Undertakings in difficulty are not eligible
A company's solvency gives insight into its long-term financial health. An 'undertaking in difficulty' is a company with weak solvency. This therefore refers not just to companies in bankruptcy or judicial restructuring, but to their financial health in a broader sense. UID is a term defined by the European Union (EU) and is a crucial element in your application dossier. The EU excludes UIDs from certain support measures under the General Block Exemption Regulation. The status of your company (UID or not) follows from a calculation using a set formula, which partly depends on the size of your company (see below).
A subsidy application from a company that is a UID according to the latest published financial statements will be refused if it has not been remediated between the end of the financial year and the date of submission of the support application (see below). Start-ups can make use of an exception rule (see below).
Size of your company and group
If your company is completely independent of other companies and is not part of a group, you only calculate the UID status at the level of your company as a subsidy applicant (stand-alone). If there are associated enterprises, an additional calculation at group level (sum of associated enterprises) must also be made.
The size of your company helps determine the calculation of your UID status. The SME definition sets out the basic criteria for determining the size of a company. It also lists the criteria for consolidation if your company belongs to a group or has partner or associated enterprises. Please note: whereas the consolidation rules from the SME definition require you to take into account partner enterprises (>=25 and ≤ 50% shareholding) and associated enterprises (> 50% shareholding), for the UID calculation you only need to consolidate the associated enterprises.
You add together the figures (turnover, balance sheet total, employment) of all associated enterprises (including your company). If consolidated financial statements are prepared, the criteria can be calculated on the basis of the data included in these financial statements. If the consolidated financial statements are not filed, they must be certified by a (certified) ITAA accountant or auditor. You then look at whether the whole group is an SME or an LE using the basic criteria from the SME definition. You apply the corresponding UID calculation at company stand-alone level and group level.
Calculation module for SMEs and large enterprises
Use this UID calculation module to calculate your company's UID status. To calculate the main criterion, ratio of equity to issued capital/contribution (explained below) at group level, you should also use the UID calculation module at group level.
The criteria for calculating the UID status
You apply the criteria below to the company stand-alone and, where applicable, also to the group. When making the calculation, we start from the corresponding codes in the financial statements. For more explanation about this, please consult your accountant.
Main criterion (for both SMEs and LEs):
Equity to issued capital ratio < 0.5 => you are a UID
Limited liability companies (nv, bvba, cvba, etc.) start from the following items:
| Financial statements code | Description |
|---|---|
| 10/15 + 101 | Equity |
| 100 + 11 | Issued capital |
Private companies (bv, cv, etc.) start from the following items:
| Financial statements code | Description |
|---|---|
| 10/15 + 87901 + 87911 | Equity |
| 10/11 + 87901 + 87911 | Issued capital |
Note: a company in collective insolvency proceedings or benefiting from rescue or restructuring support is always a UID.
Additional criteria only for large enterprises (LE):
There are additional criteria for large enterprises that can mean that the company is a UID. An LE is also a UID if the company exceeds the following limits in 2 consecutive financial years:
Criterion 1: ratio of loan capital (LC) to equity (EQ) is more than 7.5
| Financial statements code | Description |
|---|---|
| 16 + 17/49 | LC |
| 10/15 + 101 | EQ of limited liability companies |
| 10/15 + 87901 + 87911 | EQ of private companies |
Criterion 2: ratio of EBITDA/interest burden is less than 1.0
| Financial statements code | Description |
|---|---|
| + 9903 | Profit/loss for the year, before tax |
| - 750 | Income from financial fixed assets |
| - 751 | Income from current assets |
| - 752/9 | Other financial income |
| + 650 | Cost of debt |
| + 652/9 | Other financial costs |
| - 769 | Other non-recurring financial income |
| + 668 | Other non-recurring financial costs |
| + 630 | Depreciation and amortisation of formation expenses, intangible and tangible fixed assets |
| + 631/4 | Write-downs on inventories, on orders in progress and trade receivables: additions (reversals) |
| + 660 | Non-recurring depreciation and amortisation of formation expenses, intangible and tangible fixed assets |
| - 760 | Write-back of depreciation and of amortisation of intangible and tangible fixed assets |
| + 651 | Write-downs on current assets other than inventories, orders in progress and trade receivables: additions (reversals) |
| + 661 | Write-downs on financial fixed assets |
| - 761 | Write-back of write-downs on financial fixed assets |
| = | EBITDA |
| + 650 | Cost of debt (= interest burden) |
Both limits must have been exceeded during the last two completed financial years. In the example below, the figures do not result in a UID because in year 1 the ratio of EBITDA to interest burden >=1.
| Financial year | Year 1 | Year 2 |
| Debt-to-equity ratio | >7,5 | >7,5 |
| EBITDA/interest burden ratio | >=1 | <1 |
Certain companies are never undertakings in difficulty
- An SME that has been in existence for less than three years is by definition not a UID and this is according to Article 2, point 18 of the General Block Exemption Regulation (GBER).
- A small enterprise that has been in existence for more than three years and less than five years may still be subsidised as a UID in some cases in accordance with Article 22 of the GBER as support for start-ups.
However, the subsidy allocation for these companies is capped and comes with specific obligations.
If the company is part of a group, the size of the group (SE, ME or LE) and the age of the oldest company in the group are taken into consideration. In determining the age of the group, account should only be taken of associated enterprises (> 50% shareholding or control; the higher of the two applies) when consolidating the group.
Demonstrating UID remediation
The demonstration of the UID remediation sets out in very precise detail what concrete steps you have taken to boost solvency so that your company is no longer a UID. Add documents to the submission that substantiate this remediation. In particular, this involves documents that substantiate the implemented capital operation in conjunction with interim certified figures. These interim certified figures may not be more than three months old at the (final) submission date. Possible exit routes:
- A UID exit through improved profitability that translates into a profit carried forward when the results are processed. You justify the increased profitability and include the UID calculation module with a calculation of the interim financial statements after UID exit. The formal proof of a UID exit consists of filed or unfiled financial statements/interim financial statements certified by an auditor or (certified) ITAA accountant.
- A UID exit via a capital increase and/or capital reduction. You indicate when your company carried out the capital operation and for what amounts. You complete the UID calculation module with a calculation of the interim financial statements after this planned capital operation. The formal proof consists of the notarised deed of the capital or contribution operation together with filed or unfiled financial statements/interim financial statements certified by an auditor or (certified) ITAA accountant.
Legal background
Under European rules, a company must not be an undertaking in difficulty at the time when the support is granted. The definition of an undertaking in difficulty can be found in Article 2, point 18 of the General Block Exemption Regulation (GBER).