A company's solvency gives insight into its long-term financial health. An 'undertaking in difficulty' (UID for short) is a company with weak solvency. This therefore refers not just to companies in bankruptcy or judicial restructuring, but to their financial health in a broader sense. UID is a term defined by the European Union (EU) and is a crucial element in your application dossier. The EU excludes UIDs from certain support measures. The status of your company (UID or not) follows from a calculation using an established formula that partly depends on 'the size of your company' (see below). The status of your company (UID or not) follows from a calculation using an established formula that partly depends on the size of your company.

Size of your company and group

If your company is completely independent of other companies and is not part of a group, you only calculate the UID status at the level of your company as a subsidy applicant (stand-alone). If there are associated enterprises, an additional calculation at group level (sum of associated enterprises) must also be made.

The size of your company helps determine the calculation of your UID status. The SME definition sets out the basic criteria for determining the size of a company. It also lists the criteria for consolidation if your company belongs to a group or has partner or associated enterprises. Please note: whereas the consolidation rules from the SME definition require you to take into account partner enterprises (>=25 and <=50% shareholding) and associated enterprises (> 50% shareholding), for the UID calculation you only need to consolidate the associated enterprises.

You add together the figures (turnover, balance sheet total, employment) of all associated enterprises (including your company). If consolidated financial statements are prepared, the criteria can be calculated on the basis of the data included in these financial statements. If the consolidated financial statements are not filed, they must be certified by a (certified) ITAA accountant or auditor. You then look at whether the whole group is an SME or an LE using the basic criteria from the SME definition. You apply the corresponding UID calculation at company stand-alone level and group level.

Calculation module for SMEs and large enterprises

Use this UID calculation module to calculate your company's UID status. To calculate the main criterion, ratio of equity to issued capital/contribution (explained below) at group level, you should also use the calculation module calculation of UID at group level.

The criteria for calculating the UID status

You apply the criteria below to the company stand-alone and, where applicable, also to the group. When making the calculation, we start from the corresponding codes in the financial statements. For more explanation about this, please consult your accountant.

Main criterion (for both SMEs and LEs):

Equity to issued capital ratio < 0.5 => you are a UID

Limited liability companies (nv, bvba, cvba, etc.) start from the following items:

Private companies (bv, cv, etc.) start from the following items:

Note: a company in collective insolvency proceedings or benefiting from rescue or restructuring support is always a UID.

Additional criteria only for large enterprises (LE):

There are additional criteria for large enterprises that can mean that the company is a UID. An LE is also a UID if the company exceeds the following limits in two consecutive financial years:

Criterion 1: ratio of loan capital (LC) to equity (EQ) is more than 7.5

Criterion 2: EBITDA/interest expense ratio less than 1.0

Both limits must have been exceeded during the last two completed financial years. In the example below, the figures do not result in a UID because in year 1 the ratio of EBITDA to interest burden >=1.

Certain companies are never undertakings in difficulty

• An SME that has been in existence for less than three years is by definition not a UID and this is according to Article 2, point 18 of the General Block Exemption Regulation (GBER).
• A small enterprise that has been in existence for more than three years and less than five years may still be subsidised as a UID in some cases in accordance with Article 22 of the GBER as support for start-ups. However, the subsidy allocation for these companies is capped and comes with specific obligations.

If the company is part of a group, the size of the group (SE, ME or LE) and the age of the oldest company in the group are taken into consideration. In determining the age of the group, account should only be taken of associated enterprises (> 50% shareholding or control; the higher of the two applies) when consolidating the group.

When is your application inadmissible?

Your application will not be accepted if, at the time of submission, your company is a UID according to the last filed annual accounts with the National Bank of Belgium.

There are three exceptions to this rule:

1. The figures for the company's current (or not yet filed) financial year have evolved such that the company is no longer a UID. In that case, you can report this to VLAIO using certified provisional financial statements/interim financial statements. You need to add these figures to your application. You do this by loading the figures in the 'UID remediation plan' field. These figures must be certified by a company auditor or (certified) ITAA accountant and must not be more than three months old at the time of submission.
2. For a research or development project with only one company applying for support (so one business partner), this company may still apply as a UID. In that case, a UID remediation plan must be added to the application. Proof of the remediation carried out must be submitted no more than four months after the date of the decision to grant support. The certified annual/interim financial statements should not be older than three months at the time of demonstrating the remedial action taken.
3. For VLAIO grant applications in a European partnership with one or more Flemish business partner(s), where a common European evaluation is used, you can be OIM at the time of the VLAIO grant application. In that case, an OIM remediation plan must be added to the Flemish application. Proof of the remediation carried out has to be provided before the international ranking of eligible projects is determined.

UID remediation plan

The UID remediation plan sets out in very precise detail what concrete steps your company will take to boost its solvency so that your company is no longer a UID. There is no set template for this remediation plan. You are free to design this yourself.

Please note! Your remediation plan must include concrete figures and actions that make it clear that the UID exit point will be achieved. If the plan is not concrete, then your application for support will immediately be declared inadmissible. Be sure to submit all the mandatory documents on time.

Possible exit routes:

• A UID exit through improved profitability that translates into a profit carried forward when the results are processed. You justify the increased profitability in the remediation plan and include the UID calculation module with a calculation of the interim financial statements after UID exit. The formal proof of a UID exit consists of filed or unfiled financial statements/interim financial statements certified by an auditor or (certified) ITAA accountant.
• A UID exit via a capital increase and/or capital reduction. You indicate when your company will carry out the capital operation and for what amounts. You complete the UID calculation module with a calculation of the interim financial statements after this planned capital operation. The formal proof consists of the notarised deed of the capital or contribution operation together with filed or unfiled financial statements/interim financial statements certified by an auditor or (certified) ITAA accountant. 

If you want to check the options for remediation, please contact a VLAIO business adviser.

Legal background

Under European rules, a company must not be an undertaking in difficulty at the time when the support is granted. The definition of an undertaking in difficulty can be found in Article 2, point 18 of the General Block Exemption Regulation (GBER)