The Act creates tools to support entrepreneurs in financial distress, including those affected by the pandemic. The intention is that public aid granted under this Act will be provided on an ad hoc basis to enable entrepreneurs to survive in the market and to carry out restructuring. It is worth noting that the scope of the Act covers entrepreneurs who are insolvent within the meaning of Article 10 of the Bankruptcy Law, as well as those at risk of insolvency (see Article 6 of the Restructuring Law), provided that they are entrepreneurs from the SME sector. This Act is an expression of the government programme adopted in 2014 entitled ‘New Chance Policy’, which was to cover the years 2014-2020.

The Covid-19 pandemic has caused a significant intensification of the legislator’s work. Academic circles emphasise that this kind of ‘special act’, which rebuilds, systematises and significantly simplifies the procedure for obtaining public aid by entrepreneurs who have felt the effects of the financial crisis, is a very good solution. Undoubtedly, micro, small and medium-sized entrepreneurs are most affected by the crisis caused by the pandemic, so it is understandable to create a tool that allows cash to be transferred as quickly as possible in order to survive the most difficult period of the crisis and implement restructuring measures (see: P. Zimmerman, B. Sierakowski, Act on granting public aid for the rescue or restructuring of entrepreneurs. Commentary, commentary on Article 1, thesis 6, Warsaw 2020, C.H. Beck Publishing House).

It should be noted here that, pursuant to Article 13(1) of the Act, aid is granted by the minister responsible for the economy, who may, however, entrust the granting of aid to the Industry Agency Joint Stock Company. An exception to these rules is Article 39(3) of the Act, according to which aid is granted in the form of relief from the enforcement of an administrative financial penalty by the authority that imposed the penalty.

On the basis of this Act, it is possible to obtain three forms of public aid:

• public aid for rescue,
• temporary restructuring support,
• public aid for restructuring.

The rest of this article will focus exclusively on public aid for rescue. Other forms of aid will be presented in a separate article.

State aid for rescuing enterprises

Pursuant to Article 15(1) of the Act, rescue aid may be granted to an entrepreneur who is in a difficult economic situation in order to enable him to continue his economic activity for the period necessary to develop a plan for restructuring or liquidating his business and to carry out the necessary analyses in this regard. In our opinion, the term ‘restructuring plan’ should be understood broadly, not only in the context of the restructuring plan referred to in Article 10 of the Restructuring Law. Considering that debtors undergoing restructuring proceedings may also apply for state aid.

As indicated at the outset, rescue aid may also be granted to an entrepreneur from the SME sector who meets the conditions for granting state aid in accordance with Article 141(1) of the Restructuring Law and who, due to exceptional and unforeseen circumstances, requires urgent financial liquidity support.

Rescue aid is granted in the form of a loan, the granting of which may be conditional on collateral, including in the form of a blank promissory note, pledge or mortgage.

Amount and term of the loan

The amount of the loan is limited to the funds necessary to maintain operational activities within the meaning of the Accounting Act. In other words, this aid is intended to be a cash injection that will enable the entrepreneur to ‘survive on the market’.

The Act specifies the following method for calculating the loan:

1. the first step is to calculate the negative cash flow from operating activities, i.e. to determine the difference between the gross profit for the last financial year plus depreciation for the last financial year and the change in working capital (this change is calculated as the difference between current assets and short-term liabilities for the last financial year);
2. in the second step, we multiply the amount calculated in this way in point (a), i.e. negative cash flow, by the period for which the loan is to be granted, bearing in mind that the period is expressed in years; since the maximum loan repayment period is 6 months, the highest permissible multiplier in this equation will be 0.5.

For example, assuming that the entrepreneur recorded a loss of PLN 150,000 for the last financial year, depreciation amounted to PLN 30,000, the difference between current assets and current liabilities of a short-term nature for the last year amounted to PLN 100,000, and PLN -200,000 for the previous financial year.

This gives us the formula -150,000 + 30,000 – [100,000- (-200,000)]*0.5= – 120,000 – 300,000 = -420,000 PLN * 0.5=- 210,000 PLN.

The above-described company can count on a loan of PLN 210,000, because the number is negative and in such a case the loan amount corresponds to the absolute value of the number obtained. If the number obtained were positive, the entrepreneur would have to demonstrate in detail that they are in a difficult economic situation and justify the need to obtain a loan in the requested amount, in particular on the basis of a financial projection specifying the entrepreneur’s liquidity needs in the requested period.

The content of the application for assistance is described in Article 18 of the Act and includes, among other things:

1. the name of the entrepreneur and their NIP (tax identification number) and KRS (National Court Register) number;
2. the names of the company’s representatives, if the applicant is a capital or partnership company;
3. a description of the business activity according to the PKD classification;
4. a statement by the entrepreneur in a difficult financial situation that they have the status of an SME, are in a state of insolvency or at risk of insolvency, and meet the conditions for receiving public aid.
5. specification of the amount of rescue aid requested;
6. description of the difficult economic situation or exceptional and unforeseen circumstances requiring urgent financial liquidity support;
7. the period for which the rescue aid is to be granted.

The application must be accompanied by statements and documents confirming that the applicant is in a difficult financial situation. These may include, in particular, accounting documents, payment requests, etc. In addition, the applicant should indicate in the justification for the application what positive effects the granting of the loan will have. To this end, the applicant should indicate the planned restructuring measures that they intend to take or implement after receiving the funds. Since public rescue aid is, in principle, intended to be a cash injection for survival, these measures should, in principle, have a positive effect in the form of at least a partial restoration of the company’s profitability. Furthermore, although the Act does not expressly mention the requirement to attach the balance sheet for the last financial year to the application, it will not be possible to precisely determine the entrepreneur’s needs and the amount of the loan without it.

The application is considered within 30 days of its effective delivery. The decision on the application may be appealed, and if it was issued by the minister, a request for reconsideration may be submitted. As a rule, the loan is granted for a period of 6 months. An entrepreneur who has received aid is obliged to use it for its intended purpose, submit to control and repay the loan with interest.

Given that this is a fairly short period, it is unlikely that an entrepreneur will be able to repay the loan, but forms of aid can be combined, so an entrepreneur who has received rescue aid will be able to take advantage of temporary restructuring support. Rescue aid will enable the entrepreneur to draw up a restructuring plan and commence the selected restructuring procedure, as the costs of the restructuring procedure can also be financed from the loan amount obtained.

Summary

Rescue aid is a relatively easy measure to obtain, but in our opinion it requires the entrepreneur to submit at least a draft of the planned restructuring measures and a reliable presentation of the expected positive results of the implementation of this measure at the application stage. Given the short-term nature of this loan, in many cases it will only be a prelude to the actual restructuring of the enterprise. The six-month period for which the loan is granted may in many cases prove too short to restore the full profitability of the enterprise, allowing it to repay all outstanding liabilities and current costs, as well as the loan itself. Nevertheless, the aid under consideration will certainly be invaluable support for many entrepreneurs in settling at least their strategic liabilities and preparing, together with a restructuring adviser, a restructuring plan and selecting the appropriate company restructuring procedure.