Procedural aspects of anti-crisis support for businesses

Businesses financially affected by the COVID-19 pandemic have access to a number of measures developed by the government and the banking sector. This analysis focuses on the procedural aspects of financial support available from the Polish Development Fund (Polish: PFR) or the Guaranteed Employment Benefit Fund (Polish: FGŚP).

As part of the Financial Shield of 15 June 2020, the Polish Development Fund launched a support programme for micro enterprises, SMEs and large enterprises that have been affected by the Covid-19 pandemic. The main criteria for eligibility for support from the Polish Development Fund and details of the purposes for which the support may be used, as well as the criteria for cancellation of the related debt, are specified in the Rules for Access to Support from the Government Programme called the “Polish Development Fund's Financial Shield for Micro Enterprises and SMEs"¹ and “Polish Development Fund’s Financial Shield for Large Enterprises”². To be granted financing from the Polish Development Fund, a business owner must submit an application and sign an agreement for the grant of a financing.

As regards support from the Guaranteed Employment Benefit Fund, to be eligible for such support, an enterprise owner must meet the requirements set out in the Act of 31 March 2020 to amend the Act on special measures to prevent, counteract and combat COVID-19, other infectious diseases and related crisis situations, and some other statutes. Applications must be made to the director of the provincial job centre for the registered office of the applicant. As in the case of payments from the Polish Development Fund, support from the Guaranteed Employment Benefit Fund is deemed granted when it is paid directly into the applicant's bank account.

According to §11.13 of the Polish Development Fund's Rules for SMEs, if an applicant makes a false statement or provides false information in their application, the Polish Development Fund may require the applicant to repay all or any part of the received financing. If this is the case, the business owner will be required to repay all or part of the financing immediately, but not later than within 14 business days since the financing reception, into a specified bank account held with the bank that paid out the financing. However, pursuant to §4.7 of the Polish Development Fund’s Rules for Large Enterprises, PFR is entitled to refuse to pay or request reimbursement of financing if there is a reasonable suspicion of any type of fraud, in particular based on information obtained from competent authorities.

Additionally, the obtaining of financial support from the Polish Development Fund or the Guaranteed Employment Benefit Fund when the applicant is found not to have met the eligibility criteria may constitute the crime of extortion of public funds, which is a criminal offence under  art. 297 of the Polish Penal Code, carrying a penalty of imprisonment for three months to five years. Additionally, a business owner applying for financial support from the Guaranteed Employment Benefit Fund may be criminally liable for making a false statement in the application (art. 233 of the Polish Penal Code).

It is, therefore, advisable for any applicant to ensure that they meet the eligibility criteria for the support before applying, in terms of the negative impact of the pandemic on their business. This is particularly important if the business owner has any doubts over their eligibility for the support.

If a financing paid by the Polish Development Fund to an applicant is lower than the amount applied for, the decision may be appealed against using an electronic form and the same bank through which the original application was filed. The appeal will only be accepted if the applicant provides documentary evidence showing differences between the reasons for the decision to refuse the payment applied for and the applicant's actual situation, or proves a mistake or error that resulted in the payment of an amount lower than that applied for. Two such appeals are allowed, except that the second appeal may be filed only if the business owner was not paid the missing part of the amount applied for after the first appeal. The time limit for filing an appeal is two months from the receipt of the first decision to grant the financing.

However, no appeals are accepted from a business owner whose application has been rejected. He may then re-apply at any time when the Polish Development Fund's programme is available, after contacting the Polish Social Insurance Institution (ZUS), respective tax office and bank for details of the rejection of the first application. Neither the Act of 31 March 2020 on a System of Development Institutions nor the Regulation of the Minister of Development Funds and Regional Policy of 28 April 2020 concerning the Financial Shield, contain specific provisions for appeals against the Polish Development Fund's decisions to refuse to grant financial support. Similarly, there are specific provisions for appeals against the Polish Development Fund's decision not to cancel the beneficiary's debt resulting from the grant of support.

In response, the Ombudsman for SMEs has applied to the Ministry of Development for explanatory notes on the criteria for eligibility for support as part of the Financial Shield. According to the Ombudsman³, the Polish Development Fund is an institution with public administration duties and, as such, its determinations are official decisions and appeals against them should be available. Determinations of such appeals should be appealable to a provincial administrative court. At the time of writing this analysis, as indicated on the Ombudsman's website⁴, the Ombudsman's application has not been considered.

It needs to be highlighted that §14 of the Polish Development Fund’s Rules for SMEs (in force since May 28, 2020), introduces explanatory proceedings, pursuant to which entrepreneurs applying for a financing are entitled to turn to PFR with a question regarding the refusal to receive a financing and regarding the entrepreneur's error, which resulted in financing grossly lower than the maximum amount that the entrepreneur could have applied for.

The explanatory procedure is a form of quasi-appeal procedure, however, the provisions regarding the

necessity to submit a new application for financing in the event of a negative decision have not changed. In view of the above, the explanatory proceedings in practice only allow the entrepreneur to become familiar with the reason for issuing a refusal decision, but not to change the decision itself.

At the same time, as follows from the explanations contained in §4 of the Polish Development Fund’s Rules for Large Enterprises (effective from June 9, 2020), due to the extraordinary nature of the PFR programme and to ensure the efficiency and quickness of recognition of applications for financing, the procedure for examining these applications does not provide for the possibility of appeal against PFR decisions to grant or refuse financing.

As regards financial support from the Guaranteed Employment Benefit Fund to help employers pay wages, the Guaranteed Employment Benefit Fund is a special-purpose fund within the meaning of the Public Finance Act of 27 August 2009 and is not a body corporate. Therefore, the provisions of the Code of Administrative Procedure apply to the Fund except for the provisions on administrative decisions. This means that the grant of financial support by the Polish Development Fund is not an administrative decision and if an application for support from the Guaranteed Employment Benefit Fund is rejected or if the beneficiary is required to repay all or part of the support (plus interest), no appeal should be available (this is confirmed by information posted on the website of the Ministry of Family, Labour and Social Policy: https://www.gov.pl/web/rodzina/dofinansowanie-do-wynagrodzen-z-funduszu-gwarantowanych-swiadczen-pracowniczych-dla-kogo).  It seems that because of the special nature of the financial support provided by the Guaranteed Employment Benefit Fund, which is one of the measures in place to counteract the socioeconomic impact of the COVID-19 epidemic, the Ombudsman's suggestions regarding applications for support from the Polish Development Fund should also apply to applications for support from the Guaranteed Employment Benefit Fund.

In view of the above, while the measures provided as part of the Anti-Crisis Shield and the Financial Shield are of benefit to business owners, it is our opinion that the procedural aspects of the anti-crisis support for businesses should be made more precise.

¹ The rules can be downloaded from the Polish Development Fund's website at https://pfrsa.pl/dam/serwis-korporacyjny-pfr/documents/tarcza-finansowa-pfr/regulamin_programu_tarcza_finansowa_pfr_dla_mmsp.pdf.

² https://pfrsa.pl/dam/serwis-korporacyjny-pfr/documents/tarcza-finansowa-pfr-250 /Regulamin_programu_Tarcza_Finansowa.pdf, dalej: „Regulamin dla dużych firm”.

³ https://rzecznikmsp.gov.pl/rzecznik-msp-wnioskuje-do-wiceprezes-rady-ministrow-minister-rozwoju-o-wydanie-objasnien-prawnych-w-przedmiocie-warunkow-skorzystania-z-tzw-tarczy-finansowej-przez-mikroprzedsiebiorcow-2/.

⁴ https://rzecznikmsp.gov.pl/.

Marcin Górniak,
Senior Manager in the Tax Litigation Team at KPMG in Poland

Ilona Augustyniak,
Senior Consultant in the Tax Litigation Team at KPMG in Poland