A purchaser of assets from a company which has received illegal aid from an EU Member State may be liable to repay that aid with interest. This clearly could be a significant issue for the purchaser due to the impact on the valuation of the assets.

A recent case decided by the EC provides an example of how properly to structure an acquisition of assets so as to avoid such a concern. On 7 May 2015, the EC decided that aid granted by Portugal to shipyard operator Estaleiros Navais de Viana do Castelo, S.A. (ENVC) was not compatible with EU State aid rules. This aid included a capital increase, several loans granted to cover operating costs and comfort letters and guarantees to underwrite financing agreements between ENVC and commercial banks.

The issue of liability for repayment was thus examined. ENVC is currently in the process of being wound up and part of its assets had been acquired by a third party, WestSea. Since WestSea acquired only part of the assets and acquired them at market conditions following an open and competitive tender, the EC concluded that WestSea is not the economic successor of ENVC (there being no “economic continuity” between ENVC and WestSea). The obligation to repay the incompatible aid therefore remained with ENVC and was not passed on to WestSea.

WestSea, having obtained this “no continuity” decision from the EC, is free of the risk of repayment. However, similar buyers have got this wrong, and it pays to be careful in these situations. This is particularly the case since aid can arise in any form, the basic test being whether an advantage has been obtained which would not have been obtained under normal market conditions.