EMCC European Monitoring Centre on Change

Act governing the rescue and restructuring aid for companies and cooperatives in difficulty

Slovenia
Phase: Management
Тип:
  • Access to finance
  • Rescue procedures in case of insolvency
  • Training
Last modified: 06 July, 2020
Native name:

Zakon o pomoči za reševanje in prestrukturiranje gospodarskih družb in zadrug v težavah

English name:

Act governing the rescue and restructuring aid for companies and cooperatives in difficulty

Coverage/Eligibility

An instrument that is available to companies and cooperatives that are unable to access funding to curtail negative trends in their business performance, and which would, without intervention, jeopardise the existence of the company or cooperative.

Main characteristics

A company or cooperative in difficulty that wishes to get state aid must prepare a restructuring strategy. The strategy must include a programme to address the needs of employees facing redundancy and retraining programme for employees, provided by the employer. The provided state aid can take different forms: a loan, a subsidy, an interest rate subsidy, a guarantee, a financial investment or a deferral of taxes or contribution payments.

Funding

  • National funds

Involved actors

National government
The programme for rescuing and restructuring of companies and cooperatives in difficulty is implemented by the Ministry of Economic Development and Technology, Department for Entrepreneurship, Competitiveness and Technology. Its main task is to decide on allocating state aids to companies and cooperatives in difficulty.

Effectiveness

In 2018, state aid for the restructuring of companies amounted to €0.5 million. It is a significant decrease in comparison with the year 2015 when €102.9 million was given for the restructuring of companies. The total sum for rescue aid and restructuring varies from year to year and depends on economic situations and the needs of companies. During the last 10 years, the amount reached an absolute peak in 2015 mainly due to the restructuring of the three large companies: Cimos, Mariborska Livarna Maribor, and Polzela. The purpose of the aid was to prevent negative social and economic consequences in the environment where these large companies in difficulty are operating.

The latest analysis of the effectiveness of state aids for rescuing and restructuring of firms dates to 2010 and relates to the pre-crisis period (see Burger et al, 2010). Analysis of the effectiveness of rescuing and restructuring state aids granted in 1998–2006 in Slovenia shows that 23.6% of companies which were aid recipients did not survive. Propensity score matching analysis shows that state subsidies proved ineffective in promoting recipient firms’ revenues, increasing productivity and creating or retaining employment.

The table shows the effectiveness of state aids for rescuing and restructuring of companies in 2004–2015:

 

After 3rd year

After 4th year

After 6th year

After 8th year

After 10th year

Preservation of companies (in %)

64

55

43

30

17

Preservation of employments (in %)

71

56

34

20

18

Value added per employee (in %)

32

44

62

92

98

Source: Ministry of Finance of the Republic of Slovenia, Twentieth annual report on state aids for years 2016, 2017 and 2018, p. 118.

Strengths

State aid assists firms and cooperatives facing difficulties in the short run.

Weaknesses

State aids for rescuing and restructuring of firms are theoretically among the most contentious types of aid as they provide assistance to old industries which are facing difficulties. They are justified in terms of eliminating the negative market consequences of firms’ exiting on the market and saving numerous jobs. They may assist firms in question in the short term, but without subsequent deeper restructuring, state aid of this kind has usually proven to be inefficient. In the case of Slovenia, the majority of this aid is allocated to firms which have lower than average performance indicators in their respective industries.

Examples

In the period 2014–2018, the following companies were state-aid recipients: POLZELA tovarna nogavic, AGIS TECHNOLOGIES, AGRORUŠE proizvodnja, trgovina in storitve, BREST-POHIŠTVO, ILES Lesna industrija, ODEJA Tovarna prešitih odej, MARIBORSKA LIVARNA MARIBOR, CIMOS, ROBOTIKA KOGLER, SEMENARNA LJUBLJANA, and AROS MOBIL.
Sources
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