HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"L 27/12
EN
Official Journal of the European Union
31.1.2012
COMMISSION DECISION
of 23 March 2011
on State aid C 39/07 implemented by Italy for Legler SpA
(notified under document C(2011) 1758)
(Only the Italian text is authentic)
(Text with EEA relevance)
(2012/51/EU)
THE EUROPEAN COMMISSION,
dated 26 September 2008, 1 December 2008, 3 June
2009, 6 October 2009, 24 February 2010 and
20 April 2010.
Having regard to the Treaty on the Functioning of the European
Union (hereinafter ‘the Treaty’), and in particular the first
subparagraph of Article 108(2) thereof,
II. DESCRIPTION
Having regard to the Agreement on the European Economic
II.1. Beneficiary
Area, and in particular Article 62(1)(a) thereof,
(6)
Legler SpA is the parent company of an Italian textile
manufacturing group (hereinafter referred to as ‘Legler’,
Having regard to the Commission decision to initiate the
‘the group’ or ‘the company’) founded in 1863 which, at
procedure laid down in Article 108(2) of the Treaty (
the time the formal investigation procedure was initiated,

1 ),
comprised several legal entities, namely: Legler Ottana
SpA, Legler Siniscola SpA and Legler Macomer SpA.
Having called on interested parties to submit their comments
Legler SpA held a minority shareholding in Legler
pursuant to the provisions cited above, and having regard to
Maroc SA and a 40 % share in Legler Ottana SpA The
their comments,
majority shareholding in Legler SpA was held by the
holding company Piltar Ltd (hereinafter referred to as
‘Piltar’).
Whereas:

I. PROCEDURE
(7) In
2007,
Legler
employed
1
213
( 4 ) persons and had
plants in the region of Sardinia (at Macomer —
(1) On
5
April
2007,
six
months
after
the
granting
of
rescue
province of Oristano, and at Siniscola and Ottana —
aid approved as compatible with the internal market by
province of Nuoro) and in the region of Lombardy (at
the Commission ( 2 ), Italy notified a restructuring plan for
Ponte San Pietro — province of Bergamo). The group’s
Legler SpA.
turnover was EUR 101 million in 2006 and EUR
30,9 million in September 2007.
(2) On
25
September
2007,
the
Commission
initiated
the
formal investigation procedure in respect of the restruc
turing plan (
(8) Legler’s
core
activity
was
the
manufacturing
of
high-

3 ). Observations from Italy were received on
30 November 2007.
quality denim fabric, a sector in which the company

had been a leading player in Italy and Germany and an
important supplier to France and the Benelux. According
(3) On
10
December
2007,
the
Commission
received
to the Italian authorities, the denim market comprises
comments from one interested party. It transmitted the
two segments: prêt-à-porter for famous brands (this was
comments to Italy by letter dated 3 March 2008. Italy
Legler’s main sector) and mass-market products, where
provided its observations by letter dated 20 May 2008.
competition is mainly price-based. Legler’s main
competitors were based in Italy, Greece, France, Tunisia,
Turkey and Japan. Legler began experiencing difficulties
(4) On
23
July
2008,
the
Italian
authorities
withdrew
the
in 2003, when a significant part of production was
restructuring aid notification, stating that the plan had
relocated to Asia or the southern Mediterranean.
been abandoned.
(5) The
Commission
requested
further
information
from
the (9) On
30
May
2007,
at
a
board
meeting
of
SFIRS
SpA,
an
Italian authorities on 8 August 2008, 22 October 2008,
investment company of the region of Sardinia, it was
9 February 2009, 4 September 2009 and 17 March
decided that SFIRS would purchase from Intex SpA, in
2010, to which the Italian authorities replied by letters
liquidation, for the price of EUR 450 000, a debt of a
nominal value of EUR 17 million owed by Legler SpA
and Legler Siniscola SpA.
( 1 ) OJ C 289, 1.12.2007, p. 22.
( 2 ) OJ C 159, 12.7.2007, p. 2. The rescue aid was approved for the
period 5 October 2006 to 5 April 2007.
( 4 ) This figure represents the number of persons who worked full-time
( 3 ) See footnote 1.
for the company during the entire period under consideration.

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(10) At
the
same
meeting,
SFIRS
also
decided
to
convert
a
(18) On
21
October
2010
Texfer
SpA
was
declared
bankrupt.
part of Legler’s EUR 17 million debt, in the amount of
On 17 and 18 November 2010 Texfer Ottana SpA,
EUR 14,5 million, into participation in Legler’s equity.
Texfer Siniscola SpA and Texfer Macomer SpA were
also declared bankrupt.
(11) On
31
May
2007,
the
debt-for-equity
swap
was
carried
out at a shareholders’ meeting of Legler. By converting
part of Legler’s debt (for a face value of EUR
Financial situation of the beneficiary
14,5 million) into Legler capital, SFIRS acquired 49 %
of the ordinary shares (and 100 % of the extraordinary
(19) In 2006, Legler’s equity was negative at EUR -
shares ( 5 )) in Legler SpA The remaining 51 % was
8,6 million, against a still positive value of EUR
retained by Piltar.
17,2 million in 2005. The company reported losses of
EUR 25,9 million in 2006 and of EUR 28,1 million in
2005. Its turnover amounted to EUR 101,4 million in
2006 while it had been EUR 124,2 million in 2005.
(12) In
January
2008,
SFIRS
decided
to
divest
itself
of
its
EBITDA amounted to - 10,9 in 2006 and - 0,7 in
shareholding in Legler SpA, and of the remaining
2005. Interest costs were also increasing.
Legler group debt, and launched a call for expressions
of interest for the joint purchase of the Legler equity and
debt.
(20) On
30
November
2007,
Legler’s
equity
was
negative
for
an amount of EUR 16,3 million. The losses over the
(13) The
winning
offer,
submitted
by
the
company
Ferratex
period 2003-2007 had reached EUR 94,9 million and
SRL (hereinafter referred to as ‘Ferratex’) was in the total
the company’s situation had been steadily deteriorating,
amount of EUR 2 000 001. According to the Italian
with increasing losses and shrinking turnover.
authorities, this price reflected the market value of
SFIRS’ total receivables from Legler and its subsidiaries,
evaluated by an independent expert at EUR 2 million,
plus the symbolic price of EUR 1 for SFIRS’s holding
in Legler’s equity, also based on an independent
expert’s appraisal. The sale took place on 25 January
(21) On
13
November
2008
the
group
was
subjected
to
2008.
collective insolvency proceedings under the national
law, which ended with bankruptcy (see recitals 16 to 18).
(14) However,
Legler
ceased
operations
at
all
its
plants
in
the
period between December 2007 and August 2008 and
all its plants have since remained inactive.
II.2. The restructuring measures
(22) The
restructuring
plan
(piano industriale) notified by Italy
(hereinafter also referred to as ‘the plan’) covered a three-
year period (2007-2009) and consisted of three
(15) On
23
July
2008
Legler
SpA
changed
its
name
to
Texfer
SpA. Its Sardinian subsidiaries were also renamed
measures: (i) EUR 13 million in the form of a medium-
respectively Texfer Ottana SpA, Texfer Siniscola SpA
term guarantee for the restructuring period, replacing the
and Texfer Macomer SpA.
six-month guarantee authorised as rescue aid (


6 ); (ii) EUR
13,2 million in the form of a direct grant; and (iii) EUR
13 million in the form of a conversion of debt into
equity. However, on 31 May 2007 SFIRS implemented
a debt-for-equity swap for a nominal amount of EUR
(16) On
18
August
2008
the
group’s
parent
company
was
14,5 million.
declared insolvent by the competent court, and on

13 November 2008 it was admitted to the collective
insolvency proceedings known as ‘amministrazione straor
dinaria’, together with its subsidiaries.
(23) Although
the
Italian
authorities
had
submitted
a
restruc
turing plan (piano industriale) for the period 2007-2009,
(17) The
rescue
aid
guarantee
was
called
by
the
bank
shortly
they claimed that the actual restructuring period would
after Legler’s failure to repay the rescue loan by the
run from 1 June 2007 to the end of 2012. The only data
deadline. Consequently, the competent Ministry
provided to chart the progress of the company’s restruc
reimbursed the loan plus interest on 16 September 2008.
turing from 2009 until 2012 were the cash flows and
the evolution of the liabilities of the newly created
company (NewCo).
( 5 ) The extraordinary shares gave the shareholder a preferential right in
the allocation of profit and repayment of capital in the event of
dissolution of the company.
( 6 ) I.e. until 31 December 2012.

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Official Journal of the European Union
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(24) In
this
broader
time-frame,
the
overall
costs
for
setting
conditions seemed unrealistic, given the suspension of
up a new company from the merger of Legler SpA
Legler’s production. The Commission also doubted that
and its Sardinian subsidiaries amounted to
the proposed compensatory measures were real and went
EUR 106,2 million, including EUR 86,7 million for
beyond the measures necessary to restore viability, that
extensive group reorganisation, while the balance would
the level of own contribution was sufficient and that the
go to restore capital and cover losses.
‘one time, last time’ principle had been respected.
(25) The
NewCo’s
activity
would
focus
on
the
company’s
traditional core business, i.e. high-quality denim,
(30) Finally, the Commission requested the Italian authorities
whereas the other two production lines (corduroy and
to submit information concerning the doubts raised
flat cotton) would be closed down. The group’s
(origin of SFIRS’ credit, detailed information on Piltar
geographical location would also be concentrated in
and on the allocation of costs within the group, on the
only two production plants (Siniscola and Ottana),
compensatory measures, on the actual likelihood of
located in the same region. The remaining assets would
Legler finding a new shareholder and on access to the
be sold to enable Legler to provide its own contribution
private financing required for reorganising Legler).
and to reduce energy, transport and personnel costs. The
Macomer plant was not included in the plan ( 7 ).
III. COMMENTS FROM INTERESTED PARTIES
(26) The
plan
also
envisaged
the
entry
of
a
new
shareholder
(31) By
letter
dated
14
December
2007,
an
interested
party
together with SFIRS, and indicated the need to obtain
submitted its comments on the opening decision. The
credit lines from private sources to implement the reor
third party claimed that the measures in question
ganisation process.
would cause distortions of competition and pointed out
that the sector was affected by significant overcapacity. It
provided figures on worldwide denim production
capacity for the year 2006, showing a global over
II.3. Grounds for initiating the procedure
capacity of 27 %.
(27) In its decision to initiate the procedure, the Commission
had doubts whether the debt-for-equity swap was free
from State aid elements. The Commission doubted that
a private investor would have accepted swapping debt for
IV. COMMENTS FROM ITALY
shares in the company in the circumstances, especially as
(32) Firstly,
the
Italian
authorities
explained
how
SFIRS
had
it appeared that part of the company’s activities had been
become the majority shareholder in Legler. In March
suspended for several months and the Italian authorities
2007 SFIRS purchased debt of Legler SpA and Legler
had submitted to the Commission no counterfactual
Siniscola SpA from the company Intex SpA, in liqui
scenario supporting SFIRS’ assumption that investing in
dation, for the price of EUR 450 000. On 31 May
Legler and bearing its restructuring costs was more cost-
2007 SFIRS converted part of that debt, having a
effective than liquidating the group.
nominal value of EUR 14,5 million, into Legler equity,
thereby acquiring 49 % of Legler’s ordinary shares (while
Piltar retained the remaining 51 %) and 100 % of its
extraordinary shares ( 9 ).
(28) As regards the compatibility of the aid with the internal
market on the basis of the Community guidelines on
State aid for rescuing and restructuring firms in
difficulty ( 8 ) (hereinafter referred to as ‘the rescue and
restructuring guidelines’), the Commission firstly posed
(33) Secondly,
the
Italian
authorities
explained
that
Piltar
was
the question whether Legler’s difficulties could have
a mere vehicle controlled by natural persons. It was
been dealt with by the majority shareholder Piltar and
founded exclusively for the purpose of acquiring a share
whether there had been an arbitrary allocation of costs
holding in Legler and was engaged in no other business
within the group.
activity. The Italian authorities added that Piltar had long
made it clear that it did not plan to support the company
financially and that it intended to divest itself
progressively of its shareholding in the group. Indeed,
(29) Secondly, the Commission doubted that the plan would
it appears that together with the 49 % shareholding
be able to restore long-term viability, as the planned
SFIRS also acquired the right to purchase the remaining
divestment of assets and production lines seemed rather
51 % of Legler’s ordinary shares.
indeterminate and many assumptions on future operating
( 7 ) The plan envisaged a separate industrial plan for this site.
( 8 ) Community guidelines on State aid for rescuing and restructuring
(34) Thirdly, the Italian authorities promised to provide
firms in difficulty (OJ C 244, 1.10.2004, p. 2) and Commission
information on the compensatory measures.
communication concerning the prolongation of the Community
guidelines on State aid for rescuing and restructuring firms in
difficulty (OJ C 156, 9.7.2009, p. 3).
( 9 ) See footnote 6 above.

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(35) Fourthly,
Italy
stated
that
the
market
segments
targeted
(42) Article
107(1)
of
the
Treaty
lays
down
that
any
aid
by Legler’s restructuring plan to restore financial viability,
granted by a Member State or through State resources
described in recital 25, were showing encouraging trends.
in any form whatsoever which distorts or threatens to
The Italian authorities also mentioned the company’s
distort competition by favouring certain undertakings or
intention to secure private credit lines and a new share
the production of certain goods shall, in so far as it
holder to finance part of the plan, and stated that steps
affects trade among Member States, be incompatible
had already been taken to that effect.
with the internal market.
(36) Next,
in
response
to
the
third
party’s
comments,
the
(43) Where State aid within the meaning of Article 107(1) of
Italian authorities pointed out that Legler’s market share
the Treaty is to be or was granted to a company in
in the year 2006 was as little as 0,27 %. They added that
difficulty, the compatibility of this aid must be assessed
as a compensatory measure, the plan involved a 22 %
on the basis of the rescue and restructuring guidelines.
reduction in the company’s capacity compared to 2006
Consequently, the aid can only be considered compatible
and a 40 % reduction compared to 2005. Therefore, they
on the basis of Article 107(3)(c) of the Treaty if the
considered that the aid would not distort competition to
conditions laid down in the rescue and restructuring
an extent contrary to the common interest.
guidelines are met.
(37) In
their
submissions
following
the
withdrawal
of
the
V.1. Existence of aid
restructuring plan, the Italian authorities argued that
the debt-for-equity swap would not qualify as State aid
The extension of the rescue aid guarantee for the entire
within the meaning of Article 107(1) of the Treaty, as
duration of the restructuring period
SFIRS had acted in line with the market economy
investor principle. According to the Italian authorities a
(44) The rescue aid guarantee in the amount of EUR
private investor would have acted in the same way to
13 million was not terminated on the expiry of the six-
avoid bankruptcy and recover at least part of his credit in
month period for which it had been approved by the
the most effective way, i.e. by converting it into capital
Commission, but remained in place after notification of
and restructuring the company together with a new
the plan was withdrawn (see recital 17).
private investor and a new credit line.
(45) The
extension
of
the
rescue
aid
guarantee
was
notified
as
V. ASSESSMENT
a measure granted from the resources of the competent
Ministry, financed from the State budget. Therefore, it
(38) Under Article 8(1) of Council Regulation (EC) No
was granted from State resources and it is imputable to
659/1999 ( 10 ), the Member State concerned may
the State. The guarantee constitutes a selective advantage
withdraw the notification within the meaning of
as it allowed Legler to access financial resources which it
Article 2 in due time before the Commission has taken
would not have otherwise obtained, given its financial
a decision pursuant to Article 4 or 7.
situation. Hence, it relieved Legler from the costs it
would otherwise have incurred. Furthermore, as Legler
was implementing a restructuring process aimed at
(39) In this case, where the Commission initiated the formal
resuming production, the aid was liable to distort
investigation procedure, the Commission shall close that
competition in the internal market and to affect trade
procedure pursuant to Article 8(2) of the same Regu
between Member States. The distortive effect of the
lation.
measure was stressed by a third party, who also
pointed out that the sector suffers from overcapacity.
(40) The
Commission
notes
that
the
direct
grant
of
EUR
13,2 million has not been implemented by Italy and
(46) Therefore, the Commission considers that the extension
Italy will not pursue this aid project further. As the
of the rescue aid guarantee, which is also a restructuring
restructuring plan has been withdrawn, the formal inves
measure, constitutes State aid within the meaning of
tigation procedure opened on this measure no longer
Article 107(1) of the Treaty.
serves any purpose.
(47) In determining the amount of aid, the Commission
(41) As
the
other
two
notified
restructuring
measures
were
recalls paragraph 4.1(a) of the Guarantee Notice ( 11 ),
unlawfully implemented by Italy, in order to close the
which states that ‘for companies in difficulty, a market
formal investigation procedure the Commission must
guarantor, if any, would, at the time the guarantee is
determine whether they constitute State aid within the
granted charge a high premium given the expected rate
meaning of Article 107(1) of the Treaty, and if so,
whether this aid is compatible with the internal market.
( 11 ) Commission Notice on application of Articles 87 and 88 of the EC
Treaty to State aid in the form of guarantees (OJ C 155, 20.6.2008,
( 10 ) OJ L 83, 27.3.1999, p. 1.
p. 10).

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of default. If the likelihood that the borrower will not be
(52) Firstly,
on
the
basis
of
Legler’s
financial
statements,
the
able to repay the loan becomes particularly high, this
Commission notes that in 2007 the company had a
market rate may not exist and in exceptional circum
capital of EUR 1,8 million and a negative equity of
stances the aid element of the guarantee may turn out
EUR - 16,2 million; over the period 2003-2007 losses
to be as high as the amount effectively covered by that
reached EUR 94,9 million and the company’s situation
guarantee.’
was clearly deteriorating, with increasing losses and
decreasing turnover.
(48) In
the
light
of
Legler’s
severe
financial
distress
at
the
time
the guarantee was granted (increasing losses, decreasing
turnover and negative equity as described in recitals 19
(53) The
Commission also notes that despite the critical
to 21 and 52), the Commission considers that it was
financial situation outlined above, SFIRS did not carry
highly unlikely that the company would have been able
out a comprehensive cost/benefit analysis and a risk
to obtain a bank loan on the market without State inter
assessment for the transaction. In fact, despite
vention; therefore, the Commission concludes that the
numerous requests from the Commission to this effect,
aid amount corresponds to the totality of the loan
the Italian authorities have never submitted a
amount (
substantiated counterfactual scenario demonstrating that

12 ).
SFIRS’ choice was preferable to the scenario of liquidating
Legler.
Debt-for-equity swap
(49) The
Commission remarks
that
the
swap
was
imple
mented by SFIRS, a public entity whose main share
(54) Indeed, similar remarks were made by the Bank of Italy
holder, the Region of Sardinia, exerts a dominant
in a report ( 15 ) issued after an investigation into SFIRS’
influence on its decisions (
activity. The report criticised SFIRS’ behaviour for the

13 ). Italy has never denied
this fact. Hence, the Commission concludes that the
incompleteness of its prior analysis of the debt-for-
measure in question is imputable to the State and was
equity swap and for the inherent contradiction of
granted through State resources. This measure is also
making an ‘investment’ offering no concrete prospects
selective as it favours a single company, Legler.
of recovery.
Furthermore, as Legler was pursuing a restructuring
process aimed at resuming production, the aid was
liable to distort competition in the internal market and
to affect trade between Member States. The potential
(55) Irrespective
of
this
assessment,
the
financial
situation
of
distortive impact of the measure was also highlighted
the company was such that no reasonable private
in the comments submitted by a third party, which
investor in a market economy would have entered into
also pointed out that the sector suffers from over
a similar transaction.
capacity.
(56) In
this regard, the Commission also notes that the
(50) In
its
response,
Italy
argued
that
the
measure
in
question
restructuring plan (piano industriale) notified by the
conferred no advantage on Legler as, in its view, it was in
company cannot be considered as a realistic basis for
line with the market economy investor principle.
predicting the company’s future performance. The fact
alone that the plan covered not all but only a part of
the restructuring period, and provided no information on
(51) According
to
settled
case-law
( 14 ), in order to determine
the subsequent progress of the restructuring (see recital
whether Legler received an advantage from State
23), clearly shows that such lack of information would
resources it is necessary to consider whether, in similar
have dissuaded any private investor from entering into
circumstances, a private investor with characteristics
the transaction in question.
comparable to those of SFIRS would have been willing
to carry out a similar debt-for-equity swap, having regard
to the information available and developments fore
seeable at the date the transaction was implemented.
(57) Second,
as
to
SFIRS’
actual
prospects
of
recovering
the
money owed to it by Legler, by becoming a shareholder
( 12 ) See also the Commission’s decision in case C 59/07 of 28 October
via the debt-for-equity swap SFIRS had actually weakened
2009 on rescue aid to Ixfin (OJ L 167, 1.7.2010, p. 39).
its claim position, compared with its prior position as a
( 13 ) SFIRS SpA (a financial intermediary under Articles 106 and 107 of
preferential creditor.
Legislative Decree No 385 of 1 September 1993) prepares plans
and programmes, and drafts guidelines of the autonomous region
of Sardinia targeting the region’s economic and social development.
SFIRS is an operational instrument of the Autonomous Region of
Sardinia which holds 93 % of its shares. SFIRS is administered by a
(58) The value and future prospects of SFIRS’ equity
board of directors appointed by the autonomous region of Sardinia.
investment at the moment of the debt-for-equity swap
Moreover, SFIRS is subject to the same power of direction and
seemed too limited to counterbalance the risks outlined
control as the administration of the autonomous region of Sardinia.
( 14 ) Case C-482/99 France v Commission, paragraph 70. Case C-42/93
Spain v Commission, paragraph 13.
( 15 ) Submitted by Italy as an annex to its letter of 29 May 2009.

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above, particularly in the light of the company’s critical
(66) With regard to the extension of the rescue aid, point 26
financial situation. This was clearly highlighted by an
of the guidelines provides that where the Member State
independent valuation of the company, which gave it
has submitted a restructuring plan within six months of
the symbolic figure of EUR 1.
the date of authorisation or, in the case of non-notified
aid, of implementation of the measure, the deadline for
reimbursing the loan or for putting an end to the
(59) It can be concluded from the above that in carrying out
guarantee is extended until the Commission reaches its
the debt-for-equity swap SFIRS did not act as a private
decision on the plan, unless the Commission decides that
investor operating under normal market conditions. A
such an extension is not justified.
private investor would not have entered into such a
transaction without a credible and realistic prior
assessment showing that it would be more cost-
(67) The
notification
of
the
restructuring
plan
allowed
the
effective to swap the debt for equity instead of
rescue aid to continue beyond six months. However,
remaining a preferential creditor of the company.
Italy later withdrew this notification. It follows from
point 26 of the guidelines that the notification of a
restructuring plan is a condition sine qua non for an
(60) Hence,
by
carrying
out
the
debt-for-equity
swap,
SFIRS
extension of the rescue aid. Therefore, if a notified
granted an advantage to Legler.
restructuring plan is later withdrawn, the extension
allowed for the rescue aid has to be terminated.
(61) It follows from the foregoing that the debt-for-equity
swap constitutes State aid within the meaning of
(68) It follows from the Commission’s decision-making
Article 107(1) of the Treaty.
practice (cases Ernault ( 16 ) and Huta Cynku ( 17 )) that if
neither a restructuring plan nor a liquidation plan have
been notified to the Commission or, as in the present
case, if the restructuring plan has been withdrawn, the
(62) As
to
calculating
the
amount
of
aid,
it
should
be
noted
extension of the rescue aid in question cannot be main
that the notion of State aid is limited to aid granted
tained beyond the date on which the Member State
through public resources. The amount of aid must be
withdrew notification of the restructuring plan.
calculated on the basis of the market value of the debt
which SFIRS converted into Legler’s equity. Hence, if the
total nominal value of Legler’s debt towards SFIRS was
EUR 17 million, while on the day before the swap its
(69) As the medium-term guarantee (for the duration of the
market value was EUR 450 000, the market value of the
restructuring plan), intended as notified restructuring aid,
transaction whereby SFIRS’ converted 85,3 % of its
was an extension of the rescue aid guarantee, it was
total credit i.e. a nominal value of EUR 14,5 million,
compatible until Italy withdrew its notification.
into equity, was EUR 383
850 (i.e. 85,3
% of
EUR 450 000). Hence, the advantage granted through
State resources was EUR 383 850. On the other hand,
(70) Thus, the compatibility of the extended State aid
the nominal value of the swapped credit cannot be
guarantee with the internal market should be assessed
viewed as an advantage other than in merely accounting
starting from the day following that on which Italy
terms.
withdrew its notification (i.e. from 24 July 2008).
V.2. Compatibility of the aid with the internal
Eligibility of the company for restructuring aid
market
(71) The
granting
of
State
aid
to
a
company
in
difficulty
can
(63) As the two notified measures
have been found to
be considered compatible on the basis of
constitute State aid within the meaning of
Article 107(3)(c) of the Treaty only if all the conditions
Article 107(1) of the Treaty, the Commission has to
laid down in the rescue and restructuring guidelines are
assess whether this aid is compatible with the internal
respected.
market.
(72) Pursuant
to
points
12(a)
and
14
of
the
guidelines,
only
(64) The
compatibility
of
the
State
aid
measures
in
question
firms in difficulty are eligible for restructuring aid.
with the internal market must be assessed on the basis of
the rescue and restructuring guidelines.
(73) Under point 9 of the guidelines, a firm, irrespective of its
size, is regarded as being in difficulty where it is unable,
(65) As
regards
the
public
guarantee,
in
order
to
assess
its
whether through its own resources or with the funds it is
compatibility a distinction must be made between
extension of the rescue aid on one hand, and the
provision of State aid in the form of a medium-term
( 16 ) Case C 32/05 (ex N 250/05) of 4 April 2007 (OJ L 277,
20.10.2007, p. 25).
guarantee, which is also a restructuring measure (for
( 17 ) Case C 32/06 (ex N 179/06) of 25 September 2007 (OJ L 44,
the duration of the restructuring period) on the other.
20.2.2008, p. 36).

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L 27/18
EN
Official Journal of the European Union
31.1.2012
able to obtain from its shareholders or on the market, to
(79) The Commission also observes that Legler is not a newly
stem losses which, without outside intervention by the
created firm within the meaning of point 12 of the
public authorities, will almost certainly condemn it to
rescue and restructuring guidelines.
going out of business.
(80) Pursuant
to
point
13
of
the
rescue
and
restructuring
(74) Under point 10 of the guidelines a firm is regarded as
guidelines a firm belonging to or taken over by a
being in difficulty in the following circumstances:
larger business group is not normally eligible for rescue
or restructuring aid, except where it can be demonstrated
that the firm’s difficulties are intrinsic and are not the
(a) in the case of a limited liability company, where
result of an arbitrary allocation of costs within the group,
more than half of its registered capital has
and that the difficulties are too serious to be dealt with
disappeared and more than one quarter of that
by the group itself.
capital has been lost over the preceding 12 months;
(81) The Commission notes that Piltar was a mere
(b) in the case of a company where at least some
commercial vehicle, which pursued no business activity
members have unlimited liability for the debt of
other than holding shares in Legler. None of the
the company, where more than half of its capital
information available to the Commission suggests that
as shown in the company accounts has disappeared
the company’s difficulties were the result of an
and more than one quarter of that capital has been
arbitrary allocation of costs within the group.
lost in the preceding 12 months;
Moreover, as Piltar was fully owned by private individuals
and engaged in no business activity other than its equity
investment in Legler, it was not in a position to
contribute to Legler’s restructuring.
(c) whatever the type of company concerned, where it
fulfils the criteria under its domestic law for being the
subject of collective insolvency proceedings.
(82) On the basis of the foregoing, it can be concluded that
the conditions set out in point 9 of the rescue and
restructuring guidelines are fulfilled.
(75) It
follows
from
point
10(a)
of
the
rescue
and
restruc
turing guidelines that without outside intervention a
company that has experienced a massive loss of
registered capital will inevitably go out of business in
(83) Given
that
Legler
is
eligible
for
restructuring
aid,
it
now
the short or medium term. In an earlier decision ( 18 )
has to be assessed whether the conditions set out in
the Commission concluded that a company that has
points 32 to 51 of the rescue and restructuring
negative equity will a fortiori be considered to be in
guidelines for compatibility of the restructuring aid are
difficulty. In its Biria judgment ( 19 ) the General Court
met.
also confirmed that a massive loss of capital is indeed
a sign of difficulty, and that the Commission had been
right in concluding that a company with negative equity
Consequence of the plan’s withdrawal on the compatibility of
is a company in difficulty.
the restructuring measures
(84) However,
Italy
withdrew
Legler’s
restructuring
plan,
and
(76) Legler fulfilled the criterion of point 10(a) of the rescue
therefore it is no longer committed to any restructuring
and restructuring guidelines as it had a negative equity in
plan within the meaning of point 35 of the rescue and
the year of 2006 (see recital 19).
restructuring guidelines. Consequently, the Commission
cannot assess the unlawful aid in the light of the
criteria set out in points 32 to 51 of the rescue and
restructuring guidelines.
(77) The
Commission also notes that Legler was already
considered to be a firm in difficulty within the
meaning of Point 10(a) of the rescue and restructuring
guidelines as at 22 May 2007, when the rescue aid was
(85) Moreover, the Commission takes the view that the public
authorised.
guarantee and the debt-for-equity swap cannot be found
to be compatible with the internal market on any other
legal basis.
(78) Thereafter,
Legler’s
financial
situation
did
not
improve.
In
fact, it was declared insolvent by the competent court in
2008 (see recital 16).
VI. CONCLUSION
(86) The
formal
investigation
procedure
under
Article
108(2)
( 18 ) C 38/07 (ex NN 45/07) Arbel Fauvet Rail SA of 7 October 2010 (OJ
of the Treaty in respect of the direct grant of EUR
L 238, 24.10.2007, p. 17).
13,2 million must be terminated since Italy has
( 19 ) T-102/07 Freistaat Sachsen v Commission and T-120/07 MB
Immobilien Verwaltungs and MB System & Co. (T-120/07) v
withdrawn its notification and does not intend to
Commission.
pursue this aid project further.

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EN
31.1.2012 Official
Journal
of
the
European
Union L
27/19
(87) The
Commission
concludes
that
the
public
guarantee
and
Article 2
the debt-for-equity swap fall within the scope of
Article 107(1) of the Treaty.
The public guarantee amounting to EUR 13 million and the
debt-for-equity swap of EUR 383 850 respectively, granted by
Italy in breach of Article 108(3) of the Treaty in favour of
(88) These two measures were implemented by Italy in breach
Legler SpA constitute State aid incompatible with the internal
of Article 108(3) of the Treaty.
market.
(89) According to the Treaty and the Court of Justice’s estab
Article 3
lished case-law, when it has found aid to be incompatible
with the internal market the Commission is competent to
1. Italy
shall
recover
the
aid
referred
to
in
Article
2
from
the
decide that the State concerned must abolish or alter
beneficiary.
it ( 20 ). The Court has also consistently held that the
obligation on a State to abolish aid regarded by the
Commission as being incompatible with the internal
2. The
sums
to
be
recovered
shall
bear
interest
until
the
date
market is designed to restore the previously existing situ
of their actual recovery.
ation ( 21 ). In this context, the Court has established that
that objective is attained once the recipient has repaid the
As regards the public guarantee, such interest shall be calculated
amounts granted by way of unlawful aid, thus forfeiting
from the day following Italy’s withdrawal of notification of the
the advantage which it had enjoyed over its competitors
restructuring aid.
on the market, and the situation prior to the payment of
the aid is restored ( 22 ).
As regards the debt-for-equity swap, such interest shall be
calculated from the date on which the aid was made available
(90) Following
that
case-law,
Article
14
of
Council
Regulation
to the beneficiary.
(EC) No 659/99 ( 23 ) laid down that ‘where negative
decisions are taken in respect of unlawful aid, the
Commission shall decide that the Member State
3. The
interest
shall
be
calculated
on
a
compound
basis
in
concerned shall take all necessary measures to recover
accordance with Chapter V of Commission Regulation (EC) No
the aid from the beneficiary’.
794/2004 ( 24 ) and Commission Regulation (EC) No
271/2008 ( 25 ) amending Regulation (EC) No 794/2004.
(91) Thus, given that the measures at hand are to be
considered as unlawful aid incompatible with the
4. Italy
shall
cancel
all
outstanding
payments
of
the
aid
internal market, the amounts of aid of these two
referred to in Article 2 with effect from the date of adoption
measures, i.e. EUR 13 million and EUR 383 850 respect
of this Decision.
ively, must be recovered in order to restore the situation
that existed on the market prior to the granting of the
aid.
Article 4
1. Recovery
of
the
aid
referred
to
in
Article
2
shall
be
(92) As
regards
the
public
guarantee,
recovery
shall
therefore
immediate and effective.
be effected from the day following Italy’s withdrawal of
the notification of the restructuring aid, i.e. from 24 July
2008, and shall bear recovery interest until their actual
2. Italy
shall
ensure
that
this
decision
is
implemented
within
recovery.
four months following the date of notification of this Decision.
(93) As
regards
the
debt-for-equity
swap,
the
sums
to
be
Article 5
recovered shall bear interest from the date on which
the aid was put at the disposal of the beneficiary, i.e.
1. Within two months following notification of this
from 31 May 2007, until their actual recovery,
Decision, Italy shall submit the following information to the

Commission:
HAS ADOPTED THIS DECISION:
(a) the total amount (principal and interest) to be recovered
from the beneficiary;
Article 1
The formal investigation procedure under Article 108(2) of the
(b) a detailed description of the measures already taken or
Treaty in respect of the direct grant of EUR 13,2 million to the
planned to comply with this Decision;
company Legler SpA is closed.
(c) documents demonstrating that the beneficiary has been
( 20 ) Case C-70/72 Commission v Germany, paragraph 13.
ordered to repay the aid.
( 21 ) Joined cases C-278/92, C-279/92 and C-280/92 Spain v
Commission, paragraph 75.
( 22 ) Case C-75/97 Belgium v Commission, paragraphs 64-65.
( 24 ) OJ L 140, 30.4.2004, p. 1.
( 23 ) OJ L 83, 27.3.1999, p. 1.
( 25 ) OJ L 82, 25.3.2008, p. 1.

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L 27/20
EN
Official Journal of the European Union
31.1.2012
2. Italy shall keep the Commission informed of the progress of the national measures taken to
implement this Decision until recovery of the aid referred to in Article 2 has been completed. It shall
immediately submit, upon request by the Commission, information on the measures already taken and
planned to comply with this Decision. It shall also provide detailed information concerning the amounts of
aid and interest already recovered from the beneficiary.
Article 6
This Decision is addressed to the Italian Republic.
Done at Brussels, 23 March 2011.
For the Commission
Joaquín ALMUNIA
Vice-President

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