PKF Attest

Economy

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Last March 2021, by Royal Decree-Law 5/2021, the Fund for the recapitalization of companies affected by Covid-19 was created, the management of which was entrusted to the public-private commercial company Cofides. It is a tool oriented to medium-sized companies of any sector which, enjoying viability before Covid-19 and having it in the medium and long term, were strongly affected by the effects of the pandemic.

The main criteria initially defined for accessing these funds have proved to be excessively demanding for companies that, having met most of the requirements, find that the impact of Covid-19 has manifested itself in 2021 and not in 2020, due, for example, to problems in the supply chain. There are companies that grew in 2020 but suffer in 2021 the impossibility of invoicing due to lack of public licenses not issued in 2020.

Changes in Recapitalization Fund regulations seek to cover more viable companies

On December 7, 2021, the Council of Ministers approved a series of amendments affecting the Fund's regulations, which are essentially the following:

  • The minimum turnover of companies eligible for this fund is reduced to 10 million euros.
  • The requirement of a 20% drop in 2020 turnover compared to 2019 as a justification for being experiencing difficulties due to Covid-19 is eliminated.
  • Justification for the deterioration of the capital structure is allowed in 2021 and not in 2020.
  • It is allowed to justify the fact of not being in crisis at a time later than December 31, 2019. The criteria for calculating the ordinary debt limit is modified, it will no longer be necessary to comply with the two aforementioned limits, but only with the less restrictive one.

If you want to know more, do not hesitate to contact us.

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Since June 28th PKF Attest has been a signatory of the United Nations Global Compact.

By adhering to this initiative, PKF Attest, as a firm, and all its employees commit to accept and implement the 10 Principles of the Global Compact, which involve respecting human rights and labor standards, fighting corruption, preserving the environment and acting with transparency in its activities and operations.

The 10 principles of the UN Global Compact are as follows:

1. Businesses should support and respect the protection of internationally proclaimed human rights.

2. Businesses should ensure that they are not complicit in human rights abuses.

3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.

4. Businesses should uphold the elimination of all forms of forced or compulsory labor.

5. Businesses should advocate for the effective abolition of child labor.

6. Businesses should uphold the elimination of discrimination in respect of employment and occupation.

7. Businesses should support a precautionary approach to environmental challenges.

8. Companies should undertake initiatives to promote greater environmental responsibility.

9. Businesses should promote the development and diffusion of environmentally friendly technologies.

10. Businesses should work against corruption in all its forms, such as extortion and bribery.

More information: pactomundial.org

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The Recovery Plan is structured around four axes (ecological and digital transition, social and territorial cohesion, and gender equality), which articulate ten policy levers, each consisting of thirty components. Within this framework, investment funds(69,528 million euros for the period 2021-2023) have been distributed as follows, with respect to each of the levers:

  1. Urban and rural agenda, fight against depopulation and development of agriculture: 20.7%.
  2. Resilient infrastructures and ecosystems: 15%.
  3. Fair and inclusive energy transition: 9.2%.
  4. An Administration for the 21st century: 6.1%.
  5. Modernization and digitalization of the ecosystem of our companies: 23.1%.
  6. Pact for science and innovation and reinforcement of the National Health System: 6.1%.
  7. Education and knowledge, continuing education and skills development:10.5%.
  8. New care economy and employment policies: 7.2%.
  9. Boosting the culture and sports industry: 1.2%.
  10. Modernization of the fiscal system for inclusive and sustainable growth.

For its part, the execution process will follow an information and financial control system. Its objectives are to ensure the reliability and achievement of milestones and objectives; to detect and correct fraud, corruption, conflict of interest and double financing; and to build on the systems already in place in the Public Administrations, reinforcing and adapting them to the new approach of the Recovery and Resilience Mechanism.

A three-level control will be carried out:

  • Level 1: internal control of the executing agency.
  • Level 2: ex ante control by the independent body of the acts of execution of expenditures.
  • Level 3: ex post control by means of audits (Intervención General de la Administración del Estado, IGAE)

In terms of organization, the control authority will be the IGAE, the responsible body being the Ministry of Finance. The National Anti-Fraud Coordination Service (of an autonomous nature) in contact with the European Anti-Fraud Office (OLAF), and the computerized management and monitoring systems in terms of milestones and objectives, execution of actions, double financing and register of final recipients will also be part of the system.

So far, 23 expressions of interest have been launched for the private sector, thirteen of which refer to digitalization. On the part of the Autonomous Communities and Municipalities, four expressions of interest have been launched.

Among the prospects for 2022, it is expected to reach cruising speed in Phase I: €26.9 billion from Recovery Plan funds. A cross-cutting impact is also expected from the PGE, as 26 of the 30 components of the plan are reflected in the budget.

As for Phase II, the Recovery and Resilience Facility is endowed with funds earmarked for the granting of non-reimbursable transfers and reimbursable loans that Member States may request until August 31, 2023. Disbursement is made in tranches and is linked to the achievement of committed milestones and targets:

  • Identification of potential projects and investments to be financed, which will be conditioned by the percentages of digital (20%) and green investment (37%).
  • Design of the optimal financial structure for channeling loan funds: directly through investments or subsidies from the different ministries, or through financial intermediaries.
  • Schedule of investments up to 2026 so that multi-year planning can be carried out and a stable framework for financing projects can be integrated into successive PGEs.

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On December 7, 2021, the Council of Ministers approved a series of amendments affecting the regulations of the Fund for the recapitalization of companies affected by COVID-19.

These modifications were made in response to the observation of the existence of numerous situations of companies that, experiencing difficulties directly or indirectly attributable to the pandemic, did not qualify in accordance with the criteria established at the creation of the Fund.

The most important changes in the requirements for companies to access the fund are:

  • The minimum turnover of companies eligible for this fund has been reduced to EUR 10 million from the previous EUR 15 million. The turnover range is therefore between EUR 10 million and EUR 400 million.
  • Access to the Cofides Fund is open to companies with a turnover of more than EUR 400 million, which did not reach the minimum amount of aid provided for in this Fund.
  • The Fund's new range of grants is between EUR 2.5 million and EUR 25 million.
  • The requirement for a 20% drop in 2020 turnover compared to 2019 is eliminated.
  • Justification of the deterioration of the capital structure (Net Equity/Net Financial Debt) is allowed based on the comparison of the closing of 2021 versus 2019.
  • Companies considered to be in crisis at the end of 2019 are accepted as beneficiaries of the Fund, provided that at the time of applying for assistance from the Fund, they had reversed this situation.
  • The maximum amount of aid from the Fund in the form of an ordinary loan will be the most favorable of: (i) twice the beneficiary's annual salary costs as of 2019 or the last year available, (ii) 25% of the total turnover for 2019. For the purposes of the latter calculation, the ICO Covid loans that the companies would have requested are also computed as ordinary debt with state aid.

These modifications apply to the Fund for the recapitalization of companies affected by COVID-19 created in March 2021, whose management was entrusted to the public-private commercial company Cofides. It is a tool oriented to medium-sized companies of any sector which, enjoying viability before COVID-19 and having it in the medium and long term, were strongly affected by the effects of the pandemic.

1 billion and is governed by the European and national Temporary Framework for State aid measures to support the economy in the context of COVID-19.

Cofides will operate with equity or hybrid instruments (such as participating loans), which must be amortized over a maximum term of 8 years, and with ordinary loans, which must be amortized over a maximum term of 6 years.

The capital instruments cannot result in an improvement of the 2019 year-end capital structure, understood as the Net Equity/Net Financial Debt ratio.

The six-month extension granted last November by the European Commission (from December 31, 2021 to June 30, 2022) provides an oxygen balloon, although perhaps insufficient (from December 31, 2021 to June 30, 2022) provides an oxygen balloon, although perhaps insufficient, so that the companies can use part of the funds necessary for their recovery and continuity.

A delayed effect, which will occur throughout 2022, is the end of the maximum grace period of the EUR 140 billion of bank loans guaranteed by ICO. The debt service on these loans will most likely exceed the cash generation capacity of many companies, especially those that requested them in 2020, to cover the heavy losses they were suffering.

Levante EMV

PKF Attest advises and assists companies to access the Cofides recapitalization fund
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PKF Attest advises and assists companies to access the Cofides recapitalization fund
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The Economist

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We offer advice on Financing, both for the Search for Capital and for the Obtaining of Debt, depending on the specific needs of your company.

 

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Commission Delegated Regulation (EU) 2021/2139 of 4 June 2021 supplementing Regulation (EU) 2020/852 of the European Parliament and of the Council and establishing the technical selection criteria for determining the conditions under which an economic activity is deemed to make a substantial contribution to climate change mitigation or adaptation and for determining whether that economic activity does not cause significant harm to any of the other environmental objectives

This Delegated Regulation establishes the technical selection criteria for determining under what conditions an economic activity shall be considered as making a substantial contribution to climate change mitigation and for determining whether such economic activity causes significant harm to any of the other environmental objectives of this Regulation.

Regulation (EU) 2020/852 establishes the general framework for determining whether an economic activity can be considered environmentally sustainable for the purposes of determining the degree of environmental sustainability of an investment. This Regulation applies to measures adopted by the Union or by Member States imposing on financial market participants or issuers any requirements in respect of financial products or corporate bond issues that are offered as environmentally sustainable, on financial market participants offering financial products, and on companies that are subject to the obligation to publish non-financial statements.

In this sense, the technical selection criteria should take into account the nature and magnitude of the economic activity and the sector to which they refer, and whether the economic activity is a transitional economic activity. Accordingly, these technical selection criteria should specify the minimum requirements that the economic activity must meet in order to be considered environmentally sustainable. An independent third party must verify compliance with these technical selection criteria in relation to these activities.

The technical selection criteria should ensure that the widest possible range of critical infrastructures, including, in particular, energy transport or storage infrastructures, or transport infrastructures. In addition, technical selection criteria should be established for educational, health, social services, artistic, recreational and entertainment activities. The sectors analyzed in this standard include the following:

  • Forestry
  • Environmental protection and restoration activities
  • Manufacturing
  • Energy
  • Water supply, sanitation, waste treatment and decontamination
  • Transportation
  • Building construction and real estate development activities
  • Information and communication
  • Professional, scientific and technical activities

For all these sectors, a series of generic criteria are established relating to the principle of not causing significant harm to adaptation to climate change, sustainable use and protection of water and marine resources, prevention and control of pollution in relation to the use and presence of chemical products, and protection and recovery of biodiversity and ecosystems.

With a view to ensuring that the implementation of Regulation (EU) 2020/852 evolves in line with technological, market and policy developments, this Regulation should be regularly reviewed and, where necessary, amended with regard to activities.

This Regulation shall enter into force on the twentieth day following that of its publication in the OJEU; it shall be directly applicable in each Member State as from January 1, 2022 and shall be binding in its entirety.

We offer regulatory advisory services in a business environment in which it is essential to have as much information as possible to support decision making. From the Regulation & Public Policy Group we are able to help manage business regulatory risk through our regulatory monitoring and regulatory intelligence services.

Contact us for any questions you may have.