FAQs on the Economic Stabilisation Fund (ESF)

The ESF aims to ward off any long-term damage to the economy and society from the coronavirus pandemic by enabling fast, targeted and temporary measures for the stabilisation of undertakings from across the real economy.

The ESF mitigates the economic impact of the pandemic on undertakings whose potential failure would have significant effects on the economy, technological sovereignty, security of supply, critical infrastructures or the labour market.

The ESF helps undertakings from across the real economy to consolidate their capital base and overcome any liquidity shortages they might have.

Until 31 December 2021 the ESF had a total volume of up to €600 billion. This was divided into the following amounts; up to:

• €400 billion for federal guarantees,
• €100 billion for recapitalisation measures.

Effective from 1 January 2022 the volume has been reduced (up to 100 billion for guarantees and 50 billion for recapitalisation measures).

A further €100 billion has been earmarked for refinancing the KfW Special Programme 2020, another instrument launched in response to the crisis.

The ESF is targeted at undertakings from across the real economy that have met at least two of the following criteria in the balance sheets for the two financial years completed prior to 1 January 2020:

• an annual balance sheet total exceeding €43 million,
• an annual turnover exceeding €50 million
• an annual average of more than 249 employees.

In individual cases, smaller undertakings can get access to the Fund if they operate in one of the sectors mentioned in Section 55 of the Foreign Trade and Payments Ordinance (in German) or if they are of similar importance to public security or the economy. Likewise, support from the ESF in the form of recapitalisation measures is also available in specific instances to start-ups whose company value has been estimated by private investors to be a minimum of €50 million during at least one financing round concluded on or after 1 January 2017 (including the capital received in the course of that round).

The decision whether an individual undertaking that does not meet the size criteria is granted exceptional access to the ESF rests with the ESF Committee (see question 19).

Further conditions for receiving support from the ESF include the following:

• The company was on or at least temporarily after 31 December 2019 not facing difficulties (according to the EU definition of “undertaking in difficulty”).
• No other financing options are available.
• The undertaking has a clear prospect of business continuity and viability after the end of the COVID-19 outbreak.

The ESF is not targeted at undertakings in the financial sector, banks or bridge institutions.
If an undertaking meets the following criteria, it is considered a financial sector entity and therefore not eligible for support under the ESF:

• It is a credit institution within the meaning of Section 1 (1) Banking Act,
• holds a banking licence,
• is not subject to the exemptions under Section 2 (1), (4) or (5) Banking Act, and
• is not a credit institution under Section 5 subsection 1 number 2 of the Corporation Tax Act in the version in force until 31 December 2014
• nor a bridge institution within the meaning of Section 5 (1) of the Restructuring Fund Act in the version in force until 31 December 2014.

The ESF is targeted at undertakings from all sectors across the real economy that meet the eligibility requirements (see question 3).

Undertakings applying for the ESF are first assessed in terms of whether they individually fulfil the size criterion. If the undertaking falls short of the mark, an assessment of the corporate group may be undertaken, i.e. including the foreign companies. As a prerequisite, these companies need to be qualified as affiliated companies as defined by the EU Commission (EU Commission Regulation (EU) No. 651/2014 of June 17, 2014 Annex I Article 3 paragraph 3). In the case that ESF stabilization measures are granted, it would then have to be ensured on a case-by-case basis through contractual arrangements that the funds remain with the applicant (or in the German companies).

In certain circumstances, the ESF is also accessible to undertakings that do not meet the established size criteria (see question 3). The decision whether access to the ESF is granted to individual undertakings rests with the ESF Committee. Irrespective of such exceptional arrangements, it is evident that a large number of SMEs and family-owned companies are in fact able to meet the size criteria of the ESF. Therefore, the ESF is clearly a programme that is also intended for the SME sector.

In view of the coronavirus pandemic, the Federal Government has launched a range of far-reaching assistance measures for undertakings. These include, for example, immediate assistance for own-account workers, freelancers and small businesses, tax relief measures and the KfW Special Programme 2020. An overview of all programmes can be found here (in German).

For general business-related questions on coronavirus, feel free to contact the coronavirus hotline run by the Economic Affairs Ministry (+49 30 12002-1031 /-1032).

BMWK-Hotline for undertakings applying for other public coronavirus assistance programmes (i.e. Bridging Assistance, November and December Assistance):

Hotline for third-party auditors
+49 30 – 530 199 322 (new number)

Hotline for direct applications own-account workers, November and December Assistance and New Start Assistance
+49 30 12002-1034

In principle, start-ups that meet the size criteria are eligible for ESF support (guarantees and recapitalisation measures) in the same way as other undertakings. Start-ups that do not meet the size criteria may be given exceptional access to the ESF, provided that their company value has been estimated by private investors to be a minimum of €50 million during at least one financing round concluded on or after 1 January 2017 (including the capital received in the course of that round). Whether support is granted is decided by the ESF Committee on a case-by-case basis. In such exceptional cases, start-ups are eligible for recapitalisation measures under the ESF (but not for ESF guarantees).

Apart from that, start-ups are subject to the same individually applicable preconditions and requirements as other undertakings. In particular, the start-up in question needs to have good prospects of economic self-reliance once the pandemic has been overcome. It therefore needs to give proof that its business model is relatively well established on the market.

The ESF is a subsidiary scheme that is only available if other assistance measures are not applicable or sufficient in scope. For start-ups, this means that the priority should be on using the matching options under the €2 billion package for start-ups. The start-up in question is required to give proof that it is pursuing such options.

As a rule, recapitalisation measures for start-ups will only take the form of market-based financing instruments and structuring measures.

The ESF comprises two stabilisation tools:

• federal guarantees on loans, including credit lines, and capital market products (borrowed capital)
• recapitalisation measures as a direct means of strengthening equity

Standardised conditions apply under the ESF for guarantees for bank loans, guarantees for corporate bonds and for recapitalisation measures (silent partnerships and subordinated loans). You can find further information under the following links:

• “Guarantee for bank loans“ (PDF, 288 KB)
• “Guarantee for corporate bonds” (PDF, 219 KB)
• „Silent partnerships and subordinated loans“ (PDF, 277 KB)

Other cases may require individual structuring measures within the framework of the provisions of the Stabilisation Fund Act and the Implementing Ordinance on the Economic Stabilisation Fund Act (PDF, 74 KB) (in German). The ESF is able to assume guarantees for a broad range of debt instruments and to provide equity instruments or hybrid financing instruments for the recapitalisation of undertakings.

Guarantees:

On application by undertakings, the ESF may assume guarantees of any appropriate design for

• non-subordinated debt instruments or other liabilities such as bank loans and credit lines within the meaning of section 3.2 of the Temporary Framework for State Aid Measures, or
• other types of credit in compliance with applicable State aid rules, including case-by-case authorisations. These may include sureties, letters of credit or derivatives.

The ESF assumes guarantees of a volume of at least €5 million.

Recapitalisation measures:

For recapitalisation measures, a distinction must be made between

• participations in the form of non-voting preferred shares or other non-voting preferred participations in companies other than public limited liability companies,
• silent participations, subordinated loans and other hybrid financial instruments, and
• participations in the form of shares with voting rights or participations with full voting rights in undertakings other than public limited liability companies.

Stabilisation measures incur an appropriate, i.e. market-based charge. Detailed arrangements are set out by the Implementing Ordinance on the Stabilisation Fund Act (PDF, 74 KB) (in German).

As a general rule, guarantees take precedence over other measures. Recapitalisation measures may be considered if crisis-related equity losses require the injection of subordinated or equity capital in order to restore the company’s creditworthiness. Restoring creditworthiness through the provision of equity or subordinated capital is necessary in particular if the undertaking is not able to obtain the needed financing on the market to meet its liquidity needs and ensure its survival.

Standardised conditions apply under the ESF for guarantees for bank loans, guarantees for corporate bonds and for recapitalisation measures of up to €100 million. You can find further information under the following links:

• “Guarantee for bank loans“ (PDF, 288 KB)
• “Guarantee for corporate bonds” (PDF, 219 KB)
• „Silent partnerships and subordinated Loans” (PDF, 277 KB)

Other cases may require individual structuring measures within the framework of the provisions of the Stabilisation Fund Act and the Implementing Ordinance on the Economic Stabilisation Fund Act (PDF, 74 KB) (in German).

Yes, it is possible to combine various stabilisation measures under the ESF.

The ESF is able to assume guarantees for debt instruments issued and liabilities accrued from 28 March 2020 until 30 June 2022.

Guarantees that are to terminate later than 31 December 2021 may only be granted up to a level equivalent to twice the recipient company’s annual payroll for 2019 or the latest year available. The payroll is to include social insurance contributions and costs for personnel working at the company site but formally assigned to the payroll of subcontractors. For undertakings founded on 1 January 2019 or after, the maximum loan amount must not exceed the expected annual payroll for the first two years of operation.

Irrespective of the payroll, guarantees that are to terminate later than 31 December 2021 may also be granted up to a level of 25% of the recipient company’s total turnover in 2019. In individual cases for which appropriate justification is provided to the European Commission, a disclosure form by the recipient company, to be confirmed by an auditor or tax advisor, may suffice to increase the amount of the guarantee in order to provide the liquidity needed in the coming 18 months for SMEs, or 12 months for large undertakings, calculated from the date the guarantee is granted.

The term of the guarantees and the liabilities to be insured must not exceed 60 months. The period of duration is established upon approval of the application.

As a general rule, recapitalisation measures should be completed within six years or ten years at the latest. A range of incentives may be adopted in individual cases in order to ensure the timely withdrawal of the public-sector involvement.

Undertakings that benefit from stabilisation measures under the ESF have to guarantee to follow a sound and prudent business policy. Above all, they are to make a contribution towards stabilising production chains and safeguarding jobs.

Also, while an undertaking is receiving support from the ESF, it has to comply with specific requirements regarding the remuneration of managers. In particular, members of the governing bodies and directors must not be granted any bonuses, other variable remuneration components or similar payments, including any payments from group undertakings. The same applies to special payments in the form of blocks of shares, gratuities or other remuneration in addition to the fixed salary. While a given stabilisation measure is in place, the distribution of dividends or other profits to shareholders other than the ESF is forbidden. Such rules also apply to second-level management. Also, specific provisions may be put in place to avoid distortions of competition.

Separate notification to the European Commission is required for recapitalisation measures worth €250 million or more.

As a general rule, the ESF is subsidiary to other assistance programmes. Only if these are not applicable or sufficient in scope is support from the ESF an option to be considered. The ESF assumes guarantees only for those liabilities for which no or no sufficient state coverage can be obtained through other programmes. This shall not apply to guarantees applied for in conjunction with recapitalisation via the ESF.

Yes, it generally can, as long as the support provided by other assistance programmes is not sufficient to prevent insolvency.

The application deadline for ESF stabilization measures was April 30, 2022. It is no longer possible to file an application.

The Federal Ministry for Economic Affairs and Climate Action is responsible for reviewing the applications. It is being assisted by PwC as an agent of the Federal Government.

The decision whether to approve an application rests with different entities, depending on the scope of the stabilisation measure being applied for. This decision is usually based on the following thresholds:

If an undertaking applies for both recapitalisation and a guarantee, the decision-making level depends on the total volume of funding being applied for. In case different decision-making levels apply for the two stabilisation tools, the decision may be taken by the entity responsible for recapitalisation.

The ESF Committee is an interministerial committee. It consists of one representative each from the Federal Chancellery, the Federal Ministry of Finance, the Federal Ministry for Economic Affairs and Climate Action, the Federal Ministry of Labour and Social Affairs, the Federal Ministry of Justice, and the Federal Ministry for Digital and Infrastructure. The ESF Committee is headed by Werner Gatzer, State Secretary at the Federal Ministry of Finance. Udo Philipp, State Secretary at the Federal Ministry for Economic Affairs and Climate Action, serves as Deputy Chair. In addition, the ESF Committee comprises one representative each from the KfW (Reconstruction Loan Corporation) and Bundesrepublik Deutschland Finanzagentur GmbH (Federal Republic of Germany Finance Agency) as advisory members.

The ESF Committee is in charge of applications for guarantees worth more than €500 million and for recapitalisation measures worth more than €200 million. It is entitled to assume responsibility for other cases as well. It decides whether undertakings that do not meet the established size criteria are given exceptional access to the ESF, and is in charge of general issues and matters of particular importance.

In addition to a number of basic requirements (see question 3), the following criteria are assessed in order to decide whether a given application should be approved:

a) the company’s significance for the German economy,
b) urgency,
c) effects on the labour market and competition, and
d) the principle that ESF funding should be used as economically as possible.

Additional requirements apply to recapitalisation measures:

• The measure is necessary for stabilisation.
• The Federal Government takes a considerable interest in the company’s stabilisation.
• The desired objective cannot be achieved in a better and more economical manner.

There is no legal entitlement to support from the ESF.

The applicant has to bear the costs incurred in the processing of their application. Provisions for cost reimbursement are laid down in Section 19 of the Stabilisation Fund Act and in the Ordinance on Costs under the ESF (PDF, 37 KB) (in German).

Guarantees and recapitalizations can be granted until 30 June 2022. Applications could be filed until 30 April 2022.

The time needed to reach a decision on a given application primarily depends on the degree of complexity of the case. Tailored structuring measures requiring a high level of funding or a combination of various stabilisation tools are likely to take more time for processing than applications for standard products. Therefore, it is impossible to make a general statement on the duration of processing.

Bundesrepublik Deutschland Finanzagentur GmbH (Federal Republic of Germany Finance Agency) concludes the contracts needed for the implementation of stabilisation measures.

The role of the state as a shareholder in an undertaking is based on the applicable legal provisions, particularly under company law. Its role primarily depends on the size of the stake it holds in the undertaking. When individual stabilisation measures are designed, it is important to strike the right balance between ensuring opportunities for government influence and maintaining entrepreneurial leeway.

The Federal Ministry for Economic Affairs and Climate Action is available for general questions related to the ESF:

wsf-info@bmwk.bund.de; +49 30 18615 6091

Questions related to a specific application should be addressed to PwC, the Federal Government agent authorised by the Federal Ministry for Economic Affairs and Climate Action:

de_wsf@pwc.com; +49 30 2636 2030