II Guarantee Scheme as a measure of additional...
II Guarantee Scheme as a measure of additional support to the economy due to the prolonged negative impact of the COVID-19 pandemic
The Assembly of Serbia on April 22nd, 2021 three laws for the implementation of the third package of assistance to citizens and the economy to mitigate the consequences of the corona virus pandemic.
To revert back - on April 16, 2020, the Law on Determining the Guarantee Scheme was adopted as a measure of support to the economy for mitigating the consequences of the pandemic, which includes an incentive for banks to support companies in the form of loans. One of the three newly adopted laws is the Amendments to the Law on Determining the Guarantee Scheme as a measure of support to the economy for mitigating the consequences of the pandemic, which concern changes in the repayment period of the already established scheme.
In addition to the existing amendments, the Law on Determining the Second Guarantee Scheme was adopted as a measure of additional support to the economy due to the prolonged negative impact of the pandemic and as a follow up to the successful implementation of the last scheme.
I CONDITIONS, GUARANTEE PROCEDURE
The Republic of Serbia undertakes the obligation set by law to settle, as a guarantor, the claims of banks arising on the basis of approved loans for financing the liquidity of working capital for crediting the economy due to the prolonged negative impact of the pandemic. The funds in the budget necessary for the fulfilment of the obligations undertaken on the basis of the guarantee will be provided in the planned maximum amount of the guarantee at the level of the secured portfolio of 128 million euros.
The Republic of Serbia, the National Bank of Serbia and individual banks will conclude individual guarantee agreements which will specify the conditions under which loans can be provided, mechanisms for increasing, mechanisms for including and excluding loans from the secured portfolio, guarantee period and other important issues. By concluding the contract, it is considered that the Republic of Serbia has issued an Individual Guarantee.
The guarantee provides loans to finance liquidity and working capital. Such loans can also be used to refinance and for early repayment of instalments of existing liquidity and working capital loans, but they cannot be used to finance loans with other banks. Also, the condition that the loan must meet in order to be secured by the guarantee is that the repayment period is up to 60 months from the loan disbursement, which includes a grace period of 18 to 24 months from the date of the loan disbursement, except in the case of a moratorium and / or other facilities introduced by the regulations of the National Bank of Serbia in order to mitigate the consequences of the pandemic.
II WHO CAN (NOT) BE A BENEFICIARY OF A LOAN SECURED BY THE GUARANTEE FROM THE GUARANTEE SCHEME
The new guarantee scheme is intended for the more endangered category of companies, i.e. primarily for those who in 2020 had a drop in operating revenues of more than 20% compared to 2019. The law provides enumerates persons who can be the beneficiaries of such guaranteed for loan:
1) a person with a registered office in the Republic of Serbia, including agricultural holdings, registered with the Business Registers Agency and classified as an entrepreneur, or a micro, small or medium-sized company in accordance with the law governing accounting, as well as another person not registered in the Business Registers Agency, and has officially published financial reports and is classified as an entrepreneur, or micro, small and medium enterprise in accordance with the law governing accounting;
2) a person with a registered office in the Republic of Serbia, who is registered with the Business Registers Agency, and who has a decrease in operating income of more than 20% in 2020 compared to the same period in 2019 (and does not apply to micro, small and medium-sized enterprises operating in the sectors of passenger transport, catering, travel agencies and hotels in cities);
3) a person to whom a new loan or a loan for refinancing an existing loan has been approved in accordance with the bank's credit policy, for which the Republic of Serbia may guarantee to the bank in accordance with this Law.
Also, persons who cannot be credit users are listed exhaustively:
1) Persons who were in difficulties on December 31st 2019 and persons who are in the status of non-payment of obligations in terms of the regulations of the National Bank of Serbia on 29 February 2020;
2) Persons who have due but unpaid tax liabilities in the Republic of Serbia;
3) Persons in which the Republic of Serbia, an autonomous province or a unit of local self-government has a share in the ownership of over 50%;
4) Users whose debts were in the status of non-performance or to whom the bank undertook restructuring measures in the period of 12 months before February 29th 2020, in accordance with the definition of non-performance status according to the regulations of the National Bank of Serbia, i.e. restructured receivables which regulate the classification of balance sheet assets and off-balance sheet items of banks;
5) Companies subject to consensual financial restructuring in terms of the Law on Consensual Financial Restructuring ("Official Gazette of RS", No. 89/15), which are subject to proceedings in terms of the Law on Bankruptcy ("Official Gazette of RS" 09, 99/11-dr. Zakon, 71/12-US, 83/14, 113/17, 44/18 and 95/18) (previous bankruptcy proceedings, bankruptcy, reorganization) and over which the procedure of compulsory liquidation is being conducted according to the Law on Companies ("Official Gazette of RS", no. 36/11, 99/11, 83/14-other law, 5/15, 44/18, 95/18 and 91/19).
The Republic of Serbia is trying to provide additional reliefs for further uninterrupted business operations of economic entities, despite various obstacles caused by the prolonged duration of the pandemic. According to the latest records, banks have approved an amount of 1.7 billion euros in loans under the already existing guarantee scheme.
Detailed conditions and necessary documentation necessary for obtaining a loan in accordance with the guarantee scheme will likely soon be published on individual bank’s websites.