A recent ruling by the Trade and Industry Appeals Tribunal (CBb) highlighted the importance of the notion of an “undertaking” within state aid law. This particularly with regard to the situation where several entities are considered to be one undertaking. In such cases, all aid received by these entities should be added up, as they qualify as one undertaking and thus one aid beneficiary. This may have implications for, for example, application of aid ceilings. The ruling therefore offers important insights for companies that are part of a group and may receive state aid.
In the judgment of February 20, 2025 (ECLI:NL:CBB:2025:76), the CBb dealt with a case in which a company (hereafter: Company X) appealed against a decision of the Minister of Economic Affairs in which a TVL subsidy (Reimbursement Fixed Costs) of Company X was revised and lowered. Based on this decision, an amount of €333,831.48 of the TVL subsidy received as an advance was recovered from Company X for exceeding the aid ceiling.
The Minister reached this decision as Company X was part of a group which until December 1, 2021 consisted of Company X, Company Y and Company Z. Company Z was dissolved on December 1, 2021. All three companies received subsidies under the TVL scheme over different periods. This TVL scheme gave financial support to enterprises with loss of turnover due to COVID measures from June 2020. According to the Minister, in the present case, the TVL subsidy to Company X had exceeded the aid ceiling of €2.3 million applicable until Q1 of 2022.
Company X believed that the recovery of part of its subsidy was unlawful, as the subsidies received by Company Z should not be added to the total subsidies received by the group. This is because Company Z had been dissolved as of December 1, 2021, which meant that it was not part of the group at the time of both the award and review of the subsidy given to Company X.
The CBb did not follow Company X’s position and upheld the Minister’s judgment. The court ruled that the three companies qualify as one undertaking under state aid law, and that the total aid granted to them may not exceed the aid ceiling. Exceeding the aid ceiling would result in unlawful state aid. The fact that Company Z was no longer part of the group due to dissolution at the time of award and review of the subsidy does not change this. Because Company Z ceased to exist, the TVL subsidies granted to it (earlier) were not withdrawn from the group. They benefit the group (in)directly. This is also the case if the balance of dissolution has been used to pay a tax debt of Company Z. Even then, the subsidy received by Company Z prior to dissolution can provide (in)direct benefit to the rest of the group.
In view of the above, the CBb held that the revision and lowering of the subsidy to Company X was justified. Determination of a higher amount would constitute unlawful state aid, according to the CBb.
Under state aid law, an undertaking is defined as any entity engaged in an economic activity, regardless of its legal form and method of financing. Based on Union law jurisprudence, carrying out economic activities is defined as offering goods and/or services on a market. The concept of undertaking within state aid law is thus very broad, and can include virtually any legal form, regardless of whether the entity in question is profit-making or not. Any provider of a good or service on a market is, in theory, an undertaking within state aid law.
Within state aid law, several separate legal entities may be deemed to constitute a single economic entity for the purposes of state aid rules. They then qualify as a single undertaking, for the purposes of State aid reviews. This was also the case for the companies that were part of the group in the CBb ruling.
In assessing whether multiple entities qualify as a single undertaking, a number of factors are considered which have been developed in Union law jurisprudence. In particular, the following factors are considered:
The classification of multiple legal entities as a single undertaking under state aid law may have negative consequences for the amount of aid granted. In such cases, the aid received by these separate legal entities must be added together to determine whether the aid remains below applicable aid ceilings. In the CBb ruling, this worked out negatively for Company X, which received a lower subsidy due to a past group composition. Indirect aid should also be taken into account in such cases.
For companies that may receive state aid, it is crucial to carefully analyse the interrelationships between different entities. Failure to pay sufficient attention to this may lead to unlawful state aid and recovery risks. This is the case, for example, when aid ceilings are exceeded because aid granted to different entities must be added together within the frameworks of state aid law.
Do you have questions on this topic? Would you like to learn more about the qualification of multiple entities as a single enterprise for state aid purposes? Please feel free to contact Monika Beck or one of our other state aid specialists.
Attorney at Law