Corona (COVID-19) continues to affect the Swiss population and businesses alike. With the arrival of the new year the number of infections remains high, but vaccinations are being rolled out across the country, indicating that a modicum of normalcy might return soon. Nonetheless, in light of recent developments concerning the more contagious virus mutation, the Swiss government imposed even stricter measures to curb the spread of the virus on 13 January 2021. At the same time, the Swiss government also increased its hardship compensation fund for the hardest hit sectors of our economy by an additional CHF 1.5bn to CHF 2.5bn (or an increase of 150%)! The funds will be provided jointly by the Swiss Federation (CHF 1.9bn) and the Cantons (CHF 0.6bn). Below, we provide an overview of the financial support for hardship cases as well as the Cantonal implementation of the distribution of funds.
Conditions for hardship aid relaxed
On 13 January 2021, the Swiss Federal Council relaxed the conditions that a company must meet in order to receive hardship aid. Among other things, businesses that have been officially closed for at least 40 calendar days since 1 November 2020 are now considered hardship cases without evidence of a revenue decline. The upper limits for non-refundable contributions will be increased to 20 percent of revenue or CHF 750,000 per legal entity. In addition, compensation for any decrease in revenue that occurred in 2021 can now also be claimed. To determine the extent of the decline in revenue, the revenue of the last 12 months may be used instead of the 2020 annual revenues. However, the non-refundable contributions may not exceed 20% of the average revenues of 2018 and 2019. For all companies receiving financial support the dividend ban will be shortened from 5 to 3 years or until the funds have been repaid.
In addition to these contributions, loans and guarantees with a maximum duration of ten years may be granted and can amount to a maximum of 25 percent of average annual revenues generated in 2018 and 2019, but may not exceed the amount of CHF 10,000,000 per legal entity. This regulatory amendment allows cases of hardship to be supported broadly. More than half of the cantons are already starting to accept applications for hardship benefits during January and all cantons are expected to pay out support by February 2021.
Is your company eligible for hardship aid?
How can you find out whether your company is eligible for financial support? In order to obtain funding under the new regulation, the following basic requirements need to be met:
- the company had to be incorporated before 1 March 2020, and had to have a
- minimum revenue of CHF 50,000,
- salary expenses primarily within Switzerland, and
- be able to show documentation and evidence (such as annual financial statements and monthly financial reporting)
Furthermore, the decrease in revenue during the last 12 months needs to be at least 40% or the government-ordered shutdown needs to be at least 40 calendars days since 1 November 2020.
Special rules for companies undergoing restructuring
Further, it is important to note that in the event of a company restructuring, the cantons are to be given the additional option of increasing the cap to a maximum of CHF 1.5 million. The prerequisite for this is that the shareholders and the debt providers together make an additional contribution of at least the same amount. For example, a prerequisite for increasing the state contribution to CHF 1 million would be a contribution from shareholders and/or debt providers totaling CHF 250’000 (e.g. an increase in equity of CHF 150’000 and a debt waiver of CHF 100’000). Only freshly contributed equity capital counts as an additional contribution by the shareholders, not the conversion of shareholder loans into equity capital.
The fact that the upper limit of non-refundable contributions is limited to CHF 750’000 for each legal entity causes unequal treatment of companies in the same sector. A business structured into many legal entities may get more state support than a business of the same size which subsumes its activities in one legal entity. This treatment is deemed unfair as well as unpractical by many.
Cantonal differences in distribution of financial support exist
The most hard-hit sectors of the Swiss economy, such as restaurants, bars and nightclubs, sports and leisure centers, as well as libraries, museums and other cultural institutions have been closed since 22 December 2020. In fact, the government-ordered lockdown has been extended to the end of February 2021. For many companies active in these sectors of the economy, financial support cannot arrive early enough.
The table below shows the Cantonal differences concerning the application process and the timing of disbursement of funds for the financial support measures. Strictly from a legal perspective, first disbursements of funds were possible after the referendum period has expired, meaning as of 4 February 2021 at the earliest.