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Financial shield implemented by the Polski Fundusz Rozwoju S.A. (PFR)

Support mechanisms adopted so far by the Polish government, consisting of the so-called anti-crisis shield, turn out to be insufficient from the perspective of the needs of the entrepreneurs who are suffering the negative economic consequences of the COVID-19 epidemic. The government therefore decided to introduce an additional support programme – the PFR financial shield for companies and employees. The aim of the programme, implemented through the Polski Fundusz Rozwoju S.A. (PFR), is, in particular, to protect the labour market and ensure financial liquidity for entrepreneurs in the period of serious economic disruption. The assumed cost of the programme implementation is PLN 100 billion.

The first information about the financial shield, including the conditions for obtaining funding, was published in the first days of April this year. The program was notified to the European Commission for evaluation in terms of compliance with EU law, which was prerequisite for its implementation. The approval came on 27th April 2020 and already two days later banks have made application systems available to micro, small and medium-sized entrepreneurs.

Below we present a brief overview of the programme, known as of the date of its drafting.

SDZLEGAL Schindhelm team

FOR WHOM AND WHAT?

  1. Micro, small and medium-sized enterprises:
    • support will be granted to entrepreneurs:
      1. who have experienced a decrease in revenue of at least 25% in any month after
        1st February 2020 compared to the previous month or corresponding month last year;
      2. against whom no bankruptcy, restructuring or liquidation proceedings is pending;
      3. who as of 31st December 2019 or the date of financing were not in arrears with payments
        of taxes and social security contributions;
      4. who have the tax residence on the territory of Poland, settles taxes here for at least
        the last 2 financial years and whose ultimate beneficial owner does not have a tax
        residence in any so-called tax haven1;
      5. who does not run a business in the field of products or services that may result in
        a restriction or violation of individual freedoms or human rights, ethically or morally
        questionable areas (such as arms trade or production), as well is no credit institution,
        investment company, insurance or reinsurance company, pension fund etc.
    • support will be provided in the form of financial subsidies and financial compensation
      intended to cover the costs of conducting business activity or for earlier repayment of loans
      (up to a maximum of 25% of the loan value);
    • financial support will be served through electronic banking systems of selected banks;
      such systems have already been made available for entrepreneurs.

Micro, small and medium-sized enterprises: less than 250 employees or the annual turnover does not exceed EUR 50 million or the total annual balance sheet sum does not exceed EUR 43 million.

  1. Large enterprises:
    • support will be granted to entrepreneurs who have met at least one of the conditions
      stipulated in letters a) to e)
      :

      1. who have experienced a decrease in revenue of at least 25% in any month after
        1st February 2020 compared to the previous month or corresponding month last year OR
      2. who have lost the ability to produce or provide services OR
      3. who do not receive sales payments as a result of COVID-19 in an amount exceeding
        25% of the amount due OR
      4. who, due to disruptions in the functioning of the financial market, have no access
        to the capital market or credit limits in connection with new contracts OR
      5. who are participants of Sectoral Program related to COVID-19;

      as well as:

      1. against whom no bankruptcy, restructuring or liquidation proceedings is pending;
      2. who as of 31st December 2019 or the date of financing were not in arrears with payments
        of taxes and social security contributions;
      3. who have the tax residence on the territory of the European Economic Area, are
        registered on the territory of Poland, settle taxes here for at least the last 2 financial
        years and whose ultimate beneficial owner does not have a tax residence in any
        so-called tax haven2;
      4. who does not run a business in the field of products or services that may result
        in a restriction or violation of individual freedoms or human rights, ethically or morally
        questionable areas (such as arms trade or production), as well is no credit institution,
        investment company, insurance or reinsurance company, pension fund etc.;
    • support will be provided in a returnable and chargeable form (such as loans) with the
      possibility of compensation for pandemic damage;
    • the program will be operated via a special application form, made available online.

Large enterprises: more than 250 employees or the annual turnover exceeds EUR 50 million or the total annual balance sheet sum exceeds EUR 43 million.

HOW MUCH WILL I GET AND HOW MUCH MUST I GIVE BACK?

  1. Micro enterprises:
    • subsidy will be calculated as the product of the number of employees and the base amount (from PLN 12,000 up to 36,000), depending on the scale of the entrepreneur’s decline in revenues per employee;
    • the number of persons entitled to support will be determined at the end of the month preceding the submission of the application;
    • subsidy will also apply to persons cooperating on a different legal basis than the employment contract;
    • financing will be non-returnable up to 75% of the funds received, if certain conditions are met, mainly running a business and maintaining employment for a certain period of time.
  2. Small and medium enterprises:
    • can receive support up to PLN 3,500,000 for a period of 3 years;
    • subsidy will depend on the volume of turnover and the scale of their decrease; it will be calculated as a percentage (4%, 6%, 8%) of the entrepreneur’s sales revenue for the financial year 2019;
    • financing will be non-returnable up to 75% of the funds received, if certain conditions are met, mainly running a business and maintaining employment and recording further loss on sales for a certain period of time.

NOTE
Support gained under the financial shield can be combined with other types of support related to COVID-19 and other public support. However, it will not be possible to allocate funding for the same purpose for which public funds have been previously obtained from another source. The total limit of aid obtained from various sources will be EUR 800,000.

  1. Large enterprises:
    • liquidity financing:
      • will be granted in the form of loans, bonds, purchase of receivables or granting a guarantee with a maximum financing period of 2 years, with the possibility of extension for another 1 year;
      • will amount to max PLN 1 billion for one entrepreneur; it will be possible to use the money, among others, to cover the current costs of running a business such as payment of remuneration for employees, purchase of goods and materials, settlement of public and legal obligations;
      • will contain so-called “cash sweep” mechanism, providing for accelerated financing repayments if the financial situation of the entrepreneur improves;
    • preferential financing:
      • will consist of granting preferential loans for a period of 3 years, with the possibility of extension for another 1 year, in the amount of even up to PLN 750 million for one entrepreneur;
      • it will be possible to remit the loan up to 75% of its value; the amount of remission will be equal to the maximum amount of accumulated cash loss on sales of the entrepreneur in the period from the first month showing loss after 29th February 2020 for the next 12 months and not longer than until 30th June 2021, or in another period indicated by PFR (including shorter than the period of 12 consecutive months), but not longer than until 30th June 2021;
      • PFR will also be entitled to remit the unpaid financing upon meeting by the entrepreneur additional conditions such as maintaining the level of employment by the entrepreneur or commitment to recapitalize by the ultimate beneficial owner, as well as after taking into account the specific financial situation of the entrepreneur;
      • the entrepreneur will be entitled to allocate the financing to the entrepreneur’s current operating activities or restructuring activities;
    • investment financing:
      • will take form of a subscription for capital instruments by the state, in particular shares or stocks;
      • subscription for equity instruments will be on an arm’s length basis or as part of public aid;
      • will amount up to PLN 1 billion for one entrepreneur.

NOTE
Enterprises employing more than 150 employees, with an annual turnover for 2019 exceeding PLN 100,000,000, who are not beneficiaries of the government’s programme for micro, small and medium-sized enterprises, with a financial gap exceeding PLN 3,500,000 will be entitled to apply for support on the same basis as the large enterprises.

****

The specific terms of support and obligations of the entrepreneur will be specified in each contract. Each decision on granting support will be issued after an analysis of the documents presented in the application form and after their comparison with the data available in public registers. In the event of a negative decision or a decision not in accordance with the content of the application (the amount requested will not be allocated in full), the entrepreneur will be entitled to submit an appeal.

________________
1 Tax havens within the meaning of the EU Council Conclusions on the revised EU list of non-cooperative jurisdictions for tax
purposes (2020 / C 64/03).

2 Tax havens within the meaning of the EU Council Conclusions on the revised EU list of non-cooperative jurisdictions for tax
purposes (2020 / C 64/03).

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