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Introduction |
As the recession in
Romania continues without any certainty as to its duration and conventional
sources of funding remain hesitant to provide financing, businesses are
increasingly anxious to find alternative sources of money. With internal
customary financial resources mostly scarce and bank financing in short supply
and often impossible to obtain, it is frequently a necessity for a company to
find an alternative funding solution just to survive. Our October 2009
Romanian Digest™ article, “Romanian Sate Aid in a Time of Crisis”,
presented a potential solution for those companies. (For more details, please
visit our Digest Archive at
http://www.hr.ro/digest/200910/digest.htm). This article provides an
overview of another potential alternative financing solution for companies
through the utilization of financing schemes organized by the European Union (“EU”).
Individuals or legal entities that are performing certain specified activities
in an EU member state, such as Romania, should obtain more specific information
on the financial plans currently available at the EU level in their industry
using the sources described in this article. For those who are active in fields
such as energy, manufacturing, transport, human resources, agriculture, research
and development, information technology and communication, an EU funding scheme
may be just the solution. |
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General Considerations |
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Financing is available under EU financing schemes either through
specific programs developed at the EU level, such as PHARE, or through
programs developed by other EU member states based on bilateral
agreements with Romania. This article describes only some of those
programs and does not provide a presentation of all of the potential
funding schemes available within the EU.
Since EU financial programs represent a particularly significant
financing tool for individuals and legal entities operating in Romania,
the Romanian Government created the Romanian Authority for Structural
Funding (“ACIS”) within the Ministry of Finance, charged with the
role of coordinating at the national level all of the non-refundable
support granted by the EU. Therefore, any legal entity or individual
intending to obtain funds granted at the EU level should obtain specific
information from ACIS by accessing its website at
www.fonduri-ue.ro.
However, even when provided with the requested information from ACIS, a
potential applicant must further evaluate carefully all of the
eligibility criteria applicable to the specific financing scheme being
considered. Usually, each financing scheme is applicable only to
specific categories of beneficiaries; hence it is very important for the
potential applicant to assess whether it fits into one of those
categories. A failure to observe a particular provision may lead to a
rejection of the file by the competent authority, even if all of the
other conditions have been properly fulfilled.
EU financing schemes are primarily aimed at providing support to small
and medium sized enterprises (“SMEs”), since they are considered
to be the heart of the economy of any state. According to the provisions
of Law 346/2004 regarding stimulation for establishing and developing
small and medium enterprises, eligible SMEs are the “undertakings” that
cumulatively fulfill the following conditions: they have an annual
median number of employees smaller than 250; they have a net turnover of
up to €50 million in lei, or they hold assets that do not exceed the
equivalent in lei of €43 million based upon the last approved financial
accounts of the company.
 There
are also opportunities which require a substantial capability from the
applicant, either in terms of financial wherewithal or human resources,
and such companies are defined as “large undertakings”; they are the
undertakings that are not included in the definition of SMEs set forth
in Law 346/2004. Moreover, there are other opportunities where the
beneficiaries may also be individuals or non-governmental organizations.
Another significant aspect to be taken into account is the fact that EU
financial programs are available only for the development of projects in
determined areas and, more specifically, for the performance of
particular activities under such projects. Furthermore, there are
situations in which the public procurement legislation must be observed
and complied with fully.
Moreover, there are situations in which the financing schemes do not
cover the entire project, but only parts of it, and in such cases the
applicant must be prepared to find other available funds to implement
the rest of the project. The applicant should verify its own
availability to cover the remainder of the requisite financing, and,
secondly, the possibility to obtain the rest of the necessary funds
through a credit, loan or state aid program. However, no matter what the
source is for the rest of the funds, the legal and financial documents
attesting to the availability of such funds must be well prepared, since
any failure to elaborate and submit these documents in the requested
format would lead to the rejection of the file and to the impossibility
of the applicant to further pursue the project.
Of course, obtaining a credit, a loan or even state aid to cover the
rest of the needed funds would require the preparation and submission of
even more documents, both legal and financial, and that is why
applicants for such financial programs usually resort to specialized
legal and financial advice and counseling, in order to be certain that
they would not face any risks in having their access to such funding
blocked. Needless to say, any applicant for funds provided under an EU
financing scheme is interested in obtaining the respective funds as soon
as possible, so as to be able to initiate the project and obtain
profits. Therefore, any delay in providing the requested information or
documents or any blockage in the process to obtain the financing might
trigger substantial losses for the applicant.
Furthermore, regardless of the specific field of the project, or of the
determined eligibility criteria for the applicant, the latter must pay
close attention to the financing agreement to be concluded in order to
obtain the requested funds. Such funds will be provided only based on
this financing agreement concluded with the competent authority, and any
non-compliance with the obligations undertaken by the beneficiary
through this agreement may trigger its liability, sometimes leading to
the obligation to pay large penalties, or even to the obligation to
reimburse the funds it had received. Therefore, even if the funds
provided under the EU financing schemes may be just the solution for
individuals or companies in need of financial resources, this could
easily turn into a burden difficult to overcome if the respective
individual or legal entity does not approach this alternative
responsibly.
As previously mentioned, this article does not provide an exhaustive
presentation of the financing schemes currently available at the EU
level, since its purpose is only to attract investors’ attention to this
particular alternative financing solution. There are, however, specific
areas of activity which are considered as core activities in the EU
member state economies and, consequently, there are many financial
schemes available for those particular fields. |
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Particular Funding Schemes |
Schemes in the Energy Field
A very significant industry which has been increasingly attractive to
investors is the energy field. The importance of this industry to the
economy has also been acknowledged at the EU level, and, consequently,
specific financing schemes have been set up for this particular area.
 For
instance, a financing program is currently available for large
undertakings and for SMEs, to increase energy efficiency, i.e.,
investing in facilities and equipment specific to companies active in
this industry in order to ensure the production, transportation,
distribution and supply of electricity, as well as investing in highly
efficient cogeneration capacities.
This financing program covers expenses for buildings and facilities;
expenses for technological and functional equipment; expenses for gear
fitting; intangible assets purchase, such as software, patents,
licenses, and know-how.
The financing under this program may be for as much as approximately €
9,523,800 and up to approximately € 19,047,619 in case of investments
made in highly efficient cogeneration capacities. The projects for which
financing is available under this scheme may have a maximum value of
€50,000,000. However, in cases utilizing this financing scheme, there a
co-financing requirement and, consequently, the interested applicant
must carefully observe the specific applicable conditions. The next
estimated call date for submissions for this scheme is November, 2010.
Schemes in the Production Field
Another area which may represent a good business opportunity is
production. The beneficiaries for such a grant are SMEs, and the
following activities may be financed: creating a new production unit;
expanding an existing unit so that production is increased; diversifying
the production of an existing facility by launching new products or
services; the modernization of a company; purchase of intangible assets;
or consultancy and specialized training.
Under these projects, the basic activity which may receive financing is
the acquisition of property. Even though such a transaction may seem
easy to conclude, close attention should be paid to it, especially in
cases involving the acquisition of land where there are specific
legislative provisions which must be rigorously observed. Moreover, in
cases involving the acquisition of intangible assets, compliance with
intellectual property legislation is required.
There are two estimated call dates for submissions under this scheme
during this year, i.e. July and September 2010.
Schemes in the Field of Transportation
Many investors have tried over the past years to develop public-private
partnerships in order to use the respective funds for the development of
infrastructure projects. At this point, such investors may also attempt
to obtain funds provided under EU financing schemes in order to develop
various infrastructure projects. However, as in all the other cases, the
specific eligibility conditions, as well as provisions regarding the
specific activities which may be financed, must be very closely
observed.
Schemes in the Field of Agriculture
Another area of great importance in Romania which should bring about the
revival of significant rural projects is agriculture. Perhaps this is
the reason why there is a large variety of financing schemes available
in this field. In this context, it is important for an individual or
legal entity intending to obtain funds to develop projects in the
agricultural field, to analyze carefully all the available financial
schemes to find out which one is the most appropriate in terms of
eligibility conditions to the applicant or the activities to be
financed.
For instance, even if available in the field of agriculture, there are
specific financing programs which provide funding for tourism projects
to be developed in rural areas. Consequently, in such instances, any
interested individual or legal entity potentially seeking to obtain
funds available under such a program must analyze the specific
eligibility criteria for the applicant.
Schemes in the Field of Human Resources
Another important industry for which funds may be provided under EU
financing schemes is the human resources field. In difficult economic
times when unemployment is skyrocketing, such funds allow companies to
maintain the staff they need for the development of their activity and
properly train them in new areas to help relieve a company’s economic
distress.
At this point, EU is trying to provide the necessary protection both to
individuals, as well as to companies, by providing finance for SMEs and
large companies which are hiring new employees. For instance, there is
such a financing scheme which covers the costs corresponding to
mentorship programs for entry level employees, and there is also another
financing scheme which covers the salary costs for new employees, and
also for newly employed persons coming from rural areas. That way, EU
institutions and bodies seek to offer the necessary protection for
unemployed persons, for persons coming from underprivileged conditions,
such as rural areas, and also for the companies that are hiring these
persons, since the protection provided to individuals facing social and
economic problems is a paramount concern to any nation.
Schemes in the Field of Innovation and Eco-efficiency, Research and
Development, IT&C
There is a number of EU funding programs for projects to be developed in
many fields which may be turned into more specific projects like
research, development or innovation services; purchasing software,
patents, licenses, know-how; purchasing publications, subscriptions and
paying membership fees; purchasing software applications or information
technology and communications equipment; participation at industry
fairs, international exhibitions and economic missions; and services
regarding the promotion on new internal market or on international
markets.
Schemes in the Environmental Field
Recent changes in climate, melting glaciers and the horrendous oil
disaster in the Gulf of Mexico have turned people’s attention to
environmental issues. Governments have come to understand that no new
economic activity should be developed unless there is strict compliance
with environmental protection laws. That is why EU financing schemes
provide various options for companies active in environmental
protection.
For instance, EU financing schemes are available for projects regarding
waste management; extension and modernization of water systems;
rehabilitation of polluted areas; and implementation of the adequate
management systems for environmental protection. |
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Conclusions |
 EU
funds are available and this is a fact. Individuals and legal entities
should be aware that this is not a far-away dream, but a viable option
which can be turned into reality. Despite firms in Romania with the
expertise to counsel clients regarding available EU financing programs,
few potential applicants resort to them and when they do, it is often
too late and the damage has already been done. Many potential applicants
do not take the time to prepare well the files they need to submit to
the competent authority. Even worse, many of those who were lucky enough
to receive EU funds do not treat the implementation of the projects very
seriously, and they find themselves in the untenable situation of having
to reimburse the funds received and the corresponding penalties.
EU funds are available – and they may just be the solution for the
financing needs of many companies and individuals – but only for those
who are willing to treat this opportunity seriously and professionally. |
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Editors Note: It is our policy not to mention our clients by name in
The Romanian Digest™ or discuss their business unless it is a matter of
public record and our clients approve. The information herein is correct
to the best of our knowledge and belief at press time. Specific advice
should be sought from us, however, before investment or other decisions
are made.
Copyright 2010 Rubin Meyer Doru & Trandafir, societate civila de avocati.
All rights reserved. No part of The Romanian Digest™ may be reproduced,
reused or redistributed in any form without prior written permission
from the publisher.
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RUBIN MEYER DORU & TRANDAFIR
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VISIT OUR WEB SITE:
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