# Commission Regulation (EC) No 1828/2006 of 8 December 2006 setting out rules for the implementation of Council Regulation (EC) No 1083/2006 laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund and of Regulation (EC) No 1080/2006 of the European Parliament and of the Council on the European Regional Development Fund, Article 43: General provisions

Extent: E+W+S+N.I.

1 . Articles 43 to 46 shall apply to financial engineering instruments in the form of actions which make repayable investments, or provide guarantees for repayable investments, or both, in the following:
( a ) enterprises, primarily small and medium-sized enterprises (SMEs), including micro-enterprises, as defined in Commission Recommendation 2003/361/EC as of 1 January 2005 ;
( b ) public-private partnerships or other urban projects included in integrated plans for sustainable urban development, in the case of urban development funds;
( c ) funds or other incentive schemes for energy efficiency and use of renewable energy in buildings, including in existing housing.
2 . Financial engineering instruments, including holding funds, shall be independent legal entities governed by agreements between the co-financing partners or shareholders or as a separate block of finance within a financial institution.
Where the financial engineering instrument is within a financial institution, it shall be set up as a separate block of finance, subject to specific implementation rules within the financial institution, stipulating, in particular, that separate accounts are kept which distinguish the new resources invested in the financial engineering instrument, including those contributed by the operational programme, from those initially available in the institution.
The Commission may not become a co-financing partner or shareholder in financial engineering instruments.
3 . When managing authorities or holding funds select financial engineering instruments, the financial engineering instruments shall submit a business plan or other appropriate document.
The terms and conditions for contributions from operational programmes to financial engineering instruments shall be set out in a funding agreement, to be concluded between the duly mandated representative of the financial engineering instrument and the Member State or the managing authority, or the holding fund where applicable.
The funding agreement shall include at least the following elements:
(a) the investment strategy and planning;
(b) provisions for monitoring of implementation;
(c) an exit policy for the contribution from the operational programme out of the financial engineering instrument;
(d) provisions for the winding-up of the financial engineering instrument, including the reutilisation of resources returned to the financial engineering instrument from investments or left over after all guarantees have been honoured that are attributable to the contribution from the operational programme.
4. Management costs may not exceed, on a yearly average, for the duration of the assistance any of the following thresholds, unless a higher percentage proves necessary following a competitive tender, in accordance with applicable rules:
(a) 2 % of the capital contributed from the operational programme to holding funds, or of the capital contributed from the operational programme or holding fund to the guarantee funds;
(b) 3 % of the capital contributed from the operational programme or the holding fund to the financial engineering instrument in all other cases, with the exception of micro-credit instruments directed at micro-enterprises;
(c) 4 % of the capital contributed from the operational programme or the holding fund to micro-credit instruments directed at micro-enterprises.
5 . Returns from equity, loans and other repayable investments, and from guarantees for repayable investments, less a pro rata share of the management costs and performance incentives, may be allocated preferentially to investors operating under the market economy investor principle. Such returns may be allocated up to the level of remuneration laid down in the by-laws of the financial engineering instruments, and they shall then be allocated proportionally among all co-financing partners or shareholders.
6 . Enterprises, public private partnerships and other projects included in an integrated plan for sustainable urban development, as well as operations for energy efficiency and use of renewable energy in buildings, including in existing housing which are supported by financial engineering instruments, may also receive a grant or other assistance from an operational programme.
7 . Managing authorities shall take precautions to minimise distortion of competition in the venture capital or lending markets and the private guarantee market.

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Source: https://www.legislation.gov.uk/eur/2006/1828/article/43 (the official version)
Page: https://openlegislation.uk/eu-regulation-2006-1828/article-43
Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.