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EC to investigate aid to Nováky

The European Commission suspects the first government of Robert Fico of having provided chemical producer Novácke Chemické Závody (NCHZ) with state aid to keep it from going bankrupt. At the time, the government passed a law based on which it ordered the bankruptcy administrator to allow the firm to continue operating, regardless of whether it was loss-making or not, without paying taxes and payroll taxes. The EC will now investigate whether such practices were in compliance with the European Union’s state aid rules, the Sme daily reported on July 3.

The European Commission suspects the first government of Robert Fico of having provided chemical producer Novácke Chemické Závody (NCHZ) with state aid to keep it from going bankrupt. At the time, the government passed a law based on which it ordered the bankruptcy administrator to allow the firm to continue operating, regardless of whether it was loss-making or not, without paying taxes and payroll taxes. The EC will now investigate whether such practices were in compliance with the European Union’s state aid rules, the Sme daily reported on July 3.

One of the reasons for passing the law was to secure employment for the 2,000 people working for the company, the government explained at the time, as reported by Sme. When the law expired and it was possible to close down the firm, the creditors, including the state led by the government of Iveta Radičová, decided to leave it open and functioning, Sme wrote.

NCHZ’s financial problems emerged in 2009 when the EC fined the company €19.6 million for participating in a calcium carbide cartel. The firm submitted the proposal for bankruptcy in October 2009. During the bankruptcy proceedings NCHZ did not pay social security contributions for its employees and other liabilities towards various state entities, as its revenues did not cover its operating costs.

“The Commission’s preliminary view is that Slovakia protected NCHZ from the results of standard bankruptcy proceedings through the application of the law on strategic companies,” said head of the press and political department of the Representation of the EC in Slovakia Andrej Králik, as quoted by the TASR newswire.

Králik added that there are also indications that the creditors’ decision to continue the operations of NCHZ after the expiration of the law was attributable to the state.

Therefore, the EC will verify whether any of these measures gave the company an economic advantage over its competitors and therefore constitute state aid.

“If this is the case, the EC will then ascertain whether such state aid could be compatible under the EU guidelines on state aid for rescuing and restructuring firms in difficulties,” Králik said, as quoted by TASR.

Moreover, the EC doubts whether NCHZ’s assets were sold at market price, which would ensure a maximisation of revenues to satisfy the company’s creditors, including the state. An analysis of the sale also indicates that the business was sold as a going concern, including the potential advantages that the NHCZ received from the state, as reported by TASR.

Source: Sme, TASR

Compiled by Radka Minarechová from press reports

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