How to account for PDF subsidies, or what you should remember if you’re a beneficiary

31 July 2020 was the last day to apply for subsidies granted by the Polish Development Fund for micro, small- and medium-sized enterprises within the meaning of EU law.

Companies have received significant money under the Financial Shield 1.0 legislative package, of which up to 75% can be forgiven. If a company received a subsidy of PLN 1 million, it may, in the best-case scenario, be required to repay only PLN 250,000 if it meets the requirements specified in the regulations (e.g. to maintain average headcount and to ensure that the subsidies are used appropriately). For this to happen, however, it is essential that the company's managers make sure to comply with their obligations resulting from the subsidy agreement, the rules of the PDF financial shield and the provisions of generally applicable law.

If they fail to comply with some of the obligations they might be required to return the entire subsidy granted, which for many companies would mean the need to conduct restructuring proceedings and even to file for bankruptcy.

The amount to be repaid

The PDF takes a decision on the amount of the financial subsidy to be repaid on the basis of the statement on the accounting for the financial subsidy, submitted by the beneficiary within 10 working days of expiry of 12 months calculated from the date of the pay-out of the financial subsidy. If the statement on the accounting for the financial subsidy is not submitted within the deadline, the beneficiary will be required to return the entire amount of the subsidy.

Until the end of 2020 (deadline later postponed until 31/01/2021), every beneficiary had to provide the bank (through electronic banking), through which the subsidy was paid out to it, with a statement of data compliance, and if the application was submitted by a person other than the beneficiary or its representative disclosed in the National Court Register – with documents confirming that the person who accepted the terms of the agreement and submitted the statement of will to conclude it on behalf of the company was entitled to represent it (or the beneficiary's confirmation of performing those activities in the form of a statement). The statement had to be signed using an electronic signature. Every bank accepted these documents in accordance with an internal procedure. Interestingly, some of them (such as PKO BP), in addition to the electronic form, allowed submitting the above-mentioned documents to an advisor in hard copy. In such a case, the signature on the power of attorney or statement – if the application was not submitted by a representative or owner – had to be certified by a notary public.
 

Deadlines

Failure to provide the documents within the specified deadline will result in the obligation to return the entire amount of the subsidy. Submitting an appropriate application/statement is not a complicated process, however, sometimes technical problems occurred.

The entire subsidy granted will also have to be returned if the beneficiary spends the received funds inappropriately. This can be the case for example when the funds are used for making payments to owners or affiliated entities or for financing the acquisition of shares. That is why it is worth auditing the expenditures and fulfilment of conditions to have as much as possible of the subsidy forgiven.

Micro-, small- and medium-sized enterprises

Different rules for accounting for the PDF financial subsidy apply to micro and small- and medium-sized enterprises. As the deadline for preparing the relevant documents is nearing, it is advisable to prepare, with the assistance of a financial and legal advisor, an initial simulation of whether the PDF financial aid will be used correctly and how optimal parameters can be achieved within the company, e.g. the average number of employees or cash loss. In this way, the financial aid beneficiary minimises the risk of having to return the entire subsidy granted due to failure to comply with its obligations specified in the regulations. Auditing whether the funds are used appropriately and the financial parameters are achieved within the company, and taking appropriate corrective actions as long as it is possible will be helpful if the beneficiary plans to be forgiven the maximum amount of the funds possible.