What is Undertaking in Difficulty (UiD)?
An undertaking in difficulty (UiD) is a concept defined by European legislation, specifically the General Block Exemption Regulation (GBER) and EU Guidelines on State aid for rescuing and restructuring. It identifies companies that cannot be awarded the vast majority of EU grants. These are entities that, without external intervention—whether from public funds or private investors—will be unable to remain operational in the long term. This does not refer to a business dealing with a temporary financial dip, but rather to an organization whose financial condition reveals severe structural problems.
Definition of an undertaking in difficulty
Managing authorities and individual ministries in the Czech Republic maintain their own methodological instructions for assessing undertakings in difficulty, which extend the central methodology of the Office for the Protection of Competition (ÚOHS) for specific EU funds operational programs. The following criteria apply across businesses of all sizes (small, medium, and large):
- For limited liability companies (s.r.o.) and joint-stock companies (a.s.): Accumulated losses exceed half of the subscribed share capital.
- For partnerships: Losses exceed half of the equity reported in the financial accounts.
- For all entities: Insolvency proceedings have been initiated, or the company meets the statutory conditions for insolvency under national law.
- For all entities: The book debt-to-equity ratio is greater than 7.5 and the EBITDA (earnings before interest, taxes, depreciation, and amortization) interest coverage ratio is below 1.0 for two consecutive years.
In practice, there is virtually no difference between small, medium, and large enterprises regarding the core UiD definition, as identical criteria are evaluated.
What the UiD classification means in practice
This regulation prevents unviable enterprises from receiving public money, safeguarding fair competition within the EU internal market. Grant providers must rigorously verify whether an applicant is an undertaking in difficulty before approving any project.
If such an enterprise submits a grant application under the Operational Programme Technologies and Applications for Competitiveness (OP TAK), national programs administered by the Ministry of Industry and Trade (MPO), or other European funds, and administrative verification reveals that it meets the UiD criteria, the application will be rejected. This applies regardless of the quality or degree of innovation of the proposed project. Exceptions are extremely limited, applying primarily to de minimis aid (up to EUR 300,000 over a three-year period) or dedicated restructuring schemes.
