The Essentials at a Glance

• The definition of "undertaking in difficulty" used in the EU Guidelines for Rescue and Restructuring Aid only applies when companies are on the brink of insolvency – state aid often comes too late in these cases.
• At the same time, the same definition excludes innovative start-ups and scale-ups with investment-related initial losses from many funding programmes, even though their business models are fundamentally viable.
• The planned exception for innovative start-ups (five years) is a step in the right direction, but it is insufficient in the German Chamber of Commerce and Industry's (DIHK's) view.
• The UiS definition not only applies to rescue aid but is relevant for the entire EU state aid law – an inconsistent regulation creates legal uncertainty for companies.
• Hybrid financing instruments (mezzanine capital) should be considered in evaluations if they indeed fulfil an equity function.

Answers to Frequently Asked Questions

What does 'enterprise in difficulties' mean under EU state aid law?

An 'enterprise in difficulties' is a business that, without state support, would cease its operations in the short or medium term – for instance, because more than half of its equity has been consumed by losses or it is facing bankruptcy proceedings. This classification has significant consequences: while it opens access to rescue aid, it also excludes many other support programmes.

Why is this particularly problematic for start-ups and scale-ups?

Many innovative growth businesses deliberately record losses in their initial years – as they heavily invest to access international markets. By the current definition, they may be classified as 'enterprises in difficulties', even if their business model is fundamentally sound. This might lead to exclusion from funding programmes designed specifically for such companies.

What is mezzanine capital, and why does it play a role in the statement?

Mezzanine capital refers to hybrid financing instruments that combine elements of equity and debt capital – such as silent partnerships or convertible loans. If these instruments truly absorb losses like genuine equity, the German Chamber of Commerce and Industry (DIHK) believes they should be considered when assessing whether a company is 'in difficulties'. The Commission outlines this approach in its new draft – which the DIHK regards as reasonable.

Why does the DIHK call for a unified definition in all state aid regulations?

Currently, there are differing definitions in the rescue guidelines and the General Block Exemption Regulation (GBER), which may lead to contradictions and legal uncertainties in practice. A unified definition, with clearly integrated exceptions for start-ups, scale-ups, and SMEs, would significantly simplify the application of the law for businesses, authorities, and courts.

Which industries are particularly affected?

Capital-intensive technology sectors like Deep Tech, Biotechnology, and Climate Tech are most affected. These companies often undergo years of development, regulatory approval, and market introduction phases before generating sustainable revenues. Hence, they rely heavily on reliable access to funding programmes.