Big Society Capital: State Aid requirements and exemptions
Purpose of this guide
- This handbook is an introduction to State Aid for potential investees of Big Society Capital (Investees). It explains what State Aid is, how it relates to Big Society Capital Big Society Capital and some of the considerations and exemptions which you need to understand before seeking funding from Big Society Capital .
- As part of the State Aid clearance obtained by Big Society Capital from the European Commission (EC), Big Society Capital is required to ensure that the Investees it deals with have a good understanding of their State Aid requirements and acknowledge the need to put procedures in place to deal with them.
What is State Aid?
Essentially, State Aid is an advantage (broadly defined, and so can take many forms) given by public authorities to undertakings (any entity which places goods or services on the market) which may distort competition and affect trade in the European Union.
The Treaty on the Functioning of the European Union (TFEU) (previously called the European Community Treaty) is intended to promote the development of a single market within the EU, with no artificial barriers to trade or competition amongst the Member States. It was recognised that Member States may be tempted to favour their own economies by granting assistance to domestic undertakings. Therefore, the TFEU contains the following prohibition on State Aid at Article 107(1):
“Save as otherwise provided in this Treaty, any aid granted by a Member State or through any State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market”.
State Aid may take “any form whatsoever” and there is no exhaustive list of benefits that will be State Aid. However to qualify as State Aid, there are four characteristics known as the ‘four tests,’ all of which must be present in the assistance given.