COUNCIL DECISION of 19 May 1998 on measures of financial assistance for innovative and job-creating small and medium-sized enterprises (SMEs) - the growth and employment initiative (98/347/EC)
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and in particular Article 130(3) thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the Economic and Social Committee (3),
Having regard to the opinion of the Committee of the Regions (4),
(1) Whereas the European Council, meeting in Amsterdam on 16 and 17 June 1997, in the context of measures for the alleviation of unemployment, invited the European Investment Bank (EIB) and the European Investment Fund (EIF), inter alia, to develop a facility to provide venture capital for high-technology projects of SMEs and by so doing, acknowledged, not only the link between SMEs, innovation and technology, and new jobs, but also the role of risk-capital in underpinning job-creation;
(2) Whereas the European Special Council on Employment, meeting in Luxembourg on 20 and 21 November 1997, welcomed the European Parliament's Growth and Employment Initiative, providing for the strengthening of budgetary resources earmarked for employment; whereas in its decision on the 1998 budget, the European Parliament in agreement with the Council created a new heading B5-5 (Labour market and technological innovation) for the financing with ECU 450 million over three years (1998 to 2000) of SMEs and of innovative actions and projects in the labour market; whereas, within this, ECU 30 million has been allocated in 1998 for innovative actions and projects in the labour market; whereas the European Council invited the Commission to make proposals, as soon as possible, for new financial instruments to support innovative and job-creating SMEs, as part of this initiative, so that the Council can adopt them speedily; whereas these new instruments must reinforce the European Technology Facility, financed by the European Investment Bank and administered by the European Investment Fund, by opening a 'risk capital window`, supporting the creation of transnational joint ventures between SMEs within the European Union and establishing within the European Investment Fund a special guarantee fund to facilitate risk-taking by institutions providing finance for small and medium-sized enterprises;
(3) Whereas the EIB and EIF have already responded by creating the European Technology Facility (ETF), which will provide venture-capital for technology oriented SMEs by using established venture-capital funds as intermediaries;
(4) Whereas, on 9 December 1996, the Council adopted Decision 97/15/EC on a third multiannual programme for small and medium enterprises (SMEs) in the European Union (1997 to 2000) (5); whereas this programme includes the objectives of improving access to loan and risk capital financing, facilitating the development of specific financial instruments and stimulating the development of capital markets for fast-growing SMEs;
(5) Whereas, on 5 November 1997, the Commission adopted Decision 97/761/EC approving a support mechanism for the creation of transnational joint ventures for SMEs in the Community (6), a financially limited initiative launched under the third multiannual programme for SMEs;
(6) Whereas, on 15 December 1994, the Council adopted Decision 94/917/EC, adopting a specific programme for the dissemination and optimisation of the results of activities in the field of research and technological development, including demonstration (1994 to 1998) (7) which provides for activities to improve the European environment for financing the exploitation, adaptation and dissemination of technology by appropriate Community schemes; whereas the Commission on 25 November 1996 adopted a communication on the 'First action plan for innovation in Europe - innovation for growth and employment` providing for innovation financing to be facilitated in Europe, especially by encouraging investment in risk capital and equity, particularly in start-up investment and innovative, high-growth firms which are a major source of new jobs, and by reinforcing European Investment Fund action in favour of innovation; whereas this Decision should be implemented in appropriate coordination with the abovementioned activities;
(7) Whereas in the implementation on the financial assistance programme for SMEs under this programme, particular attention should be given to small enterprises with up to 100 employees, within the objectives of the programme;
(8) Whereas the lack of venture capital constitutes a particular difficulty for new firms and SMEs looking to expand, especially those exploiting new technology and innovative ideas; whereas this segment of the venture-capital market is underdeveloped in Europe and entails the highest risks which potentially translate to high losses; whereas a determined public sector involvement will assist private sector operators to make onward investments to early stage and emerging SMEs;
(9) Whereas SMEs frequently encounter difficulties in obtaining bank financing for the development of transnational joint ventures because of the higher risk for financial institutions; whereas the development of joint ventures between Community SMEs makes it possible to make better use of the opportunities of the internal market, to increase investment and trade and to have a positive effect on employment and economic growth; whereas advances and subsidies constitute the most suitable measure to overcome the financial obstacles for SMEs to create transnational joint ventures;
(10) Whereas bank loans constitute an important source of external funding for SMEs; whereas the raising of debt finance is difficult for SMEs as banks are often reluctant to lend to them; whereas loans are often only available to SMEs against tangible security; whereas loan guarantees constitute a cost-effective instrument to facilitate access to loans; whereas both tangible and intangible investments should be eligible under the scheme; and whereas a significant leverage effect can be achieved with a guarantee instrument;
(11) Whereas this Decision constitutes the legal basis for specific measures which are complementary with other Community measures and which cannot be better carried out at Member State level and therefore respect the principle of subsidiarity; whereas the Decision is limited to the minimum necessary to achieve its objectives and does not exceed what is necessary to this end and therefore respects the principle of proportionality;
(12) Whereas the Commission should adapt the allocation to the different schemes over the three-year period to take account of their absorption and efficiency in terms of the quality of the prospects submitted, their impact on the access to financing by SMEs and their immediate and long term impact on creating sustainable jobs;
(13) Whereas the definition of SMEs as set out in Commission Recommendation 96/280/EC of 3 April 1996 concerning the definition of small and medium-sized enterprises (8) should be applied in the implementation of this Decision;
(14) Whereas the EIF was set up in June 1994 to contribute to the pursuit of Community objectives by stimulating investment in trans-European networks and small and medium-sized enterprises; whereas the Community has become a member of the EIF by virtue of Council Decision 94/375/EC (9); whereas the Fund is empowered to issue loan guarantees and to make equity investments according to its Statute;
(15) Whereas the cooperation agreements between the Commission and the EIF mentioned in Articles 3 and 5 should take account of the need to secure wide dissemination of information concerning the schemes;
(16) Whereas the EIF has indicated its willingness to participate in the implementation of the ETF start-up and the SME guarantee facility schemes under this Decision; whereas the EIF in the implementation of the ETF start-up facility should endeavour to ensure the maximum appropriate private sector venture capital involvement;
(17) Whereas the intermediary financial institutions should be selected in an open and transparent manner;
(18) Whereas the Joint European Venture (JEV) scheme will be administered by the Commission in accordance with its Decision 97/761/EC;
(19) Whereas the measures financed by the EIB and the EIF do not fall under the provisions of the Treaty on State aid; whereas those measures, if they have effected on beneficiary SMEs comparable to those arising from State aid, have to observe the limits and conditions laid down for the compatibility of comparable State aid,
HAS DECIDED AS FOLLOWS:
Article 1
Objective of the programme
A programme of financial assistance for innovatory and job-creating small and medium-sized enterprises is hereby set up with the aim of stimulating job-creation by facilitating and strengthening the establishment and growth of innovative SMEs (hereinafter 'the programme`) as defined in Commission Recommendation 96/280/EC, by supporting their investment activity through increased availability of finance. The programme shall be targeted at SMEs with growth and therefore employment creation potential.
Article 2
Description of the programme
The programme shall consist of three complementary facilities which shall be: a risk-capital scheme (ETF Start-up) managed by the European Investment Fund (EIF), a scheme for financial contributions supporting the creation of transnational joint-ventures by SMEs within the Community (Joint European Venture) managed by the Commission and a guarantee scheme (SME Guarantee Facility) managed by the EIF.
Article 3
The ETF start-up facility
1. The Community shall provide risk-capital participation in SMEs primarily at their establishment and early stages and/or innovative SMEs through investments in relevant specialised venture-capital funds, where appropriate in cooperation with other participatory mechanisms established in Member States, particularly in smaller or newly established funds, funds operating regionally or funds focused on specific industries or technologies, or venture-capital funds financing the exploitation of R& D results, e.g. funds linked to research centres and science parks, avoiding duplication of existing EIB and EIF interventions and reduction of the risk on these instruments.
2. The EIF shall select, make and manage the investments into the venture-capital funds, where appropriate working with national schemes. The detailed terms and conditions for implementing the ETF start-up facility, including its monitoring and control, shall be laid down in a cooperation agreement between the Commission and the EIF.
3. The cooperation agreement shall take account of the indicative outline set out in Annex I.
Article 4
Joint European Venture (JEV)
1. The Community shall provide financial contributions to SMEs for the setting-up of new transnational joint ventures within the European Union. The Community contribution is intended to cover a part of the expenses incurred in the conception and setting-up of transnational joint ventures. The maximum contribution per project shall be ECU 100 000 covering:
(a) up to 50 % of the eligible expenses, with a maximum of ECU 50 000;
(b) up to 10 % of the total amount of investment made in fixed assets. Particular attention shall be given to small enterprises with up to 100 employees.
2. Eligible expenses for the purposes of point (a) of paragraph 1 shall be those essential expenses related to the conception and setting-up of a transnational joint venture defined in point 6 of Annex II and created by European SMEs.
3. Applications for contributions shall be channelled to the Commission through a network of finance intermediaries. In the implementation of the JEV, the indicative outline set out in Annex II shall be taken into account.
Article 5
The SME guarantee facility
1. The Community shall provide budgetary allocations for the purpose of covering the cost of guarantees and counter-guarantees issued by the EIF in order to promote an increase of loans to SMEs, by increasing the capacity of guarantee schemes operating in the Member States in the public or private sector, including mutual guarantee schemes; the scheme may also support any risk-sharing SME instruments the EIB or any other appropriate financial institutions may make available. Appropriate cooperation with Member States will be ensured by contacts between the EIF and national authorities before implementing the facility.
2. The budgetary allocation shall cover the full cost of the facility, including EIF's guarantee losses and any other eligible costs or expenses of the facility. The cost of the facility to the Community budget shall be capped so that it does not under any circumstances exceed the budgetary allocations made available to the EIF under this action; there shall be no contingent liability on the Community budget.
3. Priority shall be given to small enterprises with up to 100 employees. The guarantees issued by the EIF shall be partial guarantees; there shall always be a risk-sharing arrangement between the EIF and the financial intermediary. Whenever possible, in the implementation of this instrument, the EIF will work guarantee schemes set up primarily to help finance loans that the banking system would not readily provide without guarantee cover and to ensure that part of the risk is borne by the lender.
4. The detailed terms and conditions for implementing the SME guarantee facility, including its monitoring and control, shall be laid down in a cooperation agreement between the Commission and the EIF.
5. The cooperation agreement shall take into account the indicative outline set out in Annex III.
Article 6
Management fees
The management fees paid to the EIF shall be determined in accordance with the accepted market practice and may be debited to the appropriations devoted to the initiative.
Article 7
Reporting and evaluation
1. The Commission shall report annually to the European Parliament and the Council on the implementation of this Decision and the different schemes under it, notably on this Decision's impact on the access to financing by SMEs, its immediate effects on the creation of employment, the prospects for the creation of employment in the long term and coherence between the financial allocation to the different schemes and the objectives of the programme.
2. The Commission shall within 48 months at most from the date of its adoption, provide an evaluation of the programme, notably as regards its overall utilisation, its immediate effects on the creation of employment and the prospects for the creation of employment in the long term.
Article 8
Final provision
Without prejudice to what is indicated in Annex I, point 5, Annex II, point 4 and Annex III, point 10, this programme shall come to an end on 31 December 2000.
Article 9
This Decision shall be published in the Official Journal of the European Communities. It shall take effect on the day of its publication.
Done at Brussels, 19 May 1998.