The Tánaiste and Minister for Finance, Brian Cowen T.D.

The Tánaiste and Minister for Finance, Brian Cowen T.D., announced today that State aid approval has now been received from the European Commission for the extension and amendment of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS).

The Tánaiste and Minister for Finance, Brian Cowen, announced the extension of the two schemes in last December's budget for a further seven years to assist small firms raise investment. He also increased the amount of money that firms can raise through the scheme to €2 million, up from the previous limit of €1 million. The higher limit is subject to a maximum of €1.5 million being raised in any one 12-month period.

The Irish Congress of Trade Unions (Ictu) lodged an objection with the Commission, claiming that the two schemes constituted illegal State aid as investors get tax breaks for putting their cash into scheme funds.

The Commission has imposed a number of conditions, which means that companies in counties Dublin, Meath, Kildare and Wicklow will qualify only for seed capital or as start-ups. Existing businesses must be in EU "assisted areas", which effectively means the other 22 counties in the Republic.

Companies which raise funds under either the BES or Seed Capital Scheme will see the amount offset against most other State aid eligibility.

The Tánaiste said “all of the studies carried out on these schemes, including the review carried out by my Department prior to the Budget last year, have shown that there is a strong business case for continuation of these schemes.  It is clear that businesses, particularly small and start-up companies, often experience difficulty in accessing early stage development capital.  I am delighted to have secured the necessary approval from the European Commission under State aid rules.  It is generally recognised that there is a shortage of such finance in the pre and early start up phases of new enterprises.  The BES and the SCS will continue to play an important role in helping bridge this financial gap for such businesses.  The importance of these schemes is further reflected in our continued commitment to them in the agreed Programme for Government.

The extension of these schemes will encourage further enterprise, incentivise innovation and promote competitiveness in Irish industry.  They will help position our businesses for long-term success.

Many of the firms using BES are small to medium-sized manufacturing companies operating in various parts of the country. They make a vital contribution to job creation and to maintaining our competitiveness.”

The Tánaiste noted that the approval received, after a careful and professional examination by the Commission, is subject to a number of conditions and a small number of amendments to the legislative provisions governing the schemes will be necessary.  The Minister intends to bring forward shortly the necessary amending provisions.  Full details will be set out in a Regulation but the changes will provide essentially that as and from 1 January 2007:

Medium-sized enterprises may qualify if they are located in assisted areas (currently includes all counties except Dublin, Meath, Kildare and Wicklow, as defined under EU State aid guidelines).  In non-assisted areas (currently counties Dublin, Meath, Kildare and Wicklow) they may qualify where they are in seed or start-up phase only. 

In order to comply with EU rules on the cumulation of State aids, a company that raises finance under the BES and/or the SCS will have the level of other State aids affected (with the exception of grants for research and development).

The Tánaiste said that “These EU conditions should not significantly hinder the overall contribution of the BES scheme to economic development and employment.”

Minister for Enterprise, Trade and Employment, Micheál Martin T.D. also welcomed the announcement today that State-aid approval has now been received from the European Commission for the extension and amendment of the Business Expansion Scheme (BES) and the Seed Capital Scheme (SCS).

Minister Micheál Martin said today: "I am delighted that we have secured the necessary approval from the European Commission under State-aid rules for the expanded BES/SCS schemes. The BES and the SCS play an important role in helping bridge the financial gap for businesses in the pre and early start up phases of new enterprises. The approval reflects my commitment to ensure that the recommendations of the Small Business Forum on this issue were implemented. The importance of these schemes is further reflected in this Government’s continued commitment to them in the agreed Programme for Government."

The Minister continued: "Small to medium-sized manufacturing make a vital contribution to job creation and to maintaining our competitiveness. The extension of these schemes will encourage further enterprise, incentivise innovation and promote competitiveness in Irish industry. They will help position our businesses for long-term success".

The Minister also welcomed the Tánaiste Brian Cowen's intention to bring forward shortly the necessary legislative provisions to give effect to this State-aid approval.

Finally, the Minister noted that, "the expansion of the BES/SCS schemes is one of a number of measures which we are implementing to promote and support small businesses which employ almost 800,000 people in Ireland."