The Polish Development Fund has begun its first audits of entrepreneurs who received support under the Financial Shield. As a reminder, the application deadline for SMEs under the PFR Shield ended on July 31, 2020.
Nearly 345,000 companies received financial support worth over PLN 60.5 billion. However, the Polish Development Fund (PFR) indicates that the audits will be limited to individual entities and not carried out en masse. Verification will be based primarily on publicly available data.
According to media reports, PFR, in cooperation with the National Revenue Administration and the Central Anticorruption Bureau, among others, is developing a special algorithm aimed at selecting companies that should undergo more thorough verification.
Given the very hasty implementation of the PFR Shield, the fact that applications were based on declarations of applicants' compliance with the conditions for receiving support, as well as frequent changes to the regulations and ongoing clarification of resulting inaccuracies, it can be expected that audits will highlight further problems related to the imprecise nature of the regulations. This poses a potential risk of negative consequences for all entrepreneurs who acted in good faith and submitted truthful declarations.
Analyzing the conditions that had to be met in order to receive funding, it can be assessed that the following issues, among others, will be subject to verification:
- actual conduct of the activity indicated in the application
- a decline in the company's turnover (whether it has been overstated);
- number of employees;
- the method of spending the subsidy (including in the context of the prohibition of using the subsidy for the acquisition of another entity, etc., transactions with the owner of the entity or between related entities)
- arrears in the payment of taxes or social security contributions at the end of 2019 or on the date of submission of the application;
- the entrepreneur conducts business in sectors excluded from support;
- placing an entrepreneur under restructuring or bankruptcy proceedings;
A significant risk for entrepreneurs is the possibility of incorrectly determining SME status, which is defined in Commission Regulation (EU) No. 651/2014 of 17 June 2014. This definition includes the concepts of affiliated enterprise and partner enterprise. While these definitions provide a number of guidelines for identifying capital ties between companies, serious problems and doubts arise when attempting to establish personal ties. It is worth mentioning that the correct determination of enterprise status and the submission of a declaration in this regard were among the conditions for receiving support from the Polish Development Fund. One of the errors made by entrepreneurs was applying the definition of an SME contained in Polish law, rather than the one contained in the aforementioned Regulation.
Failure to comply with these regulations may result not only in the need to repay the aid received, but also in criminal liability for making false declarations. Article 297 of the Penal Code, concerning so-called "grant fraud," can be cited in this regard. This offense can be punished by up to five years in prison.
Therefore, it's worth preparing for the PFR audit in advance, including by conducting a follow-up audit to verify that all conditions for receiving the subsidy have been met. If you have any questions regarding the PFR Shield or the audit, we remain available.
This alert is for informational purposes only and does not constitute legal advice..
