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COVID-19 ANTI-CRISIS SHIELD FINANCIAL AID FOR LARGE ENTREPRENEURS

In relation to the finalisation of the notification procedure for the European Commission, the process
of accepting applications for subventions under the governmental scheme – Financial Shield of the
Polski Fundusz Rozwoju S.A. (Polish Development Fund – PFR), has already been launched for
Large entrepreneurs. The Financial Shield is another form of financial support addressed towards
entrepreneurs in order to combat the negative economic effects of the COVID-19 epidemic. The
financial shield for large entrepreneurs provides capital, preferential and liquidity financing. Depending
on the form, the financing can be provided in a returnable or partially non-returnable form. The
intention is to correlate, to the possible extent, the financing provided under the terms of the
programme with the actual damage suffered by the entrepreneurs in connection with COVID-19 as
well as to promote employment. It is also worth noting, that entrepreneurs may use more than one
financing instrument within the Financial Shield.

Below is a brief summary of the main conditions of this scheme.

1. Entrepreneurs entitled to aid

  • Large entrepreneurs (employing at least 250 employees as at December 31, 2019 or whose
    annual turnover exceeds EUR 50 million and balance sheet total exceeds EUR 43 million).
  • Small and medium-sized entrepreneurs (SMEs) (employing over 150 employees as at
    December 31, 2019, whose annual turnover exceeds PLN 100.000.000, provided that (i) all of
    the following conditions have been met: (a) the entrepreneur’s financing gap in accordance
    with the financial projections exceeds the amount of PLN 3,500,000 and (b) it has already
    exhausted the maximum possibilities of obtaining financing from the Programme for small and
    medium-sized entrepreneurs, or (ii) the financing relates to the Sectoral Programme in
    connection with COVID-19).

Should there be affiliations on part of the entrepreneur through the relations with other entities (e.g.
within capital groups), it may be necessary to include the data of those affiliated entities in the number
of employees, the annual turnover and balance sheet total.

2. Type and amount of financial aid

The Financial Shield for Large Companies is composed of the Liquidity Shield, Financial Shield and
Capital Shield. Funding under the Programme may be granted in the following forms:

  • Liquidity financing:
    • takes the form of a liquidity loan;
    • is intended to provide entrepreneurs with working capital, in particular for the purpose of
      settling trade liabilities, salaries, public-law liabilities and other purposes related to the
      financing of current operations established in the loan agreement;
    • is granted up to a maximum amount of PLN 1 billion;
    • repayment of the loan must be made within 4 years from the date of signing the loan
      agreement;
    • the interest rate on the liquidity loan is 1% in the case of SMEs in the first year from the
      date of signing the loan agreement, 1.25% in the second and third year and 1.75% in the
      fourth year, and in the case of large entrepreneurs 1.25% in the first year from the date of
      signing the loan agreement, 1.75% in the second and third year and 2.75% in the fourth
      year. No commissions or fees are charged on the loan agreement.
  • Preferential financing:
    • is intended to partially cover the actual damage suffered by a large entrepreneur as a
      result of COVID-19;
    • is granted in the form of a redeemable loan up to a maximum of 75% of its value or 75%
      of the actual damage suffered as a result of COVID-19;
    • the loan is granted in an amount no higher than the estimated damage due to COVID-19
      (up to a maximum of PLN 750 million);
    • actual damage due to COVID-19 will be calculated for a period no longer than between 1
      March 2020 and 31 August 2020, ex post on the basis of actual financial data;
    • the maximum repayment period of the preferential loan is 4 years from the date of signing
      the loan agreement;
    • the interest rate of the preferential loan is 1% in the case of SMEs in the first year
      following the date of signing of the loan agreement, 1.25% in the second and third year
      and 1.75% in the fourth year and in the case of large entrepreneurs 1.25% in the first year
      following the date of signing of the loan agreement, 1.75% in the second and third year
      and 2.75% in the fourth year. No commissions or fees are charged on the loan
      agreement.
  • Capital financing:
    • is intended to enable an entrepreneur to restore a stable financing structure, which has
      been disturbed, in particular by the need to reduce or stop production or provision of
      services and by the demand fluctuations resulting from COVID-19, through capital
      injections;
    • may be provided, in particular through the following capital instruments: (i) shares or
      stocks; (ii) subscription warrants; (iii) bonds or loans convertible into stock, subscribed or
      purchased by the PFR on market terms or under a State aid regime.

 

3. Conditions for the aid being granted

The entrepreneur needs to meet one of the following conditions:

  • has recorded a decrease in economic turnover (sales revenues) of at least 25% in any month
    after February 1, 2020 compared to the previous month or the same month last year, due to
    the economic disruption caused by COVID-19.
  • lost the ability to manufacture or provide services or to receive products or services by the
    purchasers due to lack of availability of components or resources in connection with COVID-
    19;
  • does not receive payments for sales due to COVID-19 that exceed 25% of the receivables;
  • due to financial market disruption, has no access to the capital market or credit limits in
    respect of new contracts;
  • is a participant in the Sector Programmes in connection with COVID-19.

4. Additional criteria

The entrepreneur must also meet the following conditions:

  • The entrepreneur conducted business activity as at December 31, 2019.
  • The entrepreneur (i) has a tax residence within the EEA, (ii) is registered in Poland (in the
    National Court Register KRS or Central Register of Business Activity and Information CEIDG)
    and (iii) its majority ultimate beneficial owner does not have a tax residence in the so-called
    tax havens.
  • The entrepreneur was not in arrears in payment of tax liabilities and social security
    contributions as at December 31, 2019.
  • The entrepreneur is not subject to liquidation proceedings, bankruptcy proceedings or
    restructuring proceedings.
  • The entrepreneur does not conduct business activity carried out by financial institutions and
    rating agencies, development or commercial real estate activities, nor in an area that is
    questionable for ethical and moral reasons, or that may result in the restriction or violation of
    individual freedoms and/or human rights.
  • The entrepreneur will successfully undergo a due diligence process, including, in particular,
    the KYC “Shield” procedure, or a confirmatory due diligence conducted by PFR (or its
    advisors) or in the form of so-called vendors due diligence.

Depending on the type of financing which the entrepreneur applies for, additional criteria may apply,
meeting of which shall be necessary in order to be granted the financing.

5. Application process

  • Financing is granted on the basis of an application for support submitted electronically via the
    application form available on the PFR website.
  • The procedure for examining applications does not provide for the possibility of appealing
    against the decision of the PFR to grant or refuse funding in this respect with regard to the
    proposed conditions for granting it.
  • Before granting financing, PFR performs the process of verification of an entrepreneur in the
    form of a simplified due diligence. The due diligence may cover, depending on the specifics of
    a given case: (i) legal, (ii) financial, (iii) market, (iv) operational and (v) as appropriate, other
    issues, e.g. tax, regulatory or commercial. As part of the due diligence process, the PFR also
    verifies the information on the ultimate beneficial owner of the entrepreneur and the risks
    associated with the entrepreneur.
  • The PFR has the right to propose to the entrepreneur to provide financing on the basis of a
    financial shield instrument other than the one indicated by the entrepreneur in the application
    and in an amount other than that declared by the entrepreneur. The decision of PFR to grant
    or refuse financing is based on the principle of reasonable discretion.
  • The amount of financing and the conditions for its granting are specified in an agreement
    concluded between the beneficiary and the PFR. The agreement may specify additional
    restrictions and obligations.
  • The resources allocated to financing under the Financial Shield for Large Entrepreneurs are
    limited. If there are more applicants than funds, granting of subventions shall generally follow
    the order in which the PFR will process applications.

FOR MORE INFORMATION PLEASE CONTACT:
Emilia May
Attorney at Law
T: +48 587 820 050
E: may@millercanfield.com
Andrzej Czopski
Attorney at Law, Partner
T: +48 587 820 050
E: czopski@millercanfield.com

Disclaimer: This publication has been prepared for clients and professional associates of Miller Canfield, and is based on the
facts and guidance available at the time of its release which may be subject to change. The purpose of the publication is to
draw attention to the legal events indicated in it and should not be the sole basis for any decision regarding a particular course
of action; nor should it be relied on as legal advice or regarded as a substitute for detailed advice in individual cases. The
services of a competent professional adviser should be obtained in each instance so that the applicability of the relevant
legislation or other legal development to the particular facts can be verified.