On March 21, 2020, the European Commission (“EC”) approved three French state aid schemes to support the French economy during the coronavirus crisis[1] under the State aid Temporary Framework adopted by the Commission two days earlier.[2]

Two of these schemes enable the French public investment bank, Bpifrance Financement S.A., to provide State guarantees on commercial loans and credit lines to non-financial companies with up to 5,000 employees. The third scheme enables the French State to provide guarantees to banks on portfolios of new loans for all types of companies active in France, regardless of their size or their business segment, thereby enabling banks to provide cash liquidity to any company that needs it.[3] The EC authorized these three State aid schemes as it considered that they cover guarantees on loans with a limited maturity and size, while limiting the risk taken by the State to a maximum of 90%.

The purpose of the third measure was, in particular, to provide State guarantees to banks and investment firms on portfolios of new loans for all types of companies (with the exception of credit institutions and civil real estate companies). Companies would be eligible for such guarantees for a period of up to six years under the following conditions: (i) the loans must be contracted between March 16, 2020 and December 31, 2020; (ii) the risk taken by the State should be limited to a maximum of 90% of the loan for SMEs and midcap companies, 80% for large undertakings generating revenues of €5 billion and 70% for large undertakings generating revenues exceeding €5 billion; (iii) the amount of the loan is limited to 25% of the 2019 revenues or double the 2019 wage share for start-ups or innovative companies; and (iv) the State guarantee is remunerated by an annual premium, depending on both the nature of the recipient company and the maturity of the loan.

The Amendment

Following the entry into force of the initial scheme on March 24, more than 500,000 companies filed a request for a State guarantee. On June 2, 2020, the French government notified to the EC an extended version of the third scheme, which was approved by the Commission on June 4.

First, the amendment extends the scope of companies eligible for the aid. Civil real estate companies, in particular companies owning historical monuments open to the public and impacted by the lockdown may now benefit from State guarantees on loans and credit lines.

Second, the amendment provides that State guarantees may back loans granted by equity crowdfunding intermediaries (intermédiaires en financement participatif ), and not only loans granted by credit institutions and investment firms.

Third, the amendment increases the maximum amount of the guarantee and allows  the  State to back up to 90% of the loan principal for all companies, regardless of their size, and to reduce or cancel the waiting period.

Fourth, the amendment introduces additional flexibility to determine the maximum amount of the guaranteed loan for companies or professionals active in sectors of seasonal activity, or sectors subject to a longer shutdown period for sanitary reasons. For such companies, the maximum amount which may be guaranteed by the State should be calculated on the basis of (i) the revenues generated during the three highest-grossing months of 2019, or if not applicable (ii) the latest financial year, provided that the beneficiary certifies that this amount is inferior to 18 months of its estimated cash requirement if it is an SME, and 12 months for other types of companies.[4]

[1]              The three schemes were approved under Decision n° SA. 56709. The French scheme for securing business financing would mobilize a total of €300 billion in liquidity support for affected companies. Since March, the French Government has received more than 500,000 requests from companies and professionals whose activities were impacted by the pandemic.

[2]              EC Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak, March 20, 2020, available at: https://eur-lex. europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.CI.2020.091.01.0001.01.ENG&toc=OJ:C:2020:091I:TOC.

[3]              For completeness, please note that this scheme does not apply to (i) civil real estate companies, (ii) credit institutions, (iii) investment firms, and (iv) undertakings that were already in difficulty on December 31, 2019.

[4]              The amendment specifies that neither the lender nor the Government will perform any counter-expertise with respect to this self-certification.