EU companies that are in the support program will not be able to pay dividends

US, WASHINGTON (ORDO NEWS) — European companies that entered the capital injection program to deal with the consequences of the outbreak of coronavirus will not be able to pay dividends, buy shares or offer bonuses or similar remuneration, reports The Financial Times .

Such restrictions were introduced after the FT announced last week that the European Commission is considering further easing the government aid block rules to help pandemic-affected companies.

Spin-offs are also prohibited from taking “excessive risks” or even engaging in “aggressive commercial expansion,” the document says amending the recent amendment of government aid rules.

Companies will not be able to buy up competitors or other operators in a similar sector, while at the same time paying the state money, is added to the document.

These restrictions are aimed at preventing “unjustified distortions in competition” and reflect similar restrictions imposed on the banking sector at the height of the global financial crisis more than ten years ago.

European enterprises receiving more than 20% of the shares from an EU member state will also be required to develop a clear exit strategy from the support program after the pandemic.

Brussels also sets clear deadlines to give companies an incentive to pay aid. If by December 31, 2024 the state’s share is not reduced to below 15%, companies will be required to submit a commission restructuring plan for approval.

“This is more flexible / soft than the principles of the times of the financial crisis, when it was usually required to present a restructuring plan within 6 months after recapitalization,” said a person familiar with the opinion of the commission.

Contrary to the conditions established during the financial crisis, Brussels also encourages incentives for companies to exit schemes as soon as possible.

He calls on Member States to pay as close as possible to “market conditions” in order to avoid “potential distortion of competition caused by government interference.”

“A member state should create a mechanism to stimulate repurchase by January 1, 2023,” the document says.

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