ACT No. XX of 1997 AN ACT to encourage the establishment of new small enterprises and the expansion of existing ones through the provision of loan guarantees by the Malta Developmelll Corporation.

I assent.

Ugo M IFSUD B ONN ICI

(LS.)

Presidem

5th August, 1997

ACT No. XX of 1997

AN ACT to encourage the establishment of new small enterprises and

the expansion of existing ones through the provision of loan

guarantees by the Malta Developmelll Corporation.

BE IT ENACTED by the President. by and with the advice and

consent of the House of Representatives, in this present Parliament

assembled . and by the authority of the same, as fol lows: -

This Act may be cited as the Sma!! Enterprises (Loan

Guarantee) Act. 1997 and shall come into force on such date as the

Min ister responsible for industry may by notice in the Gazette

establish.

In lhi .~ Act unles~ the context or ~ubject otherwise requires:-

"authorised bank·· means a commercial bank aUlhorised

by the Corporation to de termine applications for assisted loans

considered to be eligible by the Corporation in terms of this

Act

"person" means any sol e trad er or any commercial

partnership constituted under the Commercial Partnerships

O rdinance or the Compan ies Act. 1995 or any co_operative

society duly regiSlered as such under the appropriate law for

the time being in force in Malta

"Corporation" means the Malta Development Corporation Cop. 262.

established under the Malta Development Corporation Act

"assisted loan" means a loan granted by an authorised bank

in tenns of this Act and the repaymen t of which loan is paniall y

guaranteed by the Corporation;

"Minister" means the minister responsible for industry;

"small enterprise" means a person'employing between one

to ten persons (including the employer) who owns or operates

plant and machi nery or equipment the net value of which does

not e;(ceed the sum of Lm80,Ooo and whose annual turnover

does not e;(ceed the sum of Lm250,Ooo or such othcr number

of persons, net value of plant , ma<:hinery or equipment, or any

other amount of annual tu rno vcr as the Minister may by notice

in the Gazctte prescribe

Provided that groups of companies. pannerships or sole

businesses with the same ownership or control shall be

considered as one enterprise for the purposes of this. Act; and

"qualifying activity" means an activity which in the opinion

of the Corporation consists of a trade, craft or business whic h

consists ei ther in the manu facture. improvement. assembly,

processing, repair, preservation or maintenance of any goods,

mate ri als or co mmodities in clud ing computer soft ware

development, agro-industry and aquaculture, or servici ng of

equipment, plant or machinery in relation to the manufacturing

industry or any other service designated as such by the Minister

by notice to be published in the Gazette ,

( I) A sma!! enterprise carryi ng on or carrying out, or Q •• lifyi"l . m.1I

intending to carryon or carry out in Malta a qualifying activity, enterprise.

which fails to obtain a conventional loan from an authorised bank

for lack of adequate security or business track record, may be

considered by the Corporation to be eligible for an assisted loan in

terms of this Ac!.

(2) An application for an assisted loan shall only be

considered by the corporation and may only be approved by an

authorised bank if it is intended exclusively forbusiness purposes which

shall include project development, starti ng up a business, business

expansions and efficiency improvement including research and

development, purchase of stocks and raw material and shall not be

considered or approved if it is in tended for the replacement of el(isting

banking facilities, financing of interest payments. the acquisition of.

compa ny's shares or the buying out of the members of a partnership.

The Corporation will not co nsider an application as

(3)

eligible if the loan can be OIherwise adequately secured by personal

assets or personal guaral1tees.

(I) An autho ri sed bank may on ly assess and approve

applications for assisted loans if they have been considered eligible

by the Corporation .

(2) A small enterprise applying for an assisted loan shall

together wi th the loan application submillO the Corporation and the

authorised bank a business plan and any finaneial forecasts th at may be

req uired by the Corporation or the authorised bank in order to assess

the commercial viability of the project and identify the quantum of the

assisted loan .

(3) The authorised bank shall prior to the approval of an

assisted Joan under this Act be sat isfied that conventional finance would

ha\'e otherwise been granted wen: it not forthe lack of adequatesecurilY.

Notwithstnnding the provisions of this sec tion a small

(4)

enterprise qualifying for an assisted Joan may still be required by the

authorised ban k 10 pJedge or hypothecate ils movable or immovable

property in security of Ihe schemc loan . in which case such pledge or

hypothec sha!] apply for the whol e amount of the assisted loan and not

only for that part orlhe loan which is not covcred by the Corporation's

guarantee.

(I) Assisted loans under this Act may not ex.ceed the

max imum limit of twenty one thousand Malia Liri (l m21 ,000) or

such othe r maximum limit which the Minister may by notice in the

Gazette presc ribe.

(2) A small enterprise may benefit from se\'eraJ assisted

loans under this Act provided Ihac the total indebtedness under such

loan or Other ban king facilities shnll not exceed the maximum limit of

twenty one thousand MalIa liri (l m2I.ooo) or such othe r maximum

limit which the Minister may by notice in Ihe Gv..ette prescribe.

6, The tenn or any assisted loan shall be for a maximum period T .... of, ...

of five years from the date of the grant of the respective loan.

' ....... Iff.

7, (I) The Corporation's guarantee exposure regardi ng an E"n' of ...

• __ .,te.

assisted loan, shall not exceed at any moment in time sixty per centum

orthe total outstanding loan balance due to the authorised bank which

shall not exceed the sum of six thousand Malta Liri (Lm6.ooo)

Provided that in the case of an ass isted loan gran ted to a

small enterprise whic h hal; 1x::en established for at least three years,

tlte Corporatioll's guarantee exposure may be 'inc rcased to seventy

per centum of the total outstanding loan balance due at any moment

in lime to the aut horised bank which shall not e1l.ceed the sum of

seven thousand Malta Li ri (Lm7,ooo).

(2) The Corporation's guarantee of the repayment of an

assisted loan shall be subsidiary to the principal liabili ty of the small

enterprise to whom an assisted loan has been granted.

8, In case a small enterpri se to whom an assisted loan has In l<Jl" ""yoflho

been granted is in a Slate of insolvency or has been declared bankrupt cn,crpr;lC.

and such an enterprise lacks s uffi cient funds to pay the total

outstand ing balance of an ass isted loan, any funds available fo r the

repayment o f the assisted loan shall be applied in the same proportion

as Ihe Corporation's guarantee exposure bears to the exposure of

the authorised bank.

9, A small enterprise to whom an assisted loan is gran ted by 1 ... _, prcmr.",.

an authorised bank, shall pay to the Corporation a premi um of 0 .1%

per an num on that part of the outstanding loan balance guaranteed

by the Corporation

Provided that notwi thstanding the authorised bank's right to

charge an interest rate below the market rate or to grant a moratorium

period for the repayment of capita! or inte rest, the payment of the

premium of 0 .1% per annum on that part of the o utstanding loan

balance guaranteed by the Corporation shall in any case be due to

the Corporation;

Provided further that no mo ratorium granted by an aut horised

bank may increase the tenns of the loan beyond a period of five

years.

A small enterprise qualifying for an assisted loan shall

(a) furnish to the Corporation and the authorised bank

on a silt monthly basis such information, accounts, statements

and other documents which the Corporation or the authorised

bank may deem to be necessary for the purpose of this Act

(b) provide the Corporation and the authorised bank with

reasonable access to all premises, places, books and other

documents, and allow copies to be made for the purposes of

this Ac t.

II. (I) Notwithstanding an ything contained in the foregoing

provisions of this Act. the Corporation shall have the right to declare

not eligible any application under this Act.

(2) Notwithstanding anything contained in the foregoing

provisions of this Act, authorised banks shall have the right to refuse

any application under this Act even if declared eligible by the

Corporation.

Passed by the House of Representatives at Sitling No.1 13

of Wednesday, 30th July, 1997.

Myriam Spiteri Debono

Speaker

R ICHARD 1. CA UCHI

Clerk to the /IOllst of RepreJellfat;w:r.