Emergency business support measures in times of crisis caused by COVID-19

Vladislav Goranov and Emil Karanikolov, ministers of finance and of economy, announced support measures for the economic life and the businesses most affected by the emergency situation.

The ministers are hoping that with the proposed measures enterprises shall be stimulated enough so that they could continue functioning. The measures are divided into two categories and their purpose is to ensure a smooth transition through the epidemiological crisis and the later expected economic crisis. For now the measures are intended to be temporary for the next couple of months. There is a possibility to extend this period if necessary.

The two categories in which the suggested measures shall be applied concern the employment on one hand and, on the other – securing a buffer regarding companies with credits, for which servicing difficulties shall occur.

At this stage the business sector restrictions are described in Order No. RD-01-124/13.03.2020 of the Minister of health. At present business activity is permitted including – services, constructions, bank activity and etc. The ban on activities of certain industries aims mainly to achieve social restraint. The latter could affect mostly the business representatives that develop their activity in restaurants and entertainment clubs where gathering of many people is most common.

Securing the employment by providing financial help from the state

In relation to securing the employment in the most affected businesses, amendments in the Social Security Code are proposed. These amendments are intended to provide a mechanism for legal entities, which are in a situation where they have to dismiss part of their workers/employees, to give themselves a chance to keep these workers/employees for three more months (initially).

These legal entities can take advantage of the opportunity for state support in the amount of 60 % of the remuneration which they have been paying employees up until now. This will happen by applying before the employment authorities by submitting information about the number and specific data for the persons for whom the support is sought. This support will be transferred to the applied legal entities. The remaining remuneration will be paid by the employers without having to terminate employment relations with workers/employees. This measure aims to support businesses which are expected to experience temporary difficulties in the next couple of months but which also have a real perspective to continue functioning.

Making it easier for businesses with difficulties to pay off their obligations to commercial banks

This will happen by financially supporting the credit system so that the system could become a partner of the business. In connection to this there is a proposal to increase the capital of the Bulgarian National Bank with a package of 500 million BGN which will serve for two purposes:

On one hand, wallet guarantees are to be issued to the commercial banks which will lighten their capital burden and will allow them to be flexible regarding their clients which are experiencing temporary difficulties.

The second instrument will give the Bulgarian Development Bank (or the bank’s subsidiary for risk capital) an opportunity to participate simultaneously with an option for repurchase in the capital of companies in need of such participation. This will happen through the mediation of the commercial banks where these companies are clients. This way de facto a temporary free financing will be provided to companies which decide to take advantage of this instrument.

Regarding the problems connected with postponing deadlines in the legislation – these measures will be proposed for resolution in one package. On one hand, they will give the opportunity for a liquid business support, and on the other – an opportunity for implementing organizational measures so that the business subject will not be in violation (for example – postponing the deadline for the annual financial closure, for the advance payment schedule under the Corporate Income Tax Act.

A phone line will be opened in the Ministry of Finance for questions from the business about unpaid expenses from the state in the capacity of a payer or a contracting authority. This way every businessman, who has payments to receive from the state and municipalities, will be able to investigate with the help of the Ministry of Finance whether there is a problem that can be solved.