(Reference for a preliminary ruling– Structural Funds– European Regional Development Fund (ERDF)– Regulation (EU) No1303/2013– Co-financing programme– State aid– Regulation (EU) No651/2014

EU law

Regulation (EU) No1301/2013

3Recital1 of Regulation (EU) No1301/2013 of the European Parliament and of the Council of 17December 2013 on the European Regional Development Fund and on specific provisions concerning the Investment for growth and jobs goal and repealing Regulation (EC) No1080/2006 (OJ 2013 L347, p.289) states:

‘Article176 [TFEU] provides that the [ERDF] is intended to help to redress the main regional imbalances in the Union.…’

4Article3 of that regulation, entitled ‘Scope of support from the ERDF’, provides in paragraph3 thereof:

‘The ERDF shall not support:

…

(d)undertakings in difficulty, as defined under Union State aid rules;

…’

Regulation No1303/2013

5Regulation No1303/2013 lays down common rules and general provisions applicable to the ERDF, the European Social Fund, the Cohesion Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund, together referred to as the European Structural and Investment Funds (‘the ESI Funds’).

6In accordance with Article4(7) of that regulation, in principle, the part of the budget of the Union allocated to the ESI Funds is to be implemented within the framework of shared management between the Member States and the Commission.

7Article26(1) and (2) of that regulation is worded as follows:

‘1.The ESI Funds shall be implemented through programmes in accordance with the Partnership Agreement. Each programme shall cover the period from 1January 2014 to 31December 2020.

2.Programmes shall be drawn up by Member States or any authority designated by them, in cooperation with the partners referred to in Article5. Member States shall draw up the programmes based on procedures that are transparent for the public, in accordance with their institutional and legal framework.’

8Article123 of that regulation requires each Member State to designate, for each operational programme, a managing authority, a certifying authority and an audit authority.

9Article125 of Regulation No1303/2013 defines the functions of the managing authority. Pursuant to paragraph1 of that article, that authority is responsible for managing the operational programme in accordance with the principle of sound financial management.

10As regards the selection of operations, Article125(3) of that regulation provides that that authority is to:

‘(a)draw up and, once approved, apply appropriate selection procedures and criteria that:

(i)ensure the contribution of operations to the achievement of the specific objectives and results of the relevant priority;

(ii)are non-discriminatory and transparent;

(iii)take into account the general principles set out in Articles7 and 8;

…

(d)satisfy itself that the beneficiary has the administrative, financial and operational capacity to fulfil the conditions referred to in point (c) before approval of the operation;

…’

Regulation No651/2014

11Recital14 of Regulation No651/2014 states:

‘Aid granted to undertakings in difficulty should be excluded from the scope of this Regulation, since such aid should be assessed under the Community guidelines on State aid for rescuing and restructuring firms in difficulty of 1October 2004 [(OJ 2004 C244, p.2)] as prolonged by Commission communication concerning the prolongation of the application of the Community guidelines on State aid for rescuing and restructuring firms in difficulty of 1October 2004 [(OJ 2012 C296, p.3)] or their successor Guidelines, in order to avoid their circumvention, with the exception of aid schemes to make good the damage caused by certain natural disasters. In order to provide legal certainty, it is appropriate to establish clear criteria that do not require an assessment of all the particularities of the situation of an undertaking to determine whether an undertaking is considered to be in difficulty for the purposes of this Regulation.’

12Article1 of that regulation, entitled ‘Scope’, provides in paragraph4 thereof:

‘This Regulation shall not apply to:

…

(c)aid to undertakings in difficulty, with the exception of aid schemes to make good the damage caused by certain natural disasters.’

13Article2 of that regulation, entitled ‘Definitions’, is worded as follows:

‘For the purposes of this Regulation the following definitions shall apply:

…

(18)“undertaking in difficulty” means an undertaking in respect of which at least one of the following circumstances occurs:

(a)In the case of a limited liability company…, where more than half of its subscribed share capital has disappeared as a result of accumulated losses. This is the case when deduction of accumulated losses from reserves (and all other elements generally considered as part of the own funds of the company) leads to a negative cumulative amount that exceeds half of the subscribed share capital. For the purposes of this provision, “limited liability company” refers in particular to the types of company mentioned in AnnexI [to] Directive 2013/34/EU [of the European Parliament and of the Council of 26June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ 2013 L182, p.19)] and “share capital” includes, where relevant, any share premium.

…

(c)Where the undertaking is subject to collective insolvency proceedings or fulfils the criteria under its domestic law for being placed in collective insolvency proceedings at the request of its creditors.

…’

Directive (EU) 2017/1132

14According to recitals7 and 8 of Directive (EU) 2017/1132 of the European Parliament and of the Council of 14June 2017 relating to certain aspects of company law (OJ 2017 L169, p.46):

‘(7)The coordination of national provisions concerning disclosure, the validity of obligations entered into by, and the nullity of, companies limited by shares or otherwise having limited liability, is of special importance, particularly for the purpose of protecting the interests of third parties.

(8)The basic documents of a company should be disclosed in order for third parties to be able to ascertain their contents and other information concerning the company, especially particulars of the persons who are authorised to bind the company.’

15Article4 of that directive, entitled ‘Compulsory information to be provided in the statutes or instruments of incorporation or separate documents’, provides:

‘The following information at least shall appear in either the statutes or the instrument of incorporation or a separate document published in accordance with the procedure laid down in the laws of each Member State in accordance with Article16:

…

(b)the nominal value of the shares subscribed and, at least once a year, the number thereof;

…

(g)the amount of the subscribed capital paid up at the time the company is incorporated or is authorised to commence business’.

16Article14 of that directive, entitled ‘Documents and particulars to be disclosed by companies’, provides:

‘Member States shall take the measures required to ensure compulsory disclosure by companies of at least the following documents and particulars:

(a)the instrument of constitution, and the statutes if they are contained in a separate instrument;

(b)any amendments to the instruments referred to in point (a), including any extension of the duration of the company;

…

(e)at least once a year, the amount of the capital subscribed, where the instrument of constitution or the statutes mention an authorised capital, unless any increase in the capital subscribed necessitates an amendment of the statutes;

…’

17Article16 of Directive 2017/1132, entitled ‘Disclosure in the register’, provides in paragraphs3 and 5 to 7 thereof:

‘3.All documents and particulars which are required to be disclosed pursuant to Article14 shall be kept in the file, or entered in the register; the subject matter of the entries in the register shall in every case appear in the file.

…

5.Disclosure of the documents and particulars referred to in paragraph3 shall be effected by publication in the national gazette designated for that purpose by the Member State, either of the full text or of a partial text, or by means of a reference to the document which has been deposited in the file or entered in the register. The national gazette designated for that purpose may be kept in electronic form.

…

6.The documents and particulars may be relied on by the company as against third parties only after they have been disclosed in accordance with paragraph5, unless the company proves that the third parties had knowledge thereof.

However, with regard to transactions taking place before the sixteenth day following the disclosure, the documents and particulars shall not be relied on as against third parties who prove that it was impossible for them to have had knowledge thereof.

7.Member States shall take the necessary measures to avoid any discrepancy between what is disclosed in accordance with paragraph5 and what appears in the register or file.

However, in cases of discrepancy, the text disclosed in accordance with paragraph5 may not be relied on as against third parties; such third parties may nevertheless rely thereon, unless the company proves that they had knowledge of the texts deposited in the file or entered in the register.

Third parties may, moreover, always rely on any documents and particulars in respect of which the disclosure formalities have not yet been completed, save where non-disclosure causes them not to have effect.’

18According to AnnexII to that directive, the relevant types of companies for Latvia include, inter alia, the sabiedrība ar ierobežotu atbildību (limited liability company) which is the legal form of the applicant in the main proceedings.

Latvian law

The Law on the Management of the Funds

19The implementation of EU funds in Latvia is governed by the Eiropas Savienības struktūrfondu un Kohēzijas fonda2014.-2020. gada plānošanas perioda vadības likums (Law on the Management of the European Union Structural Funds and Cohesion Fund for the 2014-2020 Programming Period) (‘Law on the Management of the Funds’). Article21 of that law, entitled ‘Selection of project applications’, provides as follows:

‘(1)Procedures for the selection of project applications shall be:

1)open, where project applicants compete on equal terms for their project applications to be approved and to be granted funding from a European Union fund;…

…

(2)The liaison authority shall select project applications in accordance with the methods for selecting project applications and the regulations on the selection of project applications. The regulations on the selection of project applications shall be drawn up by the liaison authority and approved by it in conjunction with the responsible authority and the managing authority.

…

(5)Project applicants shall prepare and submit their project applications in accordance with the requirements of the regulations on the selection of project applications.

…’

20Article25 of the Law on the Management of the Funds, entitled ‘Approval, conditional approval or rejection of project applications under open procedures for the selection of projects’, provides in paragraphs3 and 4 thereof:

‘(3)A decision to reject a project application shall be made where at least one of the following situations arises:

…

2)The project application does not satisfy the evaluation criteria, and correction of the defects in accordance with paragraph4 of this article would affect the substance of the project application.

…

(4)A decision to grant a project application conditional approval shall be made where the project applicant must take certain actions specified by the liaison authority in order for the project application to satisfy the evaluation criteria in full and for the project to be implemented properly. The decision shall set out the relevant conditions, and compliance with those conditions shall be verified having regard to the regulations on the selection of project applications. If any of the conditions set out in that decision is not satisfied, or is not satisfied within the deadline laid down in the decision, the project application shall be deemed to have been rejected.’

21Article30 of that law, entitled ‘Clarification of project applications’, provides:

‘During the period between the submission of a project application and the decision to approve it, to grant conditional approval or to reject it, no further clarification of the project application may be submitted.’

The Implementing Decree

22The aid measure at issue in the main proceedings is governed by Ministru kabineta noteikumi Nr.612 ‘Darbības programmas “Izaugsme un nodarbinātība”3.1.1. specifiskā atbalsta mērķa “Sekmēt MVK izveidi un attīstību, īpaši apstrādes rūpniecībā un RIS3 prioritārajās nozarēs”3.1.1.5. pasākuma “Atbalsts ieguldījumiem ražošanas telpu un infrastruktūras izveidei vai rekonstrukcijai” otrās projektu iesniegumu atlases kārtas īstenošanas noteikumi’ (Decree No612 of the Council of Ministers laying down the regulations for implementing Phase Two of the project application selection procedure for the ‘Growth and Employment’ operational programme, specific support objective 3.1.1 ‘To promote the creation and development of SMEs, in particular in the manufacturing and [regional Research and Innovation Strategies for Smart Specialisation (RIS3)] priority sectors’, measure 3.1.1.5 ‘Support for investment in the establishment or reconstruction of production premises and infrastructure’) of 25September 2018 (Latvijas Vēstnesis, 2018, No101; ‘the Implementing Decree’). Article7 of the Implementing Decree is worded as follows:

‘Phase Two of the project application selection procedure for the measure shall be implemented by means of an open procedure for the selection of project applications.’

23Under Article15 of the Implementing Decree:

‘A project shall not be eligible for funding where:

…

15.3.The project applicant is classified as an undertaking in difficulty within the meaning of Article2(18) of Commission Regulation No651/2014;

…’

The regulations on the selection of project applications

24The practical aspects of the procedure for the selection of project applications are governed by the regulations on the selection of project applications, drafted by the Centrālā finanšu un līgumu aģentūra (Central Finance and Contracting Agency) (‘the competent national agency’), and by the annexes thereto.

25Paragraph6 of Section II of Annex5 to those regulations, entitled ‘Methodology for applying the project application evaluation criteria’, provides:

‘An “unconditional positive” evaluation will be awarded where the project applicant is not an economic operator in difficulty. The classification [of a project applicant] as an undertaking in difficulty at the time of the decision on the grant of the aid must be made on an objective basis, using verifiable and reliable information about the project applicant and related undertakings:

(a)The information in the most recent publicly available final annual report will be checked.

(b)Where an interim activity report approved by a sworn auditor is submitted, the information in that report will be used as the basis for determining whether the undertaking is in difficulty.

(c)Where the project applicant refers to publicly available ([that is to say], verifiable) information concerning an increase in share capital undertaken after the most recent final annual report, that information will be taken into account where it is accompanied by an interim activity report approved by a sworn auditor.

…

A “conditional positive” evaluation will be awarded where the information submitted is incomplete or not sufficiently precise. The project applicant will be invited to provide further clarification of the information submitted. Clarification is permitted only in respect of technical, arithmetical and drafting issues.…’

The Commercial Code

26Article12 of the Komerclikums (Commercial Code), entitled ‘Disclosure in the register’, states:

‘(1)Entries in the Commercial Register may be relied on as against third parties once they have been disclosed.…

(2)Where information which is required to be entered in the Commercial Register is not entered, or is entered but not disclosed, the information in question may not be relied on as against third parties by the person for whose benefit the information should have been entered, unless the third parties in question had knowledge thereof.

…’

27Article196 of the Commercial Code, entitled ‘Resolutions on alterations to share capital’, provides:

‘(1)Share capital may be increased or reduced only by means of a resolution, passed by a general meeting of the members, setting out the procedure for that increase or reduction.

…

(3)In the event of a resolution that share capital is to be altered, the Articles of Association must also be altered accordingly at the same time.’

28Article202 of that code, entitled ‘Applications to the Commercial Registry concerning increases in share capital’, provides as follows in paragraph3:

‘The increase in share capital shall be deemed to have occurred on the date on which the new share capital figure is entered in the Commercial Register.’