Private investor test – assess the market nature of financing
What is the private investor test?
The private investor test is an analysis designed to determine whether an investment made by a public entity (e.g. a local government unit or a state-owned legal entity) corresponds to the behaviour of a rational market investor. This test verifies whether a decision to recapitalise a company, subscribe for shares or provide other forms of financial support would have been made on market terms, rather than on the basis of granting unlawful state aid.
The private investor test is consistent with European Commission guidelines and is a key element in ensuring compliance with EU state aid law.
When is the private investor test carried out?</
- recapitalisation of a company by a public or related entity,
- granting loans, guarantees or sureties on terms deviating from market conditions,
- debt restructuring, including debt-to-equity swaps,
- subscription for shares as part of investment transactions,
- assessing whether the financing terms correspond to the behaviour of a rational market investor.
Who does the private investor test apply to?
- local government units and state-owned legal entities providing financing,
- municipal companies and companies with State Treasury shareholding,
- advisers and law firms handling projects involving public funds,
- business entities receiving financial support from public institutions,
- investors involved in public-private partnership (PPP) projects.
How can we help?
- We offer comprehensive support in conducting the private investor test:
we prepare tests in accordance with European Commission requirements and national regulations, - we analyse the profitability of actions from a market perspective,
- we develop comparative scenarios and benchmarks,
- we prepare a test report ready to be presented to an auditor, inspection authority or court,
- we provide support at the planning, implementation and review stages of the project.
Why choose us?
- Experience in working with local government units and public institutions – we carry out valuations, analyses and reports for the public sector
- Knowledge of case law and European Commission guidelines – we take into account legal requirements and EC recommendations in the valuation and reporting process
- A consistent, multidisciplinary approach – we combine financial, legal and market analysis to provide comprehensive reports
- Reports accepted in audit and inspection practice – documents prepared with audits, inspections and decision-making processes in mind
- Confidentiality and compliance with public sector requirements – every analysis is carried out in accordance with ethical principles and public sector regulations
Benefits of conducting the test
- protection against state aid risks,
- professional documentation of financial decisions,
- facilitation of audits and communication with inspection authorities,
- enhanced transparency of the investment process,
- increased security for management boards and decision-makers.
Our experience
- tests for companies with local government unit and State Treasury shareholdings,
- advice on recapitalisation transactions and business support,
- opinions for the purposes of auditor reviews.
FAQ
What is the private investor test?
It is an analysis of whether a public entity’s investment corresponds to the actions of a rational market investor.
Is the test mandatory?
Not always, but it is recommended where there is a risk of granting unlawful state aid.
How long does it take to prepare the test?
Between 1 and 3 weeks – depending on the type of activity and the availability of data.