The Ministry of Finance agreed to the appointment of an interim Board of Directors for the Cyprus Business Development Agency, with a term of up to 12 months, following a recommendation by the members of the Finance Committee at Monday’s meeting.

The creation of the organization is intended to address the financing gap faced by small and medium-sized enterprises and startups and is included in Cyprus’s Recovery and Resilience Plan (R&R Plan), with a deadline for implementation by the end of August to ensure that the relevant tranche from the Recovery and Resilience Facility is not forfeited. Part of this obligation, which is scheduled for completion by August 2026, is the appointment of the Agency’s Board of Directors.

Members of the Finance Committee have repeatedly expressed their dissatisfaction with the tight deadlines set for the review and passage of the bill. Among the changes they proposed—and which the Ministry agreed to—is that members of the Board of Directors must undergo the fit-and-proper process (to meet suitability and competence criteria), a process that takes time.

As a solution, AKEL MP Andreas Pasiourtides proposed the appointment of an interim Board of Directors without the fit-and-proper requirement, and the Committee members adopted the proposal, emphasizing that its term should be for a very limited period.

The Ministry of Finance agreed with the proposal, noting that the term of the interim Board should be at least 12 months.

The Finance Committee concluded its article-by-article debate on Monday, with Members of Parliament noting that they are still awaiting answers to a series of questions concerning even the very nature of the Organization, the fiscal cost of its operation, the sources from which it will draw funding, etc.

The Committee Chair, DIKO MP Christiana Erotokritou, asked the Ministry of Finance to provide written responses to the questions posed by MPs regarding the principle of the organization, noting that this organization can elevate a government, but if it is not managed with the utmost rigor, “it could become the political grave of a government.”

He also asked the Ministry of Finance to prepare the revised text as soon as possible, with the Committee set to meet again next Wednesday and the bill expected to be put to a vote in an extraordinary plenary session, either on Monday, July 13, or Tuesday, July 14.

DISY MP Savia Orphanidou stated that facilitating access to financing for SMEs is one of the most important factors for their survival. “DISY recognizes the need for Cyprus to comply with the SAA’s requirements to establish a national agency to facilitate business financing so that the €50 million can be disbursed,” he said.

However, he noted that DISY has expressed serious concerns about whether the purpose of the SAA is being achieved through the creation of a semi-governmental organization, which “will burden the state budget” and whether alternative solutions have been explored. For this reason, he said, “we will propose specific amendments to ensure that the funds allocated through this organization are directed toward small and medium-sized enterprises.” He also referred to the need to strike a balance so that, on the one hand, there is proper oversight, control, transparency, and accountability, along with minimal financial exposure on the part of the state, and, on the other hand, to ensure flexibility in financing SMEs through efficient and expedited procedures.

Within the Committee, AKEL MP Aristos Damianou stated that in order to take a position on the specific issues, AKEL is awaiting answers to questions of principle that have not yet been addressed, referring specifically to the raising of funds for the organization’s operations beyond the initial funding and to the organization’s operating costs.

It also requested that a “fit and proper” procedure be established for members of the KOA Board of Directors, in line with the procedure applied to members of the CSE Board of Directors, and similar to the procedures followed for bank boards of directors. His proposal was adopted by the members of the Committee and by the Ministry of Finance, with the aforementioned changes regarding the appointment of a transitional Board.

The President and Member of Parliament of the Alma Movement, Odysseas Michaelides, further proposed that appointments to the Board of Directors be made through an Advisory Council, since, as he said, these are technocratic positions. Furthermore, he said that Alma will submit a bill so that Board members are not held liable only in cases where bad faith is proven, but also in cases of reckless or irresponsible conduct, a provision he suggested be included in this specific bill as well.

Mr. Michaelides also proposed that a provision be included in the bill to prevent the KOAE from borrowing more than a specific percentage of its equity, with representatives of the Ministry of Finance noting that the proposal would be discussed with the Ministry’s Director General.

ELAM MP Marios Pelekanos disagreed with the view that hiring should be carried out by an advisory board, given that it had been accepted that candidates would undergo a fit-and-proper process. He noted, however, that individuals who have been declared bankrupt and have been automatically reinstated cannot be appointed as members of the Board of Directors, unless their bankruptcy decree is revoked.

Yiannis Laouris, a member of parliament for Direct Democracy, said that if medium-sized businesses are still included in the final bill, Direct Democracy will vote against the bill.

During the debate, the Ministry of Finance emphasized that small and medium-sized enterprises and startups receiving funding must be viable and will be evaluated using criteria similar to those of banks. At the same time, however, parameters will be included that promote the government’s priorities, noting that evaluation criteria may also include the number of jobs expected to be created, any exports that the financing may stimulate, and other factors that strengthen the economy.

In response to concerns raised by Members of Parliament regarding the agency’s exposure to risks from lending and the guarantees it will provide, the Ministry of Finance responded that the total lending provided by KOAE will not exceed 20% of the amounts KOAE intends to allocate per programming period, in order to reduce the state’s exposure to such risks.

The bill also provided for the possibility of the KOAE establishing investment funds or vehicles to provide equity capital to businesses. Following objections from Members of Parliament, the Ministry of Finance agreed to remove this specific provision.

Regarding the Organization’s funding, it was noted that the initial capital of the KOAE to be provided by the state amounts to €60 million, with the Ministry of Finance noting that the state is not expected to contribute any further funds to KOAE and that the Organization will need to be financed either through borrowing or by other means of raising capital. The Ministry also noted that the 2026 state budget includes a provision of €55 million for this purpose.

Source: CNA