AND DURATION

102. The Commission will apply these Guidelines with effect

from 10 October 2004 until 9 October 2009.

103. Notifications registered by the Commission prior

to
10 October 2004 will be examined in the light of the
criteria in force at the time of notification.

104. The Commission will examine the compatibility with the
common market of any rescue or
restructuring aid
granted without its authorisation and therefore in breach
of Article 88(3) of the Treaty on the basis of these Guide-
lines if some or all of the aid is granted after their publi-
cation in the Official Journal of the European Union.

In all other cases it will conduct the examination on the
basis of the Guidelines which apply at the time the aid is
granted.

C 244/16

EN

Official Journal of the European Union

1.10.2004

Formula (1) to calculate maximum amount of rescue aid to qualify for the simplified procedure:

ANNEX

EBITt þ depreciationt þ working capitalt– working capitalt–1
2

(cid:1)

(cid:2)

The formula is based on the operating results of the company (EBIT, earnings before interest and taxes) recorded in the
year before granting/notifying the aid (indicated as t). To this amount depreciation has been added. Then changes in
working capital must be added to the total. The change in working capital is calculated as the difference between the
current assets and current liabilities (2) for the latest closed accounting periods. Similarly, if there would be provisions at
the level of the operating result, this will need to be clearly indicated and the result should not include such provisions.

The formula aims at estimating the negative operating cash flow of the company in the year preceding the application
for the aid (or before the award of the aid in case of non-notified aids). Half of this amount should keep the company in
business for a six-month period. Thus the result of the formula has to be divided by 2.

This formula can only be applied where the result is a negative amount.

In case the formula leads to a positive result, a detailed explanation will need to be submitted demonstrating that the
firm is in difficulty as defined in points 10 and 11.

Example:

Earnings before interest and taxes (EUR million)

Depreciation (EUR million)

(12)

(2)

Balance sheet (EUR million)

December 31, X

December 31, XO

Current assets

Cash or equivalents

Accounts receivable

Inventories

Prepaid expenses

Other current assets

Total current assets

Current liabilities

Accounts payable

Accrued expenses

Deferred income

Total current liabilities

Working capital

Change in working capital

10

30

50

20

20

130

20

15

5

40

90

(30)

5

20

45

10

20

100

25

10

5

40

60

(1) EBIT (earnings before interest and taxes as set out in the annual accounts of the year before the application, indicated as t) must be
increased with depreciation in the same period plus the changes in working capital over a two-year period (year before the application
and preceding year), divided by two to determine an amount over six months, i.e. normal period for permitting rescue aid.
(2) Current assets: liquid funds, receivables (client and debtor accounts), other current assets and prepaid expenses, inventories.

Current liabilities: financial debt, trade accounts payable (supplier and creditor accounts) and other current liabilities, deferred income,
other accrued liabilities, tax liabilities.

1.10.2004

EN

Official Journal of the European Union

C 244/17

Maximum amount of rescue aid = [–12 + 2 + (–30)] / 2 = –EUR 20 million.

As the outcome of the formula is higher than EUR 10 million, the simplified procedure described in point 30 cannot be
used. If this limit is exceeded, the Member State should provide an explanation of how the future cash-flow needs of the
company and the amount of rescue aid have been determined.