The coronavirus pandemic has affected many countries around the world. In many countries - as in Germany - the economy is massively affected. Here we provide an overview of the aid that other countries are offering their companies to help them survive the crisis. So that you can keep an overview, especially if your company has a subsidiary abroad.
Since the start of the coronavirus crisis, Italian legislators have implemented a series of measures designed to provide companies with financial support in the broadest sense.
These support measures are aimed at preventing insolvency among otherwise viable companies experiencing difficulties as a result of the crisis. Changes to provisions of company and accounting law have also been introduced to this end.
Of particular importance in this regard is that Italian legislators have postponed entry into force of the reform of insolvency law until 22 May 2022. A key element of the reform, which was originally scheduled to enter into force on 15 August 2020, is the creation of an early-warning procedure using statutorily prescribed crisis indicators. In the current macroeconomic crisis, legislators felt that this early-warning system threatened to morph into a “fire accelerant” for insolvency proceedings, so it will not take effect until 2024.
Also of practical importance is a new type of rehabilitation proceedings (“composizione negoziata per la soluzione della crisi d’impresa”) created by Italian legislators in August 2021, which bears some resemblance to rehabilitation mediation under sections 94–100 of the German Act on the Stabilisation and Restructuring Framework for Businesses (Unternehmensstabilisierungs- und restrukturierungsgesetz, StaRUG).
Alongside the above, legislators have also put in place other measures to tackle the coronavirus crisis aimed at
- encouraging investment, including the “110% superbonus”, which creates wide-ranging economic incentives to investment, in particular with regard to:
- measures to make buildings more energy efficient
- thermal insulation
- replacement of heating systems
- measures to make buildings more resilient to earthquakes
- roof-mounted PV systems
- charging stations for electric cars;
- provision of financial assistance (support for liquidity and capitalisation), including in the form of non-repayable grants;
- granting of tax relief.
Completing the picture, changes have also been made to the rules around short-time working allowances and time-limited prohibitions on dismissals have been introduced.
The lawyers, tax advisors and certified public accountants at our Bologna and Milan offices will be glad to provide advice and information.
After imposing the general lockdown on 17 March 2020, two days after the first round of local elections, the French legislators immediately enacted Emergency Law No 2020-290 of 23 March 2020 in Response to the Covid-19 Epidemic (Loi n° 2020-290 du 23 mars 2020 d'urgence pour faire face à l'épidémie de covid-19). In particular, the law authorised the French government, after declaring a public health emergency, to enact temporary statutory amendments by decree and to amend the provisions of the Book VI of the French Commercial Code (code de commerce) and thus of insolvency law. At first, the government did not make use of this authority, since it believed that the emergency aid being provided to enterprises would obviate the need to apply for commencement of insolvency proceedings. But after hearing reports from commercial courts, and having received a joint appeal issued by the most important associations in the restructuring field together with the French Chamber of Insolvency Administrators, the government realised that it had misjudged the situation.
In the following, we would like to describe for you the most important changes to French insolvency law that have resulted from Ordinance No 2020-341 (Ordonnance n° 2020-341) of 27 March 2020:
Obligation to apply for commencement of insolvency proceedings suspended – liquidity on 12 March 2020 decisive!
French insolvency law provides that in the event of illiquidity (cessation des paiements), the entrepreneur must within 45 days apply with the competent commercial court for commencement of insolvency proceedings in the form of either restructuring proceedings (redressement judiciaire) or consensual conciliation proceedings (conciliation). An enterprise is illiquid is if it is unable to pay its liabilities when due from its available assets. In the event of gross negligence, failure to file a timely application may be considered mismanagement and in some cases result in assumption of liability with respect to all liabilities of the insolvency estate.
As a result of the emergency legislation, the cut-off date for determining whether illiquidity exists is now 12 March 2020, irrespective of any subsequent deterioration in the liquidity situation of the respective enterprise. By freezing the definitive date for making the determination, all enterprises that were illiquid on 12 March 2020 are automatically exempt from the obligation to file for commencement of insolvency proceedings. The actual liquidation situation will first be revisited three months after the public health emergency is lifted in France. In cases of abuse, the court is at liberty to redefine the date of onset of illiquidity, which also establishes the period for avoidance in insolvency. In addition, enterprises remain entitled to apply for the commencement of insolvency proceedings that are conditioned on illiquidity. This involves, in particular, restructuring proceedings (redressement judiciaire) and liquidation proceedings (liquidation judiciare). In practice, however, these applications are processed by the commercial courts only if the applicant can demonstrate that it lacks sufficient liquidity to pay wages and salaries.
Extension of time limits in ongoing proceedings
In consensual conciliation proceedings (conciliation), negotiations are conducted with creditors under the oversight of a court-appointed conciliator – typically an insolvency administrator or a former commercial court judge – with the aim of preparing a pre-pack sale and, in some cases making new money available by providing collateral. The proceedings are limited by statute to a period of four months (with a one-month extension upon application). This period has now been extended to the end of the public health emergency, plus an additional three months. Irrespective of this, the court president may still decide to terminate the proceedings after receiving the report from the conciliator if it has been established that the court-defined objective – typically an agreement with creditors to restore liquidity – cannot be achieved.
Ongoing proceedings or stages of proceedings – such as the monitoring phase, where continued operation of the business has been ordered for six months – are automatically extended until the end of one month following the lifting of the public health emergency.
Insolvency plans in the implementation phase – in France, these are usually deferment plans calling for repayment over a period of up to 10 years – can be extended by one year if ordered during a three-month period following the lifting of the public health emergency. Under certain circumstances, this extension can also be ordered up to six months after the end of the aforementioned three-month period.
Upon application, the time limits imposed on management bodies can be extended until the end of a three-month period following the lifting of the public health emergency.
Simplified payment of insolvency pay
After a judgment has been entered concerning discontinuation of operations (liquidation judiciaire) or restructuring by transfer, the time limits for dismissals pose liability risks for insolvency administrators, in that the assumption of severance payments by the wage guarantee scheme depends on compliance with those time limits. They have now been extended to the end of one month following the lifting of the public health emergency in France.
In addition, the insolvency administrator must now report employee claims to the wage guarantee scheme without delay. The statutorily mandated consultation procedure, particularly with employee representatives, and the review by the judicial plan supervisor are no longer to be slotted ahead of the sending of the report.
On 13 March 2020, the Polish Health Ministry announced a state of emergency until further notice as a result of the SARS-CoV-2 pandemic, which was followed on 20 March 2020 by the announcement of a national epidemiological emergency. Educational institutions and businesses have since remained closed, with exceptions similar to those in Germany. Expanded restrictions on mobility have been in place since 25 March 2020, which are also essentially the same as those in Germany.
On 18 March 2020, the Polish government introduced a package of measures known as the tarcza antykryzysowa (“Anti-Crisis Shield”) designed to mitigate the economic consequences of the nationwide closures. With a total volume of PLN 212 billion (roughly EUR 47 billion, which corresponds to approximately 10% of Poland’s GDP), it is intended to give a boost to the Polish economy, with PLN 7.5 billion (approximately EUR 1.65 billion) being directed to the Polish healthcare system. The first laws were enacted on 28 March 2020. The following provides a brief overview of the important measures:
The Polish government will reimburse sole proprietorships with no employees a portion of the costs for operating the business in the event of a decline in turnover as a result of Covid-19. Decline in turnover is defined as a decline in the sale of goods or services, whether in terms of volume or value. For the purpose of calculation, total turnover during two consecutive calendar months that fall in the period 1 January 2020 up to the day prior to filing the subsidy application is compared with total turnover for two consecutive calendar months in the previous year. The amount of the subsidy depends on amount by which turnover declined. In the case of a complete loss of turnover, it is possible to apply for a one-time subsidy in the amount of PLN 2,080, gross, depending inter alia on turnover for the previous month.
Micro-enterprises (average of fewer than 10 employees and net turnover of less than EUR 2 million) that registered prior to 1 February 2020, as well as self-employed persons, are exempt from paying social insurance contributions for three months. Where there has been a loss of work, they receive a one-time payment amounting to the equivalent of approximately EUR 430 if their income has declined by at least 15% compared with the previous month, provided that income in the previous month was less than three times the average salary. Salaries of employees are subsidised at up to 40% of the average monthly salary. In addition, micro-entrepreneurs who exercised their business activity prior to 1 March 2020 and have at least one employee can apply for a one-time micro-loan of PLN 5,000 to cover their ongoing costs. This is granted out of the Labour Fund resources for at most 12 months, with no payment of principal for six months. Under certain circumstances, the loan does not need to be repaid.
Furthermore, banks are to modify the terms or repayment dates of loans granted to micro-enterprises and SMEs. In this regard, the loan must have been granted prior to 8 March 2020, and the modification must be based on an evaluation of the borrower’s financial and economic situation that was performed not earlier than 30 September 2019. The modification is made to the terms agreed upon between the bank and the borrower, but it must not result in a deterioration of the borrower’s financial and economic situation.
Enterprises can offset losses incurred in 2020 against 2019 income by retroactively taking a tax loss deduction on income tax and corporate tax. In order to do so, they need to have finalised their annual financial statements for 2020. The tax credit is available only if revenues in 2020 are at least 50% lower compared with 2019. Furthermore, income can be reduced one time by up to PLN 5,000,000.
Entrepreneurs who as a result of the SARS-CoV-2 pandemic are experiencing problems paying their tax liabilities on time can apply to have all or some of the arrears cancelled.
In addition, the following tax deadlines have been changed for enterprises that have suffered negative economic consequences from the coronavirus pandemic. In the regard, the tax authorities will not impose any additional (extension) fees or charge interest:
- The deadline for making income tax prepayments that are imposed on salaries for the months of March and April 2020 has been postponed.
- The deadline for paying income tax advances for the months of March to May 2020 has been postponed to 20 July 2020 to the extent that revenues for the month in question have fallen by at least 50% compared to 2019.
- The deadline for paying the minimum tax on commercial properties for the period March to May 2020 has been postponed to 20 July 2020 for certain taxpayers.
- “Small” taxpayers who decided to make tax prepayments in simplified form can opt out for the period March to December 2020 in order to improve their liquidity. Their monthly prepayments for this period will then be calculated on the basis of actual income.
- Municipalities have the authority to extend to 30 September 2020 the payment deadlines for land tax instalments that are due in April, May, and June 2020. They can also decide to exempt commercially used properties from land tax for a certain period.
The legislators in Poland have provided for the following subsidies under certain circumstances for the purpose of protecting jobs:
In the case of a complete business standstill, the affected employees receive, by agreement, salary that is reduced by up to 50%, which however may not fall below the minimum wage. During the period of loss of work, the employer receives a subsidy from the Fund for Guaranteed Employee Benefits (FGŚP) in the amount of up to 50% of the minimum wage for work, plus social insurance contributions for a period of three months. Restrictions concerning dismissals for reason of redundancy apply to this period (and the three-month period immediately following it).
The Polish Anti-Crisis Shield makes it possible for employers who have maintained their business but have suffered a decline in their turnover, which must be precisely quantified, to reduce employee working time by up to 20% (but ultimately by not more than one-half of full-time working time). Employees affected by the reductions receive remuneration that is reduced by up to 50%, which similarly may not be lower than the minimum wage. In the case of working time reduction, employee remuneration is supplemented from a fund by up to 40% of the average monthly salary for the previous quarter. The employer pays the social insurance contributions that are owed. This measure has a limited duration of three months. Restrictions concerning dismissals for reason of redundancy likewise apply to this period (and the three-month period immediately following it).
Because applications are reviewed in the order of their effects until the resources provided for labour protection are exhausted, enterprises should file applications as soon as possible.
Obligation to apply for insolvency proceedings
At this time, no changes have yet been made to Polish restructuring and insolvency legislation.