Short Reads

General Court confirms that the financial position of shareholders and the possibility to increase credit facilities are relevant when assessing an inability to pay request

General Court confirms that the financial position of shareholders and the possibility to increase credit facilities are relevant when assessing an inability to pay request

General Court confirms that the financial position of shareholders and the possibility to increase credit facilities are relevant when assessing an inability to pay request

01.07.2016 NL law

On 2 June 2016, the General Court ("GC") dismissed an appeal lodged by four companies in the Celsa-group ("GSW") against the European Commission's prestressing steel decision. The companies raised several grounds of appeal which were all rejected by the GC. Of particular interest is that the GC refused to accept the application for inability to pay by the companies.

 

If the imposition of a fine "irretrievably jeopardises the economic viability of the undertaking concerned and causes its assets to lose all their value", the Commission may reduce the fine. The four companies requested such a reduction, arguing that they were unable to pay the EUR 54 million fine and that their economic viability would be jeopardised if the fine was imposed. The Commission rejected their requests on two grounds. First of all, it considered that GSW should be able to increase its short-term credit facilities. Secondly, it found that the Celsa-group and its family owners had sufficient financial resources at their disposal, which they could use to aid GSW.

GSW appealed this decision before the GC. The GC considered that if it could be shown that GSW had opportunities to increase its credit facilities or that its shareholders possessed important financial means, the rejection of GSW's request based on inability to pay would be justified. Taking into account the non-used credit facilities, total assets, consolidated cash flow and a recent refinancing, the GC agreed with the Commission that it was possible for the companies to obtain the necessary funding or guarantees from credit institutions. Moreover, the GC considered that GSW had not submitted the information that was necessary to assess the importance of the shareholder's assets. According to the GC, this "lack of diligence" on behalf of the companies was enough  to reject their application, as it falls to the company submitting an application for inability to pay to provide the necessary factual information to the Commission.

By dismissing the appeals, the GC confirmed that the test for inability to pay requests is applied strictly. In assessing such an application many factors will be relevant, such as the financial position of the shareholders of the applicant but also the possibility for the company to obtain additional financial means via a bank credit or, for example, the issuing of shares.

This article was published in the Competition Law Newsletter of July 2016. Other articles in this newsletter:

1. Court of Justice dismisses appeals in the Calcium Carbide Cartel
2. General Court confirms illegality of non-compete clause in telecoms transaction
3. District Court of Rotterdam rejects the applicability of arbitration clauses in antitrust damages litigation
4. Update on changes in antitrust damages claims legislation in the Netherlands
5. New maximum fines for competition law infringements in the Netherlands as of 1 July 2016
6. General Court rules that an implicit and unlimited guarantee does not necessarily constitute State aid

Related news

30.04.2019 EU law
Climate goals and energy targets: legal perspectives

Seminar - On Tuesday April 30th, Stibbe organizes a seminar on climate goals and energy targets. Climate change has incited different international and supranational institutions to issue climate goals and renewable energy targets. Both the UN and the EU have led this movement with various legal instruments.

Read more

21.03.2019 NL law
15 aspects of Brexit you did not know

Short Reads - A Brexit without a deal, or with a deal that does not cover all relevant aspects, is still a potential scenario. We have highlighted a number of unexpected legal consequences of Brexit in such a no deal or incomplete deal scenario.

Read more

15.03.2019 EU law
European Court of Justice issues landmark ruling on parental liability

Short Reads - On 14 March the European Court of Justice issued a landmark judgment in the Skanska case. In this ruling, the Court of Justice held that parent companies can be held liable for the damage caused by a competition infringement committed by their subsidiary if the parent company (that holds all the shares in the subsidiary) has dissolved the subsidiary but continued its economic activity.

Read more

01.03.2019 NL law
Does selling a phone on an online marketplace make you a "trader" under the Unfair Commercial Practices Directive and the Consumer Rights Directive?

Short Reads - Online marketplaces provide sales channels not only for professional traders but also for individuals selling second-hand goods. For buyers, online advertisements do not always make it clear whether the seller is a professional trader or an individual. This distinction is important because consumers buying from a professional trader can benefit from EU consumer laws, while these protections do not apply in consumer-to-consumer sales.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring