• The President of the Republic signed the legislation establishing the Cyprus Business Development Organisation, aimed at financing small and medium-sized enterprises and startups.

• The new organization will possess an initial state capital of 60 million euros and will fall under the supervision of the Ministry of Finance and the Central Bank.

• With an amendment passed, the criteria and conditions for granting loans and guarantees will be determined through regulations to be approved by Parliament.

• The seven-member board of directors will be appointed by the Council of Ministers, under strict transparency rules that exclude politically exposed persons and public servants.

• The establishment of the organization constitutes a key milestone of the national Recovery and Resilience Plan for the disbursement of the ninth installment to Cyprus.

Green light for the establishment and operation of the Cyprus Business Development Organisation (KOAE), a new legal entity under public law aimed at facilitating access to financing for small and medium-sized enterprises, startups, and self-employed individuals and filling financing market gaps, was given by the President of the Republic, Nikos Christodoulides.

Specifically, President Christodoulides proceeded last Friday to sign and publish in the Official Gazette of the Republic the bill recently passed unanimously by the House of Representatives, thereby completing the enactment of the relevant legislation and paving the way for procedures regarding the operation of the new organization to move forward.

The next step will be the appointment by the Council of Ministers of the president and members of the new Organisation, as well as the submission of Regulations by the government on the basis of which loans and guarantees will be granted by KOAE.

Tick on the RRP Milestone, but With Parliamentary Oversight

It is recalled that the Plenary of Parliament approved the creation of the new organization despite strong reactions expressed by MPs, as it is included among the obligations of the national Recovery and Resilience Plan and constitutes a milestone for the disbursement of the ninth and final installment of the plan, which provides both for the enactment of relevant legislation and the appointment of the organization's board of directors.

At the same time, however, the House of Representatives voted through a joint DISY–DIKO–ALMA amendment, which provides that the criteria and conditions for granting loans and guarantees by KOAE will be determined by regulations approved by Parliament.

It is worth mentioning that under the new legislation, KOAE is established as a national business development organization, with responsibilities that include drawing up financing schemes, providing loans, and conducting studies to identify weaknesses in the financing market.

Key Provisions of the New Law

The organization will be supervised by the Minister of Finance, while for issues regarding anti-money laundering, supervision will be exercised by the Central Bank of Cyprus.

The Republic will allocate initial capital amounting to €60m for the establishment and operation of KOAE, while subsequently, the organization will be able to cover its financing needs through its activities and borrowing from European and international organizations.

Based on the enacted legislation, however, the Organisation will be able to receive state guarantees for loans linked to approved strategic priorities.

It is further recalled that during the discussion of the bill, the Ministry of Finance submitted a revised text, incorporating suggestions from MPs and involved stakeholders.

Parliamentary Amendments to the Law

Among other things, the ability of KOAE to set up companies and assume additional powers through regulations was removed, while the scope of beneficiaries was restricted by deleting small mid-cap enterprises.

At the same time, corporate governance and transparency provisions were strengthened, with stricter rules regarding the suitability of board members, provisions to prevent conflicts of interest, and the exclusion of politically exposed persons and public servants from participating on the board of directors.

Provisions were also added for consultation with the State Aid Commissioner prior to issuing financing schemes, for submitting the organization's annual report to Parliament, and for setting performance indicators and a borrowing ceiling.

The board of directors of KOAE will consist of seven members appointed by the Council of Ministers, while a transitional board of directors with a two-year term is provided until the full operation of the organization.

Source: ink.com