Emergency situation and support measures to companies

The emergency situation required, and still requires, the government and institutions a considerable effort to ensure an economic and financial support for struggling companies. Support measures for businesses can be divided into: measures for liquidity; measures for increase of corporate equity; and non-repayable allowances for those who suffered a decrease in turnover.

These refer to emergency provisions issued between March and November2020, i.e.:

• “Cura Italia” Decree (Law Decree dated 17 March 2020, no. 18, turned into Law dated 24 April 2020, no. 27);
• “Liquidity” Decree (Law Decree dated 8 April 2020, no. 23, turned into Law dated 5 June 2020, no. 40);
• “Rilancio” Decree (Law Decree dated 19 May 2020, no. 34, turned into Law dated 17 July 2020, no. 77);
• “August” Decree (Law Decree dated 14 August 2020, turned into Law dated 13 October 2020, no. 126);

in addition to four so-called “Ristori” decrees issued over last autumn.

Budget Law 2021 (Law n. 178/2020) also extended some emergency measures up to 30 June 2021, due to the extension of the European Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak. In fact, on 29 January 2021, the European Commission extended the temporary framework up to next 31 December, increasing its ceilings.

In fact, considering the persisting economic uncertainty and the strict domestic measures introduced to limit the spread of the virus, the European Commission decided to increase the ceilings provided by the temporary framework as follows:

• 225 thousand Euro for companies operating in the primary production of agricultural products (formerly: 100 thousand);
• 270 thousand Euro for companies operating in the fisheries and aquacultural sectors (formerly: 120 thousand);
• 1.8 million Euro for companies operating in all other sectors (formerly: 800 thousand Euro).

As provided in past years, these aids can be combined with “de minimis” aids up to 200 thousand Euro per company – up to 30 thousand Euro for companies operating in the fisheries and aquacultural sectors and up to 25 thousand for companies operating in the agricultural sector – over three fiscal years.

Those companies that have been particularly impacted by the Covid-19 crisis and suffered a decrease in turnover equal to at least 30% compared to 2019, can receive a State contribution to cover part of fixed costs that are not offset by revenues, of an amount equal to up to 10 million Euro per company (previously such limit was equal to 3 million).

Moreover, up to 31 December 2022, Member states can turn the repayable allowances granted – including loans – into direct grants, even in a later phase: the aim is to incentivize States to choose a repayable allowance as their first aid option.

Therefore, over the last year, a considerable number of regulations have been introduced to prevent and limit the negative effects on the economic system.

To date, the government is working to issue a new economic decree (“Sostegno” or “Ristori-quinques” Decree), aimed to support the most struggling economic sectors, given the persisting limitations to the performance of working activities.

The abovementioned regulations introduced many measures having a more or less immediate effect, in order to support production activities in different ways. For example, the “Rilancio” Decree introduced the clearance of IRAP 2019 settlement payment and of IRAP 2020 first instalment (art. 24 of Law Decree no. 34/2020).

This measures, which certainly helped those companies that registered a positive IRAP taxable income in 2019, did not however produce those benefits for most struggling taxpayers which were already in a difficult situation before the pandemic and therefore already had a reduced or null profitability in 2019. Substantially, the provision determined for companies an economic-financial benefit that is proportional to income generated in 2019.

Many regulations also substantially proposed a postponement of the deadlines for some payments due for 2020 to 16 March or 30 April 2021. Such postponements, however, do not have the required characteristics to be considered as development drivers, since they are only postponements of payments that will in any case be due by taxpayers.

Then, other measures tried to support companies’ liquidity both by granting some non-repayable contributions, proportioned to the loss in turnover suffered due to the pandemic emergency, and by favouring access to credit through the concession of different guarantees or other favourable measures. There are also some examples of hybrid favourable measures, such as the granting of favourable loans (already existing before the pandemic) combined with a non-repayable component. This is the case, for example, of loans managed by Sace - Simest company of Cassa e Depositi e Prestiti group aimed to favour internationalization (so-called 394/81 fund).

Such loans, which are granted at a favourable interest loan equal to one tenth of the “Rendistato” rate and including a non-repayable amount equal to up to 50% of the financed amount, are aimed at investing in the international development of Italian SMEs and MidCap companies, by supporting the increase of their equity, their participation in international fairs, their entry into foreign markets, the hiring of professional figures being highly skilled in internationalization processes, as well as the training of their personnel, the development of platforms and marketplace for the promotion of their products, and lastly the feasibility studies to assess the entrance in new markets.

These measures, which are certainly much efficient for the international development of Italian companies (and much expensive for the State), were a great success and the allocated resources were exhausted in a very short time (the available period to file loan applications was already closed by Simest half October 2020). Budget Law 2021 considerably re-funded the abovementioned 394/81 fund for internationalization, in order to deal with applications filed up to October 2020. Further funds are expected to be created for 2021.

In order to face the undercapitalization that has always affected Italian companies, art. 26 of “Rilancio” Decree introduced the creation of the so-called “Fondo Patrimonio PMI” (SME heritage fund), aimed to support and relaunch the Italian economic and production system through the co-investment by the State in the capital of middle-size companies (companies with revenues between 5 and 50 million Euro), which suffered a decrease in turnover in March and April 2020 by at least 33% compared to the same period in 2019 and which resolved, and executed, on a capital increase between 19 May 2020 and 30 June 2021.

In particular, the government grants a tax credit equal to 20% of subscribed capital to those subjects who made a capital contribution in cash (within the limit of 2 million Euros) and a concurring tax credit equal to 50% of losses exceeding 10% of equity, calculated before the losses themselves, up to 30% of the capital increase.

Besides tax credit, para. 12 of the same article introduced – with the creation of the abovementioned SME heritage fund – introduced the possibility to subscribe by 31 December 2020 subordinated bonds or securities issued by companies with revenues between 10 and 50 million Euros and a number of employees lower than 250, and who resolved on a capital increase – by 30 June 2021 – equal to at least 250.000 Euro.

Through this form of co-investment, the State undertakes to subscribe a subordinate debt issued by the company for a maximum amount equal to the lower value between three times as much the private capital increase and 12,5% of 2019 turnover, without any evaluation of the creditworthiness and with a remuneration at a favourable rate. The main benefits expected from this measure are, among others: the strengthening of the capital structure of SMEs thanks to the contribution of private capital and to the leverage effect of the State loan; the immediately available liquidity for companies; and an easier access to bank loans.

With reference to larger companies, with a turnover higher than 50 million Euro, art. 27 of “Rilancio” Decree created the so-called “Patrimonio Destinato” public fund, managed directly by Cassa Depositi e Prestiti. The fund, with allocated resources equal to 44 billion Euro, can operate in two ways. Firstly, within the Temporary Framework, the fund can finance companies within September 2021 through capital increases or subscription of convertible or non-convertible bonds by contributing liquidity between 1 and 100 million Euro; then, the fund can operate for 12 years within the market in favour of companies of national interest – due to their activity industry or to their dimensional or occupational relevance – whose economic/financial situation could undermine the going concern (if it di not already arise before 31 December 2019).

A further category of measures introduced by the Government are those aimed to support investment and favour research, the innovation and the development of Italian enterprises. Among the most interesting measures introduced, amended or strengthened during this emergency period, there are:

• Revaluation of corporate assets re-introduced by August Decree and extended to intangible assets by Budget Law 2021,
• Tax credit for R&D activities 2021, strengthened compared to the measure introduced by Budget Law 2021  for last year,
• Optional Patent Box regime to support investment in intangible assets relevant to patents and know-how.

The “Expert’s opinion” of this TopHic issue analyses the cross effects deriving from the combined application of the above measures as development drivers.

The “Focus on” article analyses the suspension of depreciations for FY 2020, a measure which, together with the revaluation of capital goods, aims to ease the financial and economic situation of companies that are suffering a considerable decrease in revenues due to the emergency period.