Update following the publication of the Government Decision No. 282/2020 for the approval of the Methodological Norms (the Methodological Norms) for the implementation of the Government Emergency Ordinance No. 110/2017 on the Program for supporting small and medium-sized enterprises – IMM Invest Romania (GEO 110/2017)
The Methodological Norms provide rules regarding the procedure and conditions for granting, monitoring and settlement of payment requests for state guarantees, as well as for awarding state grants, with a view to support small and medium-sized enterprises (SMEs) during the economic crisis generated by the COVID-19 pandemic.
Below are briefly listed a few of the most relevant provisions of the Methodological Norms.
- Cumulation of credits. Microenterprises and small enterprises obtaining working capital credits can either be granted the state guarantee for (i) up to 80% of the value of the financing, for credits below the value of RON 5 million, or for (ii) up to 90% of the value of the financing, for credits below the value of RON 500,000 or 1 million respectively (depending on the type of entity), in both cases, without exceeding the additional value limits described in our article below. They can, however, cumulate a state-guaranteed working capital credit with state-guaranteed investment credits in both forms, if the total value of the credits is below RON 10 million.
- The cost of the state-guaranteed credits. The total cost of the state-guaranteed credits shall be covered from state grants for the duration of the state aid scheme and shall be composed of: (i) the interest rate, of ROBOR 3M plus a fixed margin, of up to 0% per annum, for investment credits and of up to 2.5% per annum for working capital credits (noting that this margin shall include the total value of commissions due to the credit institution, but that the administration and risk commissions, as well as any ancillary costs (e.g., notarial fees) are not included therein); (ii) the risk commission, calculated as a percentage of the state guarantee value, which shall be paid once (at the granting, extension or prolongation of the guarantee) for the whole duration of the state guarantee and (iii) the administration fee.
- No early repayment fees shall be payable and no clauses allowing for unilateral amendment by the credit institutions shall be included in the state-guaranteed credit agreements.
- Increase of the amounts made available under the credit facilities. During the availability period of state-guaranteed credits, the credit institutions may increase the value of such credits. Any increases in the state guarantees shall be subject to the rules and requirements applicable for awarding new state guarantees, but an eventual rejection of such increase request would not affect the guarantees already awarded.
- Credit availability periods. For investment credits, such period shall be of 72 months (which cannot be prolonged), while for working capital credits, the availability period is of 36 months (which can be prolonged for an additional period of up to 36 months from the initial maturity date).
- Outstanding fiscal obligations. Credit institutions shall ensure that any outstanding fiscal and budgetary obligations of the beneficiaries of working capital credits shall be paid from the amounts borrowed under the latter.
- NACE codes representing activities of SMEs excluded from the state aid scheme. The NACE codes listed within the business object of SMEs excluded from the state aid scheme are now expressly provided under the Methodological Norms, namely: (i) NACE 920 (Gambling and betting activities); (ii) NACE 110 (Manufacture of beverages), (with the exception of NACE 1107 (Manufacture of soft drinks; production of mineral waters and other bottled waters)); NACE 1200 (Manufacture of tobacco products); NACE 2540 (Manufacture of weapons and ammunition); NACE 4635 (Wholesale of tobacco products); NACE 4726 (Retail sale of tobacco products in specialised stores); and (iii) NACE 801 (Private security activities); NACE 802 (Security systems service activities) and NACE 803 (Investigation activities). Given the broad language of the Methodological Norms, as well as the reasoning behind these provisions, our view is that it is of no relevance whether the above are listed under the main domain/ object of activity or as secondary activities.
- Registration to the program. Issuance of the decision by FNGCIMM. The registration of beneficiaries shall be made through an online application made available through the website imminvest.ro, following which Fondul Național de Garantare a Creditelor pentru Întreprinderile Mici și Mijlocii (FNGCIMM) shall communicate online to the credit institution chosen by the beneficiary, its approval in principal of the beneficiary’s eligibility, as well as the other information (e.g., type of credit requested). After approving the granting of the credit to the beneficiary, the credit institution shall request from FNGCIMM the state guarantee (and submit the relevant documentation), through the application https://plafon.garantare.ro. FNGCIMM shall inform the credit institution of its decision within five (5) business days from the correct and complete submission of all documents by the latter.
- Insurance. The SMEs will be required, upon obtaining the credit, to insure for all risks all movable/ immovable goods serving as security for the state guarantees, as provided under the GEO 110/2017 (including the financed assets), for the entire period in which state guarantees are granted, at the value accepted by an insurance company, but above the value determined by the credit institution within its request for state guarantee. All rights to indemnities arising from the insurance policies shall be assigned/ mortgaged in favour of the credit institutions and the State, acting through the Ministry of Public Finances (the MPF) (pro rata with the guarantee percentage).
- Continuous monitoring by FNGCIMM. FNGCIMM shall periodically monitor the development of each state-guaranteed credit, based on information provided by the credit institution, for the duration of the validity of the state guarantee.
- Payment of the state guarantees and enforcement initiated against the SMEs. After payment in favour of the credit institution of the amounts representing state guarantee under the credit, the debt instrument attesting the payment obligation of the beneficiary shall be delivered to the latter by FNGCIMM or, in case of impossibility of such delivery, an announcement referencing the debt instrument shall be published on FNGCIMM’s website and at its headquarters. If the beneficiary does not voluntarily fulfil its payment obligation within a 15 days deadline, the National Agency for Tax Administration shall start the enforcement procedure for the recovery of the amount as per the provisions of the Tax Procedural Code.
6 April 2020
Update following the publication of the Government Emergency Ordinance No. 42/2020
The Government Emergency Ordinance No. 110/2017 on the program for supporting small and medium-sized enterprises – IMM Invest Romania (the GEO 110/2017) has been amended once more, following the publication on 4 April 2020 of the Government Emergency Ordinance No. 42/2020 on amending and supplementing the GEO 110/2017 and for the approval of the state aid scheme for supporting small and medium-sized enterprises in the context of the economic crisis generated by the COVID-19 pandemic (the GEO 42/2020).
The GEO 42/2020 not only amends the regime presented in our initial article, regarding the State guarantees established by the Government Emergency Ordinance No. 29/2020 on certain economic and fiscal measures (the GEO 29/2020), but also includes a novel form of state aid conferred to small and medium-sized enterprises (SMEs) by the State, i.e., grants. Additional eligibility criteria for SMEs applicable to both forms of state aid are also provided therein, along with, inter alia, the duration of the state aid scheme and the estimated number of beneficiaries thereof.
I. General remarks
State aid, in both of its two forms provided under the GEO 42/2020 shall be granted to SMES fulfilling the criteria set out by the GEO 110/2017 (e.g., absence of circumstances of difficulty as defined therein (including enforcement or voluntary liquidation proceedings already initiated); absence of already initiated insolvency proceedings; absence of litigation with the Ministry of Public Finances or with the credit institutions granting the loan whereby SMEs act as defendant, etc.), as well as the following conditions:
- absence of decisions for the recovery of state aid issued against the SME or, in case of already issued decisions, an already completed enforcement thereof, pursuant to the applicable law;
- absence of request of other types of state aid, for the same eligible costs;
- occurrence of circumstances of difficulty only after 31 December 2019, due to the COVID-19 pandemic; SMEs “in difficulty” are those in respect of which at least one of the following circumstances have occurred:
- in case of limited liability companies, more than half of its subscribed share capital has disappeared as a result of accumulated losses;
- in case of companies where at least some members have unlimited liability for the debt of the company, more than half of its capital (as shown in the company accounts) has disappeared as a result of accumulated losses;
- insolvency proceedings have been initiated against the SME or it fulfils the legal criteria for being subject to such proceedings;
- rescue aid has been received by the SME and it has not yet reimbursed the loan or terminated the guarantee, or restructuring aid has been received by the SME and it is still subject to a restructuring plan.
- submission by the SME of a written document attesting its undertaking not to terminate the employment agreements for the personnel existing as of the GEO 42/2020’s entry into force and until 31 December 2020 (the SME is however allowed to organise the employees’ working hours depending on the evolution of its current activities).
II. State guarantees. Amendments brought by the GEO 42/2020
SMEs acting in the following fields: financial intermediation and insurance; real estate transactions; and renting and leasing are no longer excluded as potential beneficiaries of State guarantees.
b) Limits for the maximum value of credits
The RON 10 million cap for the total value of the State-guaranteed credits/ credit lines in favour of a single beneficiary is still applicable, along with the limits for working capital credits and investment credits of RON 5 million or RON 10 million respectively (and, for credits granted to microenterprises and small enterprises, guaranteed up to 90%, the RON 500,000 and RON 1 million limits). The requirement for the value of working capital loans to fall below the average value of the working capital expenditures within the last two financial years has been eliminated.
Additional limits regarding the value of the credits have been introduced by the GEO 42/2020 and such limits are applicable to all types of credits guaranteed by the State (meaning, both up to 80% and to 90% of the value of the financing, as detailed in our initial article). The State shall only grant guarantees for credits amounting below the higher of the following three values:
- double the amount of wage expenses (including mandatory social contributions due by the SME), registered in 2019 (without exceeding the estimated amount of wage expenses for the first two years of activity, in case of SMEs established after 1 January 2019);
- 25% of the net turnover for 2019 (or of the gross income/ the annual income normative, for individuals earning income from independent activities, according to the sole return submitted with the tax authorities for the year 2019);
- the amount of the liquidity needs (including working capital and investment expenses) attested by documentary evidence, for a period of up to 18 months from the date when the credit has been granted to the SME.
c) Interest subsidies
The interest subsidies may only be granted until 31 December 2020, instead of 31 March 2021, as initially provided under the GEO 29/2020, but the provisions regarding the possibility of extension thereof for the following two years are still applicable.
III. State grants
SMEs having obtained State-guaranteed credits pursuant to the GEO 110/2017 (as amended by the GEO 42/2020) shall benefit of State grants within the limit of the RON equivalent of EUR 800,000 per enterprise, without exceeding the total value of (i) the risk commissions and administration fees (for the State guarantees) and (ii) of the interests under the credits/ credit lines (where interest subsidies have not been granted already).
Beneficiaries: Express requirements are provided for SMEs within certain industries. As such, SMEs acting in the field of processing and sale of agricultural products shall benefit from such State aid, only if (i) the latter is not transferred, in whole or in part, to the primary producers and if (ii) the value of the State grant is not established based on the price or quantity of products acquired from the primary producers or introduced on the market by the respective SMEs.
In addition, for the agriculture, fish farming and aquaculture sectors, the value of State grants is capped (i.e., EUR 120,000 for each SME acting in the fish farming or aquaculture sectors and EUR 100,000 for the field of primary production of agriculture products, respectively).
IV. Estimated number of beneficiaries
The state aid scheme shall be granted until 31 December 2020 (for the guarantees awarded by the State) and 31 March 2021 (for the State grants). Both periods may be prolonged under the conditions provided in our initial article regarding the prolongation of the period in which interest subsidies can be granted.
The estimated number of SMEs which shall benefit from the state aid scheme, in both forms, is of maximum 40,000 beneficiaries, pursuant to the provisions of the GEO 42/2020.
21 March 2020
While most of the EU Member States announced tremendous help for their economies in the fight against the effects of the COVID-19 pandemic, the Romanian Government followed suite and approved last Thursday by emergency government ordinance a set of state aid measures which has entered into force on 21 March 2020. Among these, there is the establishment of a multiannual program aimed to help small and medium-sized enterprises (SMEs) in reducing the negative impacts of the COVID-19 outbreak on their activity and finances.
Who? The beneficiaries are SMEs having obtained from the Ministry of Economy a certificate attesting the losses suffered by them due to COVID-19.
What? The State shall provide guarantees covering up to 80% of the principal amounts (excluding interest, bank commissions and charges) for one or more investment or working capital credits granted by credit institutions to SMEs and the management fees shall be borne by the State. The total State-guaranteed credits of a SME are capped at RON 10 million, with an additional cap for working capital credits of RON 5 million (but below the average value of the working capital expenditures within the last two financial years) and of RON 10 million for investment credits. The working capital credits shall be guaranteed for a period of 36 months (which may be prolonged with another 36 months, if the case).
For microenterprises (i.e., entities having up to nine employees and an annual net turnover/ total assets value below the RON equivalent of EUR 2 million) and small enterprises (i.e., entities having between 10 and 49 employees and an annual net turnover/ total assets value below the RON equivalent of EUR 10 million), the State guarantees for working capital credits can be of up to 90% of the borrowed amounts, but within the limit of RON 500,000 (for microenterprises) respectively RON 1 million (for small enterprises) without exceeding the average value of the working capital expenditures within the last two financial years.
The State shall also grant interest subsidies of 100%, depending on the percentage of the State guarantee (80% or 90% respectively). These interest subsidies shall be granted until 31 March 2021 and may continue beyond this date for the next two years only provided that the estimated economic growth for each of these two years shall be lower than the economic growth to be registered in 2020.
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