On 18 April, the parties of the Danish Folketing extended and changed the compensation scheme for fixed costs.
A separate application must be submitted under the extended scheme, and it is expected that it will be possible to not file an application under the new, extended scheme if the undertaking merely requests cover according to the previous scheme's possibilities and requirements.
It is important to stress that the actual wording of the act is not yet in place and accordingly the below outline is based solely on the preliminary announcements from the Ministry of Finance and the text of the agreement entered into between the parties.
The scheme is expanded and will now cover the period 9 March to 8 July 2020 and not as before 9 March to 8 June 2020.
In outline, the extended scheme covers the following:
Who is eligible to apply?
As a general rule, the scheme will compensate undertakings which
- Were as at 9 March 2020 at the latest registered in the Central Business Register,
- have fixed costs of at least DKK 12,500 in the course of a three-month period
- expect a decrease in revenues
- of at least 35% in the entire period (9 March up to and including 8 July 2020), or
- 100% for a part of the period (9 March up to and including 8 July 2020) as a consequence of a prohibition against being open for business.
How much is covered?
The scheme covers the following share of the fixed costs of the undertaking:
- 80% if the decrease in revenues has been in the order of 80-100%
- 50% if the decrease in revenues has been in the order of 60-80%
- 25% if the decrease in revenues has been in the order of 35-60%
If the undertaking has been subject to a prohibition against being open for business, the undertaking will receive compensation for 100% of the undertaking’s fixed costs for the period during which the undertaking was ordered to close down.
Which costs are covered?
No changes have been introduced in respect of the type of costs covered and accordingly compensation is still provided for the provable costs which the undertaking must pay even though the undertaking has no revenues, unless such costs could reasonably have been prevented.
According to the guidelines of the Ministry of Industry, Business and Financial Affairs, costs in the following categories are covered
- E.g. costs incidental to rent of premises, real estate tax, electricity and heating, necessary ongoing cleaning.
- Depreciation of tangible fixed assets and amortisation of intangible assets
- E.g. costs (depreciation) incidental to tangible fixed assets (machinery, properties, aircraft, etc.) and (amortisation) incidental to intangible assets (goodwill, trademarks, licences, etc.)
- Necessary maintenance of tangible fixed assets and rented/leased assets
- E.g. costs incidental to necessary ongoing maintenance of properties, cars and factories.
- Ongoing service agreements (including insurance)
- E.g. leasing agreements, costs incidental to newspapers, the company’s insurance policies (liability insurance, business interruption insurance, building insurance, motor insurance, insurance of machinery and equipment, etc.) membership fees and licences for use of software.
- Interest expenses and fees,
- E.g. interest, charges, administration margin, etc., on the undertaking’s bank loans, mortgage loans and other loans, however, not including installments on such loans.
Compensation will be granted, if the costs relate to the period 9 March to 8 July 2020 also where the actual payment is not made until after this period.
No changes have been introduced in respect of the so-called "reference period" and accordingly, the undertaking's expenses must as a general rule still be compared with the undertaking's corresponding expenses in the period 1 December 2019 to 29 February 2020.
The undertaking may furthermore receive compensation for 80% of its expenses incidental to obtaining an auditor’s statement for the application, however, at a cap of DKK 16,000.
Fixed costs at a maximum of DKK 110m may be covered in the period 9 March to 8 July 2020.
The Ministry of Finance is currently looking into the possibility that undertakings with extraordinary losses in 2019 may after all receive compensation.
As a new condition, undertakings will not be eligible to apply under the new scheme if the undertaking is planning to distribute dividends for the 2020 and 2021 financial years. This also applies in respect of intended share buy-back programmes. However, these conditions will only apply to undertakings receiving in excess of DKK 60m. The undertakings will, however, be entitled to pay dividends and buy back shares, if the undertakings have in advance paid back the part of the compensation received which exceeds DKK 60m.
Undertakings based in so-called tax havens will not be eligible to apply for compensation under the extended scheme, if EU law makes it possible to cut them off from participating in the scheme.
How to apply
Applications must be submitted via www.virksomhedsguiden.dk and must, among other things, be accompanied by a statement from an independent registered or approved public accountant to the effect that the undertaking has calculated revenues and fixed costs correctly.
Information about when applications according to the new rules may be submitted has not been announced yet. However, the rules apply with retrospective effect as from 8 March, and if an application has already been submitted it will be possible to apply once more.
Presumably, applications will still have to be submitted before 30 June 2020.
The undertakings must by 8 December 2020 at the latest submit a calculation of the actual revenues and the actual fixed costs in the period 9 March up to and including 8 June 2020, and the payment of compensation is thus subject to subsequent control as well as any subsequent adjustment of the amount.
When will compensation be paid?
It has not been announced yet when the undertakings will receive the amounts in compensation.
As mentioned the above is merely a description of the scheme in outline, and it is consequently important that each individual undertaking studies the scheme thoroughly or seeks advice as to which requirements and possibilities apply to the individual undertaking.
Hopefully, the scheme will provide much needed relief to the undertakings affected by the COVID-19 crisis and, together with the other aid schemes, contribute to ensuring that as many undertakings as possible make it through the crisis.