Brussels, 19/07/2006 (Agence Europe) - The European Commission has adopted guidelines to determine when state aid to support capital risk investment in small and medium-sized enterprises (SMEs) can be authorised. These guidelines replace the rules provided for in the 2001 communication “State aid and Capital Investment”. They cover risk capital measures for investment in SMEs which are in the early stages of development (seed, start-up and expansion), where funding is provided jointly by the state and private investors. “It is often costly to find the information and to follow investments, particularly small investments in small companies at the start-up phase,” a Commission expert told press on Wednesday. The guidelines provide for an important modification to the 2001 communication: setting up a safety threshold of €1.5 million per SME over a period of 12 months, a 50% increase in the previous threshold. For these cases, the Commission considers that alternative means of funding from financial markets are lacking (i.e. market failure). Above this threshold, because of the greater potential to distort competition, the Commission will make a detailed assessment: Member States will then have to provide evidence of a market failure.
There is a light procedure for measures fulfilling all the following conditions: - investments below €1.5 in an SME over a 12-month period; - finance up to the expansion stage for small enterprises and for medium-sized enterprises in assisted areas, and up to the start-up stage for medium-sized enterprises in non-assisted areas; - at least 70% of the budget must be used to provide equity or quasi-equity instruments as opposed to debt instruments; - participation by private investors must be at least 50% in non-assisted areas and 30% in assisted areas; - investment decisions must be profit-driven; - the management of the fund must follow a commercial logic. A detailed assessment will be made for a series of other measures (details are available on: http: //ec.europa.eu/comm/competition/state_aid/overview/sar.html).
This initiative is part of the “State aid Action Plan” announced in 2005 to encourage Member States to focus their State aid on areas likely to improve the competitiveness of EU industry and enhance the creation of sustainable jobs, particularly where alternative means of funding from financial markets were lacking, stressed the Commission.