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EU Bars Bailed-Out Companies From Paying Bonuses

 |  April 16, 2020

Companies given equity injections by EU member states as a result of the coronavirus will not be allowed to pay out dividends, buy back shares, or provide bonuses or similar remuneration, according to an official document seen by the Financial Times.

The terms and conditions emerged after the FT reported last week that the European Commission was exploring a further relaxation of the bloc’s rules on State aid to help ailing companies as a result of the pandemic.

Bailed-out businesses are also forbidden to take “excessive risks” or even engage in “aggressive commercial expansion,” stated a document setting out amendments to the recent relaxation of State aid rules. They will not be able to buy up rivals or other operators in the same sector while still repaying the State, the document added.

The constraints are aimed at preventing “undue distortions of competition” and mirror similar restraints imposed on the banking sector at the height of the global financial crisis more than a decade ago. 

European businesses that receive an equity injection of more than 20% from a member State will also be obliged to set up a clear exit strategy from that support in the aftermath of the pandemic.

Brussels is also setting out clear timelines to give companies an incentive to pay back the aid. If by December 31, 2024 the State’s shareholding has not been reduced to below 15%, companies will be obliged to present a restructuring plan to the Commission for approval.