"Company in difficulty" excluded from (European) grants
For many entrepreneurs, grants are an attractive source of financing. Yet access to grant money is not a given for every company. Those classified as "enterprises in difficulty" (OIM) under European Commission rules may no longer be eligible for subsidies. This includes European grants (such as Horizon Europe) as well as Dutch grants (such as MIT and OPZuid).
A company is considered an OIM at the moment that:
- The negative remaining reserves exceed 50% of the sum of the issued share capital and the share premium, and
- The entity is older than three years.
(Consolidated) financial statements
To assess whether negative other reserves exceed 50% of the sum of the issued share capital plus the share premium, the most recently adopted (consolidated) annual accounts of the group should in principle be taken into account. A group of companies exists if a company owns more than 50% of the (voting) shares in another company.
Exception for 'young' entities
For entities younger than three years, there is an exception to the OIM rule. They are - despite sufficiently stretching negative other reserves - not considered OIM. However, this exception only applies if the entire group to which the company belongs is younger than three years. There is therefore a risk here if the group consists of a company that does meet the age requirement and a company that does not - in that case, the exception lapses for the entire group. As a result, the younger company may still qualify as an OIM.
Assessment moment crucial
The assessment moment (with respect to both conditions) of an OIM may cause complications. After all, the assessment moment can change per grant. For some grants the assessment takes place at the moment the grant is applied for. For other grants, the assessment takes place when the decision is issued. It is therefore important to check the financial situation not only when the application is made, but also afterwards. This is especially crucial in multi-phase subsidy projects.
Figurative example
Suppose a company has existed for 5 years and is not part of a consolidation circle. The company's equity is distributed as follows:
- The issued share capital amounts to € 18,000.
- The share premium reserve amounts to €42,000.
- Other reserves amount to € - 40,000
The company in the above example qualifies as an OIM, despite the fact that its equity is positive. After all, the negative other reserves amount to more than 50% (in this example 66.7%) of the issued share capital plus share premium.
What can you do?
A common and relatively simple solution is to deposit (additional) share premium. This strengthens your equity and the ratio of capital to reserves can again meet the European standard.
Do you doubt whether your company or group may eventually qualify as OIM? Or do you want to discover the possibilities not to qualify as OIM, please contact your Govers contact person or the Govers start-up and scale-up team.
If you wish to receive more information about the possibilities in the field of subsidies, please feel free to contact The Subsidy Specialist at info@subsidiespecialist.nl or 040 -250 45 67.