Tekes comments on the second draft of the General Block Exemption Regulation (published 18th of December 2013)

Transcription

1 1 Tekes comments on the second draft of the General Block Exemption Regulation (published 18th of December 2013) This document contains Tekes comments on the second draft of the General Block Exemption regulation, in particular its provisions on aid for SMEs as well as aid for research and development and innovation. Tekes the Finnish Funding Agency for Technology and Innovation is the main public funding organisation for research, development and innovation in Finland. Tekes submitted its comments to the consultation on the first draft of the GBER in June Introduction The second draft of the General Block Exemption Regulation (hereafter GBER) is very good. The provisions are now much clearer. Furthermore, we have noticed that several comments that we presented earlier have been taken into account. The GBER and the R&D&I Framework The first draft of the Framework for State Aid for Research, Development and Innovation (hereafter the R&D&I Framework) was published at the same time with the second draft of the GBER. Both documents contain many similar articles and are well in line with each other. However, we would like to ask the Commission to ensure the consistency of wording of the provisions in both documents. Provisions concerning the same issue should have the same wording in both documents unless there is a specific reason to phrase the provisions differently. Inconsistent wording of provisions with identical themes causes unnecessary uncertainty and should thus be avoided. We noticed inconsistent provisions for example in Article 6 (2) of the GBER and paragraph 63 and 64 of the R&D&I Framework on incentive effect; Article 7 (5) of the GBER and paragraph 80 of the R&D&I Framework on repayable advances; Article 8 (2) of the GBER and paragraph 9 and 83 of the R&D&I Framework on cumulation of Union funding with state aid; Article 9 (1) of the GBER and paragraph 117 of the R&D&I Framework on publication/transparency; Article 24 (3) of the GBER and Annex I of the R&D&I Framework on eligible costs of R&D projects; Recital 49 of the GBER and paragraph 20 of the R&D&I Framework on ancillary economic activities of research infrastructures; Definitions of aid intensity, aid scheme, date of award/granting of aid, individual aid, organizational innovation.

2 2 Comments on Articles Article 1: Scope According to paragraph 2 (a) the GBER does not apply to aid schemes for which the planned or effective yearly public expenditure exceeds 0,01 % of national gross domestic product (GDP) for the Member State concerned for the previous calendar year, in so far as the planned or effective annual budget of the scheme in question exceeds EUR 100 million. Schemes exceeding these thresholds shall be notified. We do agree that it is important to focus Commission ex ante scrutiny of aid measures on cases with the biggest impact on the internal market. However, in our opinion large aid schemes do not automatically lead to distortion on the market. Large schemes have typically a large number of beneficiaries, many of them SMEs, but not necessary large amounts of aid per single beneficiary. Instead of large schemes as such, the focus should be on large amounts and cumulation of aid for single beneficiaries. We see that setting the thresholds as proposed creates two problems: First, the threshold that depends on the GDP of the Member State concerned treats the Member States unequally. Second, the threshold of EUR 100 million is problematic as instead of several smaller aid schemes Member States should aim at creating bigger, more flexible schemes. This would lessen the bureaucracy on the side of both authorities and aid recipients. We are worried that the proposed notification threshold of EUR 100 million would lead to situation where aid schemes would have smaller budgets and narrower scopes in order to avoid the notification obligation. This would lessen the flexibility of the aid schemes and their ability to adapt to changes in the market. Several small schemes instead a big one would also increase bureaucracy. Furthermore, would implementing this requirement in the context of structural funds lead into additional and unnecessary bureaucracy? National/regional programmes are already negotiated and accepted in a dialogue between a Member state and the Commission. Would this mean that on top of this dialogue, there would have to be an additional notification procedure before these programmes could be launched? Furthermore, the notification of aid schemes exceeding the thresholds of effective public expenditure and annual budget may create legal uncertainty for aid beneficiaries and granting authorities, for example in cases where schemes are continued and later exceed the notification threshold. As such provision was not in the present GBER, we think that transparency and monitoring of aid in accordance with Articles 9 to 12 combined with the evaluation obligation as described in the memo attached to the open consultation should be enough to ensure that the aid schemes and measures do not distort the market. Thus, we propose that this provision is modified so that instead of notification obligation, all the schemes exceeding the total amount of state aid of EUR 100 million annually will be subject to the evaluation obligation. However, as there may be aid schemes that carry a higher risk of market distortion, we propose that the notification obligation is retained to cover the most distortive schemes. Our proposal is that the notification obligation applies to schemes exceeding the annual total amount of state aid of EUR 100 million and having

3 3 specific potentially distortive characteristics, such as the scheme has a small number of beneficiaries, beneficiaries are only or mainly large undertakings, or the scheme has a relatively narrow sectoral or regional scope. In the paragraph 5 (a) we hope that the Commission could clarify what is meant by predominantly established. It is understandable that the Member States cannot limit the principles of free movement but it must be possible to require at least that the aid recipient is established in the Member State and also that the aided activity or project is carried out in the Member State providing the aid. Furthermore, this should be consistent with the requirement concerning regional aid, where it is required (Article 14 paragraph 5 that the aided activity remains in the assisted region at least for five years (or three years in the case of a SME) after the completion of the project. Article 6 Incentive effect In paragraph 2, we welcome the replacing of the reference to Annex IV with the list of the information needed for the aid application. The regulation should clarify how it is defined when the work on the project or the activity has started. The definition of start of works currently foreseen in Annex I, definition 29, only refers to investments so it seems more suitable for regional and investment aid. There should be a general definition of start of works or start of the project like in the draft framework for state aid for R&D&I. Thus we propose that the definition of start of works or start of the project is modified to cover also other activities than investments. As it is usually necessary to make preparations and planning before the start of the project, it is very good that such preparatory activities have been allowed in the revised definition. However, it should be explicitly stated that letters of intent or other arrangements conditional on the aid decision are allowed. start of works or start of the project' means either the start of construction works relating to the investment or start of other activities, or the first legally binding commitment to order equipment or any other irrevocable agreement between the beneficiary and contractors to conduct the project, whichever comes first. Preparatory works such as buying land, obtaining permits and conducting preliminary feasibility studies as well as making letters of intent or other commitments and arrangements conditional on the aid decision are not considered start of works. For take-overs, start of works means the moment of acquiring the assets directly linked to the acquired establishment Article 7 Aid intensity and eligible costs In paragraph 3, it is stated that aid payable in several instalments shall be discounted to its value at the moment of granting. The eligible costs shall be discounted to their value at the moment of granting. While the economic rationale of this paragraph is obvious, this clause may lead to increased administrative burden and to legal uncertainty for some of the costs to be discounted (e.g. depreciation of assets). The additional administrative burden may impact the time to payment which in turn may hamper the

4 4 innovative capacity of especially SMEs. Considering the overall limited impact of discounting the value at the moment of granting for grants paid over a maximum period of e.g. 3 years after decision, it is suggested reducing the scope of this paragraph to specific cases where the amount of the aid might be significantly impacted by the discounting rate (aid paid over more than 4 years). Article 8 Cumulation In paragraph 2, it is stated that union funding centrally managed by the Union, does not constitute state aid. It is very good that this is explicitly stated in the rules as this has previously lead to unclear situations especially relating to cumulation of Union funding and national aid. However, we ask the Commission to clarify the last sentence of the paragraph that ends provided that the total amount of public funding granted in relation to the same eligible costs does not exceed the most favourable funding rate laid down in the applicable rules of Union law. It is unclear to us, if Union funding is considered public funding in this provision and does the most favourable funding rate refer to maximum aid intensities as specified in the GBER or other state aid legislation. We would interpret this provision so that if an undertaking has received 50 % Union funding to a project, it may not receive any national funding to the same project and costs, when the maximum aid intensity is 50%. However, if the maximum aid intensity is 70%, it may receive 20% national funding to the same project and eligible costs. To our understanding, this is the way this provision should be interpreted but we hope that the wording of the provision could be more precise. Article 9 Publication and information The aim to publish the information on state aid measures as proposed in Article 9 is good as such. However, we hope the Commission could explicitly define when the information should be published. According to the present paragraph 4, the information should be up to date but it is left open what up to date actually means. Especially in the field of R&D&I, it would be better if the information on each aid decision did not need to be published straight after the grant of aid but a bit later as granting of public funding to R&D&I activities of an undertaking may already as such be considered as a trade secret of this undertaking. This is why we suggest that information on individual aid awards received by a beneficiary in question is published annually by the end of the first quarter of the following year. This would also lessen the administrative burden of the aid authorities. We also notice that in the GBER, the wording is a comprehensive State aid website while in the R&D&I Framework, the wording is a single website. These should be consistent with each other. 4. The information mentioned in paragraph 1(c) shall be organised and accessible in a standardized manner, as described in Annex IV, and shall allow for effective search and download functions. The information referred to in paragraph 1 shall be up to date and available for at least 10 years from the date on which the aid was granted. The information mentioned in paragraph 1(c) is up to date when it is published annually by the end of the first quarter of the year following the granting of the aid. Article 20 SME s access to finance: Risk finance aid

5 5 In the paragraph 9, the total amount of risk finance is increased to EUR 15 million per eligible SME instead of 10 million in the previous draft. Similarly, the age of an undertaking eligible for aid is increased to 7 years. These increases are quite substantial. The increase of the eligible time from 5 to 7 years is basically valid, but only as far as the structural inefficiencies of the European risk finance markets prevail. Instead of increasing the maximum levels and eligible time of public funding, it would be better to support measures that make the risk finance market more efficient. One of the key objectives should be to enhance the structural development of risk finance markets, especially the specialization of financial intermediaries to specific types of innovative growth enterprises (e.g. business sector, enterprise development stage), This requires that financial intermediaries have sufficient exit opportunities, which allows for shorter and more efficient investment cycles (i.e. quicker exits allow risk capital to circulate back to new enterprises much sooner, thus increasing the availability of risk finance). As long as the European risk finance markets are not functioning effectively enough, financial intermediaries need to hold on to their investments longer hence the need to increase eligible time from 5 to 7 years and safeguard their profits via follow-up investments hence the need to increase maximum allowed aid from risk finance schemes from EUR 10 million to EUR 15 million. However, the increase in the maximum allowed investments from risk finance schemes should primarily aim at enhancing private funding and not to extend the use of public funding. It would therefore be better to set the threshold to the maximum amount of public funding instead of the total amount of the risk financing measure. In practice and allowing for the various provisions suggested this could mean limiting the risk finance aid to a maximum of EUR 6 million of public funding, instead of EUR 15 million of the total funding from the risk finance scheme. This would allow financial intermediaries to make higher follow-up investments and safeguard their profits by using additional private funding, which could further enhance the leverage effect of public funding. Article 21 SME s access to finance: aid for start-ups We propose that the maximum level of grants is increased to EUR 0.5 million as this way the maximum amount allowed to small and innovative enterprises would be EUR 1 million as in the present GBER. We find the proposed regional bonuses of 50 to 100 % too high. Suitable level would be maximum 20 to 25 %. This would mean 0.5, 0.6 and 0.7 million for all start-ups and 1.0, 1.2 and 1.4 million for young innovative start-ups depending on the assisted status of the region. We would furthermore urge the Commission to reconsider the proposed eligibility criterion based on the age of the start-up. The current provision for young innovative enterprises limits the eligibility to 6 years, whereas the proposed eligibility limit is 5 years. Furthermore, we would suggest that the time period of eligibility could be defined to begin besides based on the date of registration, on other similar and clearly definable dates, such as the date for hiring of first employee or the beginning of a fiscal year when the enterprise first exceeds a specific turnover (e.g. EUR ).

6 6 In paragraph 2, it is stated that undertakings that have been formed through a merger are not eligible. We hope that the Commission could clarify if this applies also to undertakings which have been formed through a division. Article 24 Aid for research and development projects In paragraph 3 (b) and (c), we suggest the references to tangible and intangible assets as these are already defined in the definitions. Suggested formulation: (b) costs of instruments, equipment, buildings and land tangible assets to the extent and for the period used for the project; (c) cost of contractual research, technical knowledge and patents intangible assets bought or licensed from outside sources at arm s length conditions, as well as costs of consultancy and equivalent services used exclusively for the project; In paragraph 3(b), there is no provision on the depreciation costs while according to the Annex I of the R&D&I Framework, only depreciation costs are eligible if the tangible assets are not used for their full life for the project. In our opinion, it should be clearly stated also in the GBER that only depreciation costs of such tangible assets are eligible. We welcome the modifications made to the paragraph 4 of this Article. The rule is clearer as the time period is counted from the completion of the project. However, we hope it could be clarified whether the aid authority is obliged to monitor ex post whether the revenues deducted ex ante are later exceeded. If such monitoring obligation is established, it will remarkably increase the bureaucracy. We also hope that it could be clarified that the revenues are deducted from the eligible costs of the project in which the prototype or pilot was created. In our opinion, the aid intensity of 50 %, applied to feasibility studies also for SMEs, is insufficient. SMEs should be encouraged to make a feasibility study before entering R&D&I projects, which is why we propose that the bonuses listed in paragraph 7 also apply to feasibility studies. At this moment, it is proposed that the bonuses only apply to industrial research and experimental development. Article 25 Investment aid for research infrastructures The modifications to this Article have made it much clearer. However, we would like to ask the Commission to clarify the purpose and reasoning of this Article relating to the following issues: 1) If the infrastructure is owned by a public research organisation who receives the aid of 50 %, can the research organisation use its direct budgetary public funding or public funding from other sources to cover the other half of the investment? Or should the research organisation owning and operating the infrastructure cover the other half of the investment costs ex post by the income received from the users of the infrastructure? If so, is there a monitoring requirement to ensure this?

7 7 2) Is the market price requirement sufficient to ensure that the infrastructure does not unfairly compete with private infrastructure services should those exist, or prevent establishing such private services? 3) If the infrastructure is used for both economic and non-economic activities do the eligible costs include the whole investment or only the part of the costs based on the share of the capacity that is planned to be used for economic activities? 4) If the infrastructure is used almost exclusively for a non-economic activity and only for a purely ancillary economic activity not exceeding 15 % of the infrastructure s overall annual capacity in accordance with recital 49, what happens if the threshold of 15 % is exceeded? Should all the economic activity be interpreted non-ancillary or only that exceeding the threshold of 15 %? Would there be a certain transition period of e.g. two consecutive financial years? 5) As regards to the recital 49, we would also like to point out that 15 % of overall annual capacity of research infrastructures of large universities and research organisations may be comparable to considerable annual business volume of a company. As the definition of research infrastructures is not limited to single infrastructure but infrastructures may be combined, universities and research organisations might even combine their research infrastructures to avoid exceeding the threshold of 15 %. Has the Commission considered if this may lead to unfair competition or market distortion, especially since it is not clear if the requirements concerning separate accounting, market price and reinvesting potential profits back to the infrastructure are valid as regards to economic activities not exceeding the threshold of 15 %? Article 26 Aid for innovation clusters In paragraph 3, it is unclear to us if it is possible to charge different fees from non-members of the cluster or to reduce the fees charged from the members of the cluster to take into account the member fees or other contributions of the members to the facilities of the cluster. Consistency with the provisions related to research infrastructures would indicate that the cluster members that have contributed to the cluster investments should have preferential access and/or conditions to the cluster facilities and services provided that the total benefits received via preferential access and/or conditions do not exceed their contribution. We also hope that the Commission could clarify whether it is possible to limit the access to the cluster facilities and services to certain companies if the conditions of access are defined transparently and nondiscriminately in advance and are based on geographical location or certain sector or some other specific feature. In practice, what are the criteria (if any) which clusters can use to limit the cluster membership, i.e. decide not to admit specific enterprises and other organisations as cluster members? Article 27 Innovation aid for SMEs In our comment to the first draft of the GBER in June 2013, we proposed modifications to the draft provisions on innovation aid. We would like to repeat this proposal of wider and more flexible rules. We propose that the innovation aid can be granted to three types of slightly broader class of activities related to innovation: 1) to obtaining, validating and defending patents and other intangible assets; 2) to activities to enhance the innovation capabilities of an organization, including secondment of highlyqualified personnel and process or organizational innovation; 3) to activities preparing for commercial

8 8 launch such as advisory and support services, including market research, knowledge transfer, agreements, testing and certification, as well as participation in a fair or exhibition. Furthermore, it is suggested that these are based on two new definitions, which partly replace the definitions of innovation advisory and support services as well as complement the other related definitions. These two new definitions would allow additional flexibility between and beyond previously rather limited innovation aids. The suggested formulation would also ensure that all current forms of innovation aid are in the new regulation. We also propose that eligible costs cover the same costs as in R&D projects. As regards to obtaining intangible assets, we suggest that also costs of standardisation are defined eligible. While standardisation can significantly enhance innovation, competition and market efficiency, it can also offer large (multinational) enterprises the possibility to safeguard specific technologies and ensure their market position. It is therefore important to encourage innovative SMEs to participate in standardization. The following activities shall be eligible: (a) obtaining, validating and defending patents and other industrial property rights as well as costs of standardisation; (b) developing the innovation capability of the organisation; (c) preparing for commercial launch of a new or significantly improved product or service, excluding marketing, investments or any other direct commercial costs. The eligible costs shall be the following: (a) personnel costs; (b) costs of tangible assets to the extent and for the period used for the innovation project; (c) costs of consultancy, training and equivalent services used exclusively for the innovation activity; (d) additional overheads and other operating costs, including costs of materials, supplies and similar products as well as patenting fees, incurred directly as a result of the innovation project; Suggested new definitions 'innovation capability' means the organisation s ability to identify market needs and opportunities, come up with novel ideas and develop them in to new or significantly improved products and services, including but not limited to organisational arrangements (including organisational innovation), innovation and business processes (including process innovation), access to networks and other relevant collaborative arrangements, skilled staff and access to other qualified human resources (including training, consultancy, and secondment of highly qualified personnel), and ability to acquire, manage, transfer and protect (including trade in intellectual property rights and licensing agreements) relevant knowledge;

9 9 'preparing for commercial launch' means preparatory activities necessary for launching a new or significantly improved product or service to the market, including but not limited to access to office space, data banks, libraries and laboratories, market research, quality labelling, testing and certification, and participation in a fair or exhibition presenting new or significantly improved products and/or services; In case it is not possible to modify this Article as we propose, we ask the Commission to clarify that also the costs of the beneficiary s own activities are eligible, including personnel costs of the beneficiary, provided that they are directly linked to activities eligible for innovation aid. This is how we would now apply the provision but this interpretation could be more clearly supported by the wording. Article 28: Aid for process and organisational innovation A new provision on aid for process and organisational innovation is added to the present draft of the GBER to enable aid to large companies. As the aid intensity to large companies is very low, hardly providing any incentive effect to large companies, we propose that the aid intensity is increased to 25 %. If this is not possible we suggest that this provision is included into the Article 27 and aid for process and organisational innovation is possible only to SMEs. Article 30: Training aid Life-long learning and especially on-the-job training are gaining importance in upgrading the skills of the workforce and ensuring continuing and future employment. These include various forms of coaching, mentoring, tutoring apprenticeships, e-learning, m-learning, blended learning, active learning etc. The current draft regulations concerning training aid are somewhat ambiguous with respect to these newer forms of training. To enhance life-long learning and specifically on-the-job learning, the regulations should be sufficiently clear in that e.g. the trainer can be from the same organization as the trainees. Furthermore, the Commission should consider if the specific provision concerning the maritime transport sector could be extended. The limiting conditions referring to the specific nature of the maritime transport sector could be extended by referring to trainees which are not active employees (often with no or very low salaries during the training period), and to training targeting business activities located in the Union (excluding training for business activities that companies have primarily located outside the Union). The rationale for the latter would be to ease the access of young and/or unemployed people in to the labor market, supplement formal education and training by enhancing on-the-job training especially for those young and/or unemployed people that find formal education and (re)training approaches challenging, and thereby enhance employment and creation of new jobs. Comments on Annex I Definitions Definition 15: Individual aid We propose that separate definitions of individual aid and notifiable individual aid are introduced. For better understanding of the rules, it would be more clear if individual aid covered all types of aid awards to a certain beneficiary, whether under a scheme or ad hoc and whether exempted or under notification obligation. In the present draft, there are references to individual aid awards, referring to aid awards under

10 10 an exempted scheme, and references to individual aid, meaning notifiable aid. This easily leads to confusion. Suggested formulation individual aid means: (a) ad hoc aid; and (b) aid awarded on the basis of an aid scheme. notifiable individual aid means individual aid subject to the notification obligation. Definition 16: Intangible assets We suggest that the proposed references to technology are replaced with knowledge for the sake of consistency and to better cover all relevant intangible assets. 'intangible assets' means assets acquired through knowledge transfer of technology such as patent rights, licences, know-how or other intellectual property; Definition 25: Repayable advance We propose that the definition of repayable advance is extended to include other repayable instruments such as redeemable shares with a fixed dividend and not convertible into ordinary shares. repayable advance means a loan or another repayable instrument, which cannot be converted into ordinary shares or grants, for a project which is paid in one or more instalments and the conditions for the reimbursement of which depend on the outcome of the project. We also hope that it could be clarified whether the repayment can be waived in full if the project totally fails technically or commercially. We assume that this is the correct interpretation as the aid would not have any negative effect on the market if the project failed. Definition 32: Undertaking in difficulty For the consistency of different state aid rules, we propose that the undertaking in difficulty is defined by an explicit reference to the Community guidelines on State aid for rescuing and restructuring firms in difficulty. We also propose that a similar derogation is established for SMEs as is included in the Guidelines on State aid to promote risk finance investments. : undertaking in difficulty means an undertaking, as defined by the Community guidelines on State aid for rescuing and restructuring firms in difficulty, as amended or replaced. However, for the purposes of risk finance aid, SMEs within 7 years from their first commercial sale that qualify for risk finance investments following due diligence by the selected financial intermediary will not be considered as undertakings in difficulty, unless they are subject to insolvency proceedings or fulfil the

11 11 criteria under their domestic law for being placed in collective insolvency proceedings at the request of their creditors; Definition 70: First commercial sale It is good that the Commission has defined more closely what is meant by first commercial sale. It is important that young innovative companies are allowed to practice secondary economic activities (e.g. services outside the scope of their pursued main business) to have some form of income aside from capital and State aid, without it being interpreted as first commercial sale. We propose that the definition is modified to allow also other secondary economic activities limited in scope: 'first commercial sale' means the first sale by a company on a product or service market, excluding limited sales to test the market and any secondary economic activity which is limited in scope; Definition 85: Effective collaboration In collaboration project, both parties contribute to the implementation of the project, unlike in contract research. Thus we propose that the definition is modified to reflect this aspect too. Suggested formulation 'effective collaboration' means collaboration to exchange knowledge or technology, or to achieve a common objective based on the division of labour where the parties jointly define the scope of the collaborative project, contribute to its implementation and share its risks and outputs. Subcontracting is not considered to be effective collaboration; Definition 86: Experimental development We propose that the word technical is abandoned from the definition as this word unnecessarily leaves outside this definition innovative solutions that are not primarily technical but to which it is necessary to demonstrate their functioning in large scale and in real life context prior to commercial exploitation. Experimental development may comprise prototyping, demonstrating, piloting, testing and validation of new or improved products, processes or services in environments representative of real life operating conditions where the primary objective is to make further technical improvements on products, processes or services that are not substantially set. Definition 90: Industrial research We suggest that the proposed references to manufacturing and technical products are extended to better cover research aiming at new services. Suggested formulation 'industrial research' means the planned research or critical investigation aimed at the acquisition of new knowledge and skills for developing new products, processes or services or for bringing about a

12 12 significant improvement in existing products, processes or services. It comprises the creation of components parts to complex systems, and may include the construction of prototypes in a laboratory environment or in an environment with simulated interfaces to existing systems as well as of small scale pilot lines to test and validate the manufacturing method performance, when necessary for the industrial research and notably for generic technology validation; Definition 97: Research and knowledge-dissemination organisation We are pleased to notice that this definition has been modified so that the limitation of dissemination to non-exclusive basis is removed and that the requirement that economic activities of a research organisation may represent only a non-essential proportion of the budget devoted to independent research, is removed. These modifications ensure that the possibilities of research organisations to engage in different types of activities, even economic, are not unnecessarily limited. Definition X Knowledge transfer We propose that the definition of Knowledge transfer is added to the GBER, similar to the one in R&D&I Framework. Other issues The definition of an SME refers to Annex II which is in accordance with the SME definition from In view of continuously strengthening global competition and ensuring a level playing field between European SMEs and their international competitors, we ask the Commission to consider if the thresholds of the definition could be increased in accordance with our earlier comments. Currently the definitions applied in Europe and e.g. in the USA leave European companies with 250 to 500 employees at a clear disadvantage. We would also like to add a comment on the draft guidelines on state aid for rescuing and restructuring non-financial undertakings in difficulty where the undertaking in difficulty is defined. In our opinion the definition of undertaking in difficulty should be applied in a simplified manner at least with regard to start up aid and aid to the research, development and innovation activities to SMEs that have been operating less than five years. We propose that in the above-mentioned forms of aid to SMEs the assessment of whether a given undertaking is in difficulty should be based on paragraph 21(c) of the draft guidelines and that the safe harbour period of a newly created undertaking should be extended from three to five years (paragraph 23(b) of the draft guidelines).