Court orders suspension of bank programme

 In Development banks, News, SME, Start-Up, Venture Capital

Court orders suspension of bank programme

A programme involving the management of €500 million in funds destined for SMEs – ‘Programa Consolidar’ (Consolidate Programme) – has been suspended by the order of the Administrative and Fiscal Court in Sintra.

At issue is an injunction served by one of the venture capital companies – Menlo Capital – which was excluded in the selection process for 14 VCs (from a total of 33) to manage €500 million in funds.
Portugal’s development bank is charged with the responsibility of overseeing the channelling EU RRP funding to SMEs and MIDCAPS that have applied for EU bazooka funding under the programme Consolidar.
Menlo Capital claims it was “prejudiced” in the selection process and the court accepted the injunction “outright” whereby a request was made for the “suspension of the effectiveness of the administrative act” and the “effectiveness of the decision” determining the rejection (non-selection) of its candidacy, as well as the “decision/decisions of the selection of the candidacies” from the 14 venture capital (entities) to do with the Programa Consolidar, as well as all the agreements, contracts, protocols, or similar instruments already signed by the Banco de Fomento in this case.
The Consolidar programme, financed by the Capitalisation and Resilience Fund, foresees that the venture capital companies selected guarantee the subscription of funds with a minimum endowment of €40 million each. Furthermore, the investment in venture capital funds to be subscribed should be “obligatorily accompanied by private investment, with a co-participation of at least 30% of the total capital of each fund.
Menlo sought to exercise its right to a prior hearing because its candidacy was considered eligible but was excluded because there was not a “sufficient endowment” in the Capitalisation and Resilience Fund.
Consolidar even had a further endowment bringing funds from €250 million to €500 million. Menlo wanted to see the list of candidates and candidacies and other reports and documents, but the Banco de Fomento said that it could not satisfy the request because it dealt with “information subject to commercial or industrial secrecy or to do with the internal affairs of third party companies”.

The Banco de Fomento now has 15 days dating from 7 December to prove that “the deferment in the execution would be seriously prejudicial to the public interest”.
But the court considered that the development bank led by Celeste Hagatong did not prove how the dissemination of this data “could conflict with the legally held interests by such secrets”. It therefore decided in favour of Menlo and obliged the Banco de Fomento to supply the data within 10 days.
Banco Português de Fomento (BPF) is a Portuguese promotional bank, an institution resulting from the merger in November 2020 of three leading institutions operating within the mission of supporting Portuguese SMEs that aim to achieve innovative solutions for national and international projects, promote sustainability and economic development.

BPF is expected to enlarge the activities of its three merging entities (SPGM, PME Investimentos and IFD), focusing its activities on five key areas of the Portuguese economy:

Financing SMEs: Specifically SMEs and mid-caps, but also large corporations under specific circumstances;

Innovation Projects: Digital transformation, entrepreneurship and innovation;                                    
Green Finance: Sustainable infrastructures, transport, carbon neutrality;

Social Impact: Healthcare, long-term care, education and social housing;
Infrastructure: National and local investment projects.

The first above mentioned activity will continue being done through the Portuguese Guarantee Scheme, which includes four mutual guarantee societies and a public counter guarantee fund, the latter being managed by BPF itself.

It is expected that BPF will reach its main goals to:

Support economic development by offering innovative solutions under the same conditions as those offered by leading institutions on the international market;  

Promote the modernisation of companies, enabling entrepreneurship, research and investigation, investment and job creation; 

To promote business sustainability and economic, social and territorial cohesion in Portugal.