This article is more than 5 months old

This article is more than 5 months old

Companies rescued by EU state share-buying programmes during the coronavirus pandemic will be barred from paying executives bonuses, according to a leaked document from the European commission seen by the Guardian.

The restrictions, which would extend to a ban on dividend payments and share buybacks, could be imposed on companies where the government has taken an equity stake in order to keep the business afloat through the global pandemic.

If backed by the EU’s 27-member states, the rules would apply to the UK – under the Brexit transition period, which is due to end on 31 December, the UK follows all EU rules but is not able to help decide them.

Quick guide UK government support for workers and businesses during the coronavirus crisis Show Hide Income subsidies Direct cash grants for self-employed people, worth 80% of average profits, up to £2,500 a month. There are similar wage subsidies for employees. Loan guarantees for business Government to back £330bn of loans to support businesses through a Bank of England scheme for big firms. There are loans of up to £5m with no interest for six months for smaller companies. Business rates Taxes levied on commercial premises will be abolished this year for all retailers, leisure outlets and hospitality sector firms. Cash grants Britain’s smallest 700,000 businesses eligible for cash grants of £10,000. Small retailers, leisure and hospitality firms can get bigger grants of £25,000. Benefits Government to increase value of universal credit and tax credits by £1,000 a year, as well as widening eligibility for these benefits. Sick pay Statutory sick pay to be made available from day one, rather than day four, of absence from work, although ministers have been criticised for not increasing the level of sick pay above £94.25 a week. Small firms can claim for state refunds on sick pay bills. Other Local authorities to get a £500m hardship fund to provide people with council tax payment relief. Mortgage and rental holidays available for up to three months.

The paper has been drawn up by the EU competition commissioner Margrethe Vestager, as the EU executive rapidly amends state-aid rules to prevent them smothering crisis-rescue plans. The commission, the EU’s executive arm, has already relaxed the rules to help governments provide financial lifelines to companies, which in normal economic times would be seen as anti-competitive.

The latest paper assesses further measures that may be needed, after economists at the International Monetary Fund warned the world was on the brink of the worst economic downturn since the 1930s.

The document examines how governments might support ailing companies by taking equity stakes as part of rescue schemes, described as “an intervention of the last resort”.

Insiders are uncertain when the document will be published, and expect it to be changed after discussions between Vestager and her fellow commissioners, followed by EU member states.

British firms to be given more protection from bankruptcy Read more

Companies benefiting from a coronavirus-related equity stake would be barred from “aggressive commercial expansion financed by state aid”. Neither will they be able to buy competitors or other operators in their line of business until the state has been repaid. Some limited acquisitions may be allowed, but only to maintain a company’s viability.

Until the state has been repaid, executives will be limited to their base salaries, with no special awards. “Under no circumstances, bonuses, other variable or comparable remuneration elements shall be paid,” the document states.

Large companies benefiting from a government stake of more than 20% would be obliged to set out “exit strategies” within six months of getting help. These plans would detail how a company intended to repay the state.

In a sign that internal negotiations are not finished, the 20% and six-month variables are still in negotiators’ square brackets, evidence that the EU executive has yet to take a final position.