Entrepreneurs and their financial liabilities towards local government units – Anti-Crisis Package

In times of the pandemic, the economic situation of many entities requires the maximum possible cost reduction. One of the solutions introduced by the anti-crisis package is to extend the aid from local government units and their subordinates. The existing solutions, provided for in the Real Estate Management Act and the Public Finance Act, have been extended to be applicable in cases of decrease in financial liquidity of entrepreneurs due to the economic consequences of COVID-19 disease. We are pleased to present you the guide to the most important aspects of this change.

1. Which entrepreneurs can apply for aid from local government units?

Each entrepreneur may become a beneficiary of the aid from local government units (communes, districts, provinces, hereinafter: “LGU”) or some entities subordinate to them. This study refers to the aid provided for in Article 15zzze–15zzzg of the so-called anti-crisis package, and includes the possibility of obtaining exemption from the obligation to pay certain obligations by the entrepreneur. As an entrepreneur, you are covered by these regulations:

1. If you rent, lease or use real estate belonging to the State Treasury, LGU, local government budgetary division, budget unit or local government cultural institution;
2. If you are obliged to pay a financial obligation of a civil nature (e.g. resulting from a contract) to LGU, local government budgetary division, budget unit or local government cultural institution.

Note! The regulations in question do not cover receivables towards municipal companies, operating in the form of limited liability companies or joint stock companies. Such entities operate on the basis of self-financing, which means that they are not subject to relief and exemption mechanisms granted by LGU units.

2. What aid can I get as an entrepreneur?

The anti-crisis package provides for the following measures to ease the entrepreneurs’ commitments:

1. redemption in part or in full;
2. deferment of payment;
3. splitting the payment into instalments;

– in case of financial obligation arising due to rent, lease or use real estate belonging to the State Treasury, LGU, local government budgetary division, budget unit or local government cultural institution,

4. refraining from pursuing civil law receivables by LGU, local government budgetary division, budget unit or local government cultural institution.

NOTE! The commune council, the district council or the province parliament may determine by way of a resolution other rules of granting the above-mentioned relief. To check whether your municipality, district or province has introduced specific regulations, visit their online Public Information Bulletin and find the “Resolutions” or “Legal Acts” section. It is possible that your municipality has already introduced its own rules to help entrepreneurs!

3. What requirements should I meet to receive aid from LGU?

In order to obtain the cancellation, deferment or payment in instalments of debts for rent, lease or use, as well as in order for those units to refrain from collection of civil law debts from the entrepreneur, it must be shown that due to the spread of COVID-19 and the negative economic consequences resulting therefrom, the entrepreneur’s liquidity has deteriorated.

The law does not define the concept of deterioration of financial liquidity. From the practice, it can be assumed that this is a condition in which the entrepreneur’s ability to pay its current liabilities has decreased and at the same time this condition has been caused by the negative economic consequences of the outbreak of COVID-19. This means that aid can be applied for, for example, by an entrepreneur who, as a result of the restrictions introduced, had to close a restaurant or hairdressing salon. It will not be possible to apply for aid, e.g. by an entrepreneur whose turnover (and thus financial liquidity) decreased before the outbreak of the disease in Poland or who lost business partners during the epidemic, but this was not due to economic consequences of the epidemic (e.g. expiry of contracts). It is therefore crucial that the decrease in liquidity is the result of the negative economic consequences of the occurrence of COVID-19.

4. Can each LGU grant me with aid within the anti-crisis package?

These instruments can be used by:

1. Entities representing the State Treasury: district governors and presidents of cities with district rights,

– in case of applying for redemption, deferment or payment in instalments of the amounts due for the rent, lease or use of real estate owned by the State Treasury.

2. Local government units and their local government budgetary divisions, budget units as well as local government cultural institutions,

– in case of applying for redemption, deferment or payment instalments of the amounts due for the rent, lease or use of real estate owned by these entities, as well as in case of applying for these entities to refrain from collection of civil law claims that these entities are entitled to claim from the entrepreneur.

5. What should I do to get help? 

In order to benefit from the instruments in question, an application must be submitted to the competent authority:

1. for redemption, deferment or payment in instalments of the amounts due for the rent, lease or use of real estate owned by the State Treasury – to the district governor or president of the city on which territory the real estate is located (e.g. President of Katowice, District Governor of Zawiercie);

2. for redemption, deferment or payment in instalments of the amounts due for the rent, lease or use of real estate owned by LGU or its subordinate units – to the governor/mayor/president; in case the real estate is owned by a commune, to the district board in case of a district, to the province board in case of a province;

3. for refraining from debt collection by LGU or its subordinate units – to the governor/mayor/president; in case the creditor is a commune, to the district board – in case of a district, to the province board – in case of a province.

Important! If a resolution regulating the rules of granting the discussed reductions and exemptions has been introduced, you will find in this resolution detailed information about the units reviewing the applications and other necessary information.

6. For how long can I benefit from this aid? 

The regulations do not determine the period for which relief or exemptions may be applied for. The authorities may decide on this matter individually, taking into account the economic situation of the entrepreneur concerned.

7. Is the described aid from LGU a state aid? If so, what does that mean?

Yes, the described instruments are a state aid. This is to be understood as state aid which may distort competition on the market concerned. However, the receipt of aid in this form constitutes the so-called permitted state aid, the size of which, according to the EU regulations, does not affect competition in a particular industry. Due to the special situation caused by the COVID-19 epidemic, the amount of permitted state aid is equivalent to EUR 800 000 for each entrepreneur. However, it should be remembered that this limit also applies to other instruments provided for in the anti-crisis package, e.g. a subsidy for employees’ remuneration from a district governor.

8. What should I remember after receiving aid from LGU within the framework of anti-crisis package?

Remember the limit of permitted state aid – some of the instruments provided for in the anti-crisis package are considered as public aid and the total pool for the whole aid for the entrepreneur cannot exceed the equivalent of EUR 800 000.

Deferment of payment does not result in its cancellation! You are still obliged to pay the amount to your contracting party, but the payment deadline has been extended.

Refraining from collecting the debt includes your unpaid obligations. It is not possible to refrain from collecting amounts that have not fallen due yet (for which the payment deadline has not passed).

If you are looking for detailed information on the aid measures for entrepreneurs provided for in the anti-crisis package, please follow the comprehensive studies on www.kpr.pl or contact our experts.

Adam Madejski, attorney-at-law