Is your company an undertaking in difficulty?

An undertaking in difficulty is an enterprise that meets at least one of the five conditions in Article 2(18) of Regulation (EU) No 651/2014. The first condition concerns losses. A company is in difficulty if its losses, after being covered by reserves and retained earnings, exceed half of its share capital.

The other conditions are insolvency proceedings, rescue aid that has not been repaid or a restructuring plan still in progress and, for large enterprises, high indebtedness combined with weak interest coverage. The tool below takes you through the questions and shows which condition was decisive.

The status matters because, under that regulation, State aid is as a rule not granted to undertakings in difficulty. This is why calls in Croatia check whether the applicant is in difficulty.

Data as of 13 November 2026 · Sources: 3, listed at the end · How we check our information · Report an error

It is worth checking the rest before you apply. The site also offers the SME size test, the de minimis aid calculator, the municipality and town search and the funding programme questionnaire.

How the tool calculates

The tool follows the text of Article 2(18) of Regulation (EU) No 651/2014. It is enough that one of points (a) to (e) applies.

Point (a) concerns limited liability companies. According to Annex I to Directive 2013/34/EU, in Croatia these are the d.o.o. and the d.d., and the tool also includes the j.d.o.o. here. A company is in difficulty if more than half of its share capital has disappeared as a result of accumulated losses. Under the regulation, losses are deducted from reserves and all other elements considered part of the company’s own funds. If the result is negative and exceeds half of the subscribed share capital, the condition is met. Share capital includes any share premium.

The tool adds the loss brought forward and the loss for the current year, deducts other reserves and retained earnings, and compares the difference with half of the sum of subscribed share capital and capital reserves. A loss exactly equal to half does not yet mean difficulty, because the regulation requires that half be exceeded.

Point (b) concerns companies in which at least some members have unlimited liability for the company’s debts. According to Annex II to the same directive, in Croatia these are the j.t.d., the k.d. and the economic interest grouping. The condition is the loss of more than half of the capital shown in the company accounts. The regulation gives no formula for these companies, so the tool applies the same calculation as for a d.o.o., which is a simplification.

Points (a) and (b) do not apply to a micro, small or medium-sized enterprise that has existed for less than three years. The tool does not ask such an enterprise for balance sheet data. The tool does not cover the special exemption for risk finance aid.

Point (c) applies to every undertaking. An undertaking is in difficulty if it is subject to collective insolvency proceedings or fulfils the criteria under national law for being placed in such proceedings at the request of its creditors. The tool takes this to mean bankruptcy and pre-bankruptcy proceedings under Croatian law.

Point (d) also applies to every undertaking. It concerns an undertaking that has received rescue aid and has not yet reimbursed the loan or terminated the guarantee, and one that has received restructuring aid and is still subject to a restructuring plan.

Point (e) applies to undertakings that are not SMEs. The condition is that for the past two years the book debt to equity ratio has been greater than 7.5 and the EBITDA interest coverage ratio has been below 1.0. Both parts of the condition must be met.

For sole traders (obrt), family farms (OPG) and liberal professions the regulation does not prescribe a loss of capital calculation, because points (a) and (b) refer to companies. Points (c) and (d) apply to them. In practice, insolvency proceedings are checked for them, and the rules of an individual programme may require additional indicators.

Under Article 1(4)(c) the regulation does not apply to aid to undertakings in difficulty. The exceptions include aid schemes to make good the damage caused by natural disasters and start-up aid schemes.

Frequently asked questions

How is a loss greater than half of the share capital calculated?

Add the loss brought forward and the loss for the current year. Deduct reserves and retained earnings from that sum. If an uncovered loss greater than half of the share capital including premiums remains, the company is in difficulty. An example is a d.o.o. with a share capital of EUR 20,000, no reserves and losses of EUR 12,000. Half of the capital is EUR 10,000, so the condition is met.

Does the test apply to enterprises younger than three years?

Partly. A micro, small or medium-sized enterprise that has existed for less than three years cannot be in difficulty because of a loss of capital, since points (a) and (b) do not apply to it. The points on insolvency proceedings and on rescue and restructuring aid still apply. For large enterprises there is no such exemption, whatever their age.

Can a sole trader be an undertaking in difficulty?

Yes. The regulation does not prescribe a loss of capital calculation for sole traders, because that part refers to companies. The points on insolvency proceedings and on rescue or restructuring aid apply to every undertaking, including a sole trader. In practice, insolvency proceedings are checked for sole traders, and the rules of an individual programme may require additional indicators. Always read the guidelines of the call you are applying to.

Are capital reserves included in share capital?

Yes, to the extent that they consist of share premiums. The regulation says that for this check share capital includes any share premium. The tool therefore adds capital reserves to subscribed share capital and does not use them to cover losses. This makes the half against which the uncovered loss is compared larger, which works in the company’s favour.

Does this status mean the company is close to bankruptcy?

No. Undertaking in difficulty is a concept from State aid rules and is used to assess whether an enterprise may receive aid. A company can operate normally and pay its liabilities and still meet the condition of a loss greater than half of its share capital. Insolvency proceedings are only one of the five situations listed in the regulation.

Can the status of an undertaking in difficulty change?

Yes, because the result depends on the balance sheet. The loss condition is no longer met once the uncovered loss falls to half of the share capital or below. This happens if the owners increase the share capital or if the loss is covered, for example by next year’s profit. Which financial statements are examined is determined by the call, so check its guidelines.

Sources

• Commission Regulation (EU) No 651/2014, consolidated text, Article 2(18) (EUR-Lex)
• Commission Regulation (EU) No 651/2014, original text in the Official Journal (EUR-Lex)
• Directive 2013/34/EU on annual financial statements, Annexes I and II (EUR-Lex)