National SME Support Programmes valid as of 2006

SME support programmes for 2005-2006 were approved by the Government of the Czech Republic under Resolution No 1159 of 24 November 2004.

The Minister for Industry and Trade, based on authorization contained in the government resolution, approved changes to the terms and conditions of programmes, effective as of 1 January 2006.

The consolidated wording of the National SME Support Programmes valid as of 1 January 2006 can be found in the text below.

Programme of Guarantees for Small and Medium-Sized Enterprises

ZÁRUKA

(in the wording valid as of 1 January 2006)

Programme administrator: Ministry of Industry and Trade

Support disburser: Českomoravská záruční arozvojová banka, a.s. (hereinafter referred to as ‘ČMZRB’) (Bohemian-Moravian Guarantee and Development Bank)

This programme is implemented in accordance with Act No 47/2002 on the support of small and medium-sized enterprises, as amended, and in accordance with Commission Regulation 70/2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises, as amended (hereinafter referred to as ‘Commission Regulation 70/2001’).

1.  Objective of programme

The objective of the programme is to provide subsidized bank guarantees for bank loans and risk and development capital, guarantees for bids in public commercial tenders, and guarantees for operating loans in order to facilitate the implementation of the investment-based entrepreneurial projects of small and medium-sized enterprises, and in order to enhance the competitiveness of these enterprises.

2.  Definition of support beneficiaries

2.1. On the date an application is submitted, the support beneficiary must meet the following terms and conditions:

a) it must be a small or medium-sized enterprise in accordance with Commission Regulation 70/2001 of 12 January 2001 on the application of Articles 87 and 88 of the EC Treaty to State aid to small and medium-sized enterprises, and in accordance with Act No 47/2002 on the support of small and medium-sized enterprises, as amended (see Joint Annex No 1 to the SME Support Programmes),

b) it must be authorized to engage in business in the Czech Republic corresponding to the submitted project, and carry out the supported business activity in the Czech Republic,

c) on the date on which the application is submitted, it must be registered as an income tax payer at the revenue authority in accordance with Section 33(1) of Act No 337/1992 on the administration of taxes and charges, as amended,

d) on the date on which the application is submitted, pursuant to an affirmation it must not have any arrears in respect of the revenue authority, the Czech Social Security Administration, health insurance companies, the Land Fund, the National Property Fund, the State Environment Fund, the State Housing Development Fund, the Customs Administration of the Czech Republic, the State Cultural Fund, the State Fund of the Czech Republic for the Support and Development of Czech Film, the State Agricultural Intervention Fund, regions, municipalities, or associations of municipalities. Deferment granted for the payment of arrears or an agreement on the payment of arrears will be considered duly settled arrears.

e) on the date on which the application is submitted, pursuant to an affirmation it does not have arrears related to the wage claims of its employees,

2.2. An enterprise cannot be a support beneficiary if, on the date of submission of the application:

a)  a bankruptcy order is made against its estate,

b)  composition has been permitted with creditors,

c)  a bankruptcy petition filed against its estate has been rejected due to insufficient assets,

d)  a court has issued a writ of execution on its assets,

e)  it is in liquidation.

2.3. For the purposes of providing guarantees for capital investments, capital investors may be entities engaged in business on the territory of the Czech Republic (e.g. risk capital funds, private investors, banks) with whom ČMZRB enters into a cooperation agreement.

3.  Terms and Conditions of the Programme

3.1 Subsidized Guarantees and Guarantees for Capital Investments

3.1.1 Terms and Conditions of Project Eligibility

A ‘project’ is the plan of a support beneficiary to develop business activities.

A project must meet the following terms and conditions:

a) the nature of the project must be compatible with the Industrial Classification of Economic Activities (OKEČ), which is an annex to the programme; a manufacturing project under OKEČ 15 and 17 must not be designed to produce, process and market any products listed in Joint Annex No 4 to the SME Support Programmes,

b) the project must be implemented in the Czech Republic.

3.1.2. Other terms and conditions

a)  No support may be provided to a medium-sized enterprise that, as at the date the application for support is filed, is in receipt of support for rescuing and restructuring firms in difficulty (according to Community guidelines on State aid for rescuing and restructuring firms in difficulty, Communication from the Commission No 2004/C 244/02).

b)  A guarantee will be provided on the basis of a guarantee agreement concluded between the support disburser and the support beneficiary.

c)  The support beneficiary is obliged to supply information about the implementation of a supported project in the scope appointed by the guarantee agreement between the support beneficiary and the support disburser.

d)  A support beneficiary must allow members of staff of the support disburser, the Ministry of Industry and Trade, and the members of staff of other entities appointed by the support disburser or the Ministry of Industry and Trade to have direct access in order to inspect observance of the programme terms and conditions and expedient use of the funds of the guaranteed credit, such being at the place of project implementation or at the support beneficiary’s registered office.

e)  Under Commission Regulation 70/2001, the support beneficiary is obliged to ensure that tangible and intangible fixed assets, or tangible and intangible assets (hereinafter referred to as ‘investments’), acquired in full or in part from guaranteed credit, will, for at least 5years from the day the guarantee agreement is concluded, be in the NUTS 2 territory where the project is located and for whose implementation the guaranteed credit was intended.

f)  The support beneficiary is obliged to supply truthful information about the support beneficiary (Section 2), the fulfilment of terms and conditions of project eligibility (paragraph 3.1.1) and eligible types of guaranteed receivables (paragraph 3.1.3).

3.1.3. Eligible types of guaranteed receivables

Guarantees may be provided to secure receivables:

- stemming from investment loans for the acquisition of tangible and/or intangible (fixed) assets, such as land, buildings, structures, machinery and equipment, means of transport and know-how, and the reconstruction of tangible (fixed) assets directly related to the realization of the project,

- stemming from operating loans for stocks, receivables not yet due, and the payment of operating costs directly related to the realization of the project. Revolving operating credit may be guaranteed only if the security provided is a repeat of the previous security,

- related to capital investments, provided that the beneficiary of risk and development capital expects to attain aminimum of 50% of its revenues from the subsidized activities, as specified in the Industrial Classification of Economic Activities (OKEČ) listed in the Annex to the programme, with the exception of the restrictions stemming from Joint Annex No 4 to the SME Support Programmes.

Guaranteed capital investments may not be used by the beneficiary of the capital for the acquisition of an ownership interest in other entities.

3.2 Bonds for Bids in Commercial Public Tenders

Bonds for bids may be provided only for commercial public tenders or public works advertised by entities having aregistered office in the Czech Republic where the subject matter is the supply of products, goods, services and construction work. Considered supply of construction work will be construction, reconstruction, addition, extension, construction of anew structure, etc., fully as set forth in the building permit and project documents pertaining to the construction work.

At the request of the bond supplier, the support beneficiary is obliged to remit full payment under the guarantee as made by the supplier.

4. Type of Support

ČMZRB makes decisions on the provision of guarantees, and the amount and duration of these guarantees. The fulfilment covered by the guarantee may only be in the Czech currency. The beneficiary of support is obliged to pay charges for the provision of the guarantee in accordance with the ČMZRB price list.

The maximum intensity of state aid must not exceed the limit stipulated by the regional map of state aid intensity – see Joint Annex No 2 to the programmes, except in the case of de minimis aid – see Joint Annex No 3 to the SME Support Programmes. State aid provided in the scope of this programme in accordance with de minimis rules must not exceed EUR 100,000 on the date of provision, whereby this amount is calculated as the sum of all state aid obtained by the enterprise in the preceding three years in accordance with the de minimis principle.

4.1 Subsidized Guarantee

Under the programme, enterprises will gain access to subsidized guarantees for abank loan for the implementation ofabusiness plan. The maximum subsidy is 9% p.a. The cost of asubsidized guarantee paid by the entrepreneur, reduced by the subsidy, is between 0.1% p.a. and 0.3% p.a. of the value of the guarantee.

A subsidized guarantee for an operating loan may be provided solely as aid in accordance with Commission Regulation 69/2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid (see Joint Annex No 3 to SME Support Programmes).

A guarantee for an investment loan will be provided as aid in accordance with Commission Regulation 70/2001 in cases where the terms and conditions of paragraph 3.1.2e) have been met; in other cases the guarantee may be provided solely as aid in accordance with Commission Regulation 69/2001 on the application of Articles 87 and 88 of the EC Treaty to de minimis aid.

If part of a guaranteed loan is used for operating purposes permitted by the terms and conditions of this programme, it is tracked separately as de minimis aid.

4.2 Guarantee for Capital Investment

The following are considered capital investment for the purposes of the programme:


a) the purchase or subscription of shares or the acquisition of an ownership interest in the applicant’s undertaking (if the beneficiary of the capital is apublic limited company or limited liability company),

b) acontribution made by asilent partner,

c) aloan given to the beneficiary of capital not secured by the assets of the same.

A guarantee may be granted for up to 70% of the capital investment, such being:

a) in the case of a capital investment provided under paragraphs a) and b) as de minimis aid,

b) in the case of a capital investment provided under paragraph c), either as de minimis aid in the case of an operating loan or as aid under Commission Regulation 70/2001 in the case of loans for investments.

The cost of aguarantee for a capital investment may not exceed 1.5%, or in the case of one-year or shorter guarantees 0.75%, of the value of the guarantee. The first half of the cost of the guarantee will be paid within six months and the second within 18months of the signing of the bank guarantee agreement, but no later than the expiry of the guarantee. If the guarantee is terminated prematurely with the approval of both the investor and the beneficiary of the capital, ČMZRB will refund acommensurate portion of the fee to the beneficiary of capital.

In addition to aguarantee, an investor investing guaranteed capital may be provided with asubsidy for the reimbursement of the cost of the services of external advisers directly related to the following eligible costs:

·  specialized technical and economic assessments (including taxation and audit),

·  legal services related to the drafting of contractual documentation for capital investment, analyses of ownership and other contractual issues concerning the beneficiary.

The subsidy may amount to up to 50% of eligible costs, but a maximum of 3% of the volume of invested capital, which shall be no more than CZK 250,000 per capital investment. The subsidy will be paid as alump sum based on an application, which must include documents showing the actual cost of preparation of the capital investment, as described in the preceding paragraph. The subsidy will be paid only after the signing of an investment agreement by the investor and the beneficiary of the capital.

4.3 Bonds for Bids in Commercial Public Tenders

Bonds for bids in commercial public tenders may be granted for aminimum of CZK 100,000 and amaximum of CZK 5 million. This support is provided as de minimis aid.

5. Project selection

The support disburser makes decisions on the provision of guarantees based on the fulfilment of criteria imposed on support beneficiaries, terms and conditions of project eligibility, and an assessment of the credit risk.

6. Sanctions for Failure to Comply with the Terms and Conditions of the Programme

In the event of a breach of the programme terms and conditions stipulated for drawing on support, i.e. in the event of unauthorized use of funds from the national budget, penalties will be imposed on the support beneficiary in accordance with Section 44a of Act No 218/2000 on budgetary rules.

In the event of a breach of the condition under paragraph 3.1.2e), unauthorized acquisition of support shall be considered the amount of the subsidized guarantee exceeding the restrictions laid down in Article 4(2) of Commission Regulation 70/2001.

7. Participation in Other Programmes

Participation in this programme does not disqualify enterprises from receiving support under other Czech and foreign programmes, provided that the intensity of State aid does not exceed the limits appointed by the regional map of State aid intensity.

Aguarantee under this programme may not be provided for loans under the programmes KREDIT, START and INOVACE granted in the scope of the Industry and Enterprise Operational Programme, or for loans under the TRH programme. Further, guarantees may not be provided for projects supported by a subordinate loan in the programmes KREDIT, TRH and PROGRES.