Guidelines for the use of the assets of State Fund for Development of the
Information Technologies under the Ministry of Communications and
Information Technologies of the Republic of Azerbaijan
It was approved by
Presidential Decree No.853,
Dated April 2, 2013
1. General Provisions
1.1. These Rules determine the mechanisms and conditions of the use of the resources of the State Fund (hereinafter – the Fund) for Development of the Information Technologies under the Ministry of Communications and Information Technologies of the Republic of Azerbaijan, as well as control the issues of applications for the projects, examination of the projects, financing, monitoring and management of them.
1.2. The resources of the Fund are directed to the financing of the projects of investment and competition on the priority areas of the development of the sector of the information and communication technologies (ICT), as well as to the share capital of juridical people operating in the ICT sector, including to the investments by term with getting their shares.
1.3. In the decrees and orders of the President of the Republic of Azerbaijan, decrees and orders of the Cabinet of Ministers, governmental programs a competition is held among the entreprneurship subjects in the form and manner determined by the Fund’s Supervisory Board (hereinafter – the Board) in order to implement the specific projects which is related to the development of the ICT with the help the Fund’s resources.
1.4. Repaid loan proceeds and other proceeds are kept in the Fund’s account and are used again for the purposes set out in the paragraph 1.2 of this Regulation.
2. Project financing mechanisms
2.1. The Fund reserves the right to exercise the following project financing:
2.1.1. The share capital of juridical people operating in the ICT sector, including to the investments by term with getting their shares;
2.1.2. By the means of banks and non-bank credit institutions with the concessional credits (hereinafter – the authorized credit organizations) the financing of the entrepreneurship subjects operating in the field of ICT;
2.1.3. Grant financing of the innovative and operative scientific-technical projects (startup project).
2.2. General principles of a funding mechanism is determined by these Regulations. Additional regulations are expected to be approved on a funding mechanism by the Board in order to ensure accurate implementation of projects.
3. Investment activity
3.1. One of the main goals of the Fund is to participate as a partner or shareholder in the performance of juridical people in the field of ICT, according to the requirements of the Law of “Investment funds” of the Republic of Azerbaijan.
3.2. The financing of the project in the investment form is be carried out in the way that a portion of the capital of a juridical person is formed or increased by the means of Funds resources.
3.3. This time a contract approved by the Board is signed between the juridical person and the Fund. The contract contains financial-economic activities which are related to the implementation of the projects, project outcomes, project management and monitoring mechanisms and other measures related to the implementation of the project.
3.4. The control over the juridical person is carried out on the basis of the Fund’s rights as a shareholder.
3.5. The share capital of juridical people operating in the ICT sector, including to the investments by term with getting their shares are based on the following principles:
3.5.1. The Fund’s decision is accepted on the basis of the investment of the newly established juridical person operating the ICT field to the share capital, shares, analysis of business plans reflecting the commercial effectiveness of the proposed juridical people, taking into account their founders’, as well as other participants’ experience and achievements obtained in entrepreneurial activities.
3.5.2. The Fund must not have more shares in the share capital of the juridical people.
3.5.3. when the time allotted by the Fund’s Supervisory Board is over for the investment to the share capital of the commercial organization, the Fund sells its interests for the market prices and terminates the participation in the commercial organization.
3.6. The Fund carries out the following activities:
3.6.1. takes steps toward inventing foreign investors to the ICT field;
3.6.2. helps foreign investors have business relations with local juridical people in order to establish joint ventures;
3.6.3. Determines the projects to invest on the ICT field, carriest out their industrial and financial examination;
3.6.4. Chooses promising juridical people having innovative projects which are objects for the investment;
3.6.5. consulting services to the juridical people having promising investment projects for the preparation of investment contracts;
3.6.6. forming a consortium of investors to carry out investment;
3.6.7. Operate independently or as a part of a consortium of investors within the investment of the Fund’s assets;
3.6.8. Manages the Fund’s investment portfolio.
3.7. The Fund’s resources are invested to the entrepreneurship subjects operating in the following ICT fields:
3.7.1. conducting the operative scientific research and experimental-design works;
3.7.2. the creation of the innovative projects;
3.7.3. the creation of new technical testing facilities;
3.7.4. the creation and production of new demonstrative technique;;
3.7.5. the creation of the new technologies;
3.7.6. the creation of the software tools;
3.7.7. the creation of new services on the reception, processing, analysis and transmission of the information;
3.7.8. the application of the researches to the production and its commercialization.
4. The provision of concessional loans through the authorized credit institutions
4.1. The Fund’s assets to entrepreneurship subjects are carried out on their own behalf and risks by the means of authorized credit institutions.
4.2. The authorized credit institution, given license by the Central Bank of the Republic of Azerbaijan according to the criteria determined by the Council, may participate in giving concessional loans.
4.3. A contract containing conditions about using assets is signed between the Fund and authorized credit institution. Current year the credit line for each of the authorized bank is determined on the basis of its order. Loan funds are given to entrepreneurs in whole or in stages, depending on executing the project. The Fund may require other mandatory conditions in the future contract between the authorized credit institution and entrepreneurship subjects.
4.4. The credit is given due to the 5.7 and 5.9 paragraphs of this Regulation. Only after the loan is fully used, the authorized credit institution applies for the use of the credit line and opening a new credit line.
4.5. The credits to the authorized credit institution are given implemented according to the following procedures:
4.5.1. The remainder of the funds of authorized credit institutions by the Fund may be up to 150 percent of their share capital;
4.5.2. The authorized credit institutions have to pay the main debt and calculated interest of each month over the used assets to the Fund not later than 3 (three) bank days of following month;
4.5.3. The obligation of the authorized credit institution to the Fund does not depend on the attitudes to the entrepreneurship subjects. The authorized credit institutions have to fulfill their obligations to the Fund according to the terms of the contract, irrespective of implementation of concessional loans, interests and other payments on the obligations by the entrepreneurship subjects. If authorized credit institutions fails to perform its obligations during 1(a) month, the Fund takes measures according to the legislation for the return of the Fund’s assets;
4.5.4. The Board judges the complaints about the demand of other terms from the entrepreneurship subjects by the authorized credit institutions except the terms determined by the legislation and the Board and if such facts are approved the Board stops allocation of new funds to the authorized credit institutions or refuses its service as an authorized credit institution.
5. Allocation and use of loans to entrepreneurs
5.1. The authorized credit institutions locate the Fund’s assets on their own behalf and risks according to these Regulations.
5.2. The entrepreneurship subjects initially apply to the authorized credit institutions in order to get concessional loans from the Fund. The authorized credit institutions will register the application and submit a relevant document confirming the registration of the application. The authorized credit institutions analyze investment projects based on the minimum requirements and criterias for the evaluation on their own business interests and drafting investment projects determined by the Fund not later than 10(ten) days. The entrepreneurship subjects whose investments are considered unacceptable are given reasoned rejection letters within 3 (three) banking days by the authorized credit institutions.
5.3. The Fund examines the submitted projects in order to be financed by the Fund within 10(ten) banking days and implements directly initial monitoring of the projects submitted by the authorized credit institutions, excluding small loans.
5.4. Depending on the results of the examination, the Fund gives official information about the admission or rejection of the application to the authorized credit institutions. After having Fund’s positive decision on the admission of the application, the authorized credit institution makes the final decision on the allocation of the credits to the entrepreneurs.
5.5. After signing a credit contract with the entrepreneurship subjects an order is sent to the Fund about the allocation of credits by the authorized credit institutions. The Fund provides the allocation of credits to the authorized credit institutions within 3 (three) banking days. After the receipt of the allocated fund to the correspondent account, the authorized credit institution transfers the funds to the account of the entrepreneurship subjects within 2(two) banking days and informs the Fund and the entrepreneurship subject about this.
5.6. The Fund must be informed by the authorized credit institutions about all entrepreneurship subjects who submitted investment projects in order to use the Fund’s concessional loans after the end of each term not later than 5(five) banking days of next month.
5.7. Fund provides soft loans to entrepreneurs in the following limits:
5.7.1. From 10 000 manats to 50 000 manats – small loans;
5.7.2. From 50 001 manats to 500 000 manats – medium loans;
5.7.3. From 500 001 manats to 5 000 000 manats – large loans.
5.8. The maximum limit of the concessional credit (as well as on an investment project) got from the Fund by each entrepreneurship subject can not be more than 5 000000 manats
5.9. The Fund’s concessional lending terms are defined as followings:
5.9.1. Small loans – up to 3 (three) years;
5.9.2. Medium loans – up to 5 (five) years;
5.9.3. Large loans – up to 10 (ten) years.
5.10. The annual interest rate of the Fund’s credits is one percent.
5.11. The highest level of the annual interest rate of the authorized credit institutions applied to the Fund’s credits not exceed 5 percents of the total loan amount.
5.12. The paragraphs 5.10 and 5.11 are applied to the funds attracted from other sources excluding the Fund’s assets, taking into account the interest rates described in the contracts signed with those sources.
5.13. Grace period for the loans is determined based on the information about the cash flow depending on the nature of the activity for the credit given entrepreneurship subject and covers the first half of the loan term. During the grace period, an entrepreneurship subject pays only the interest, doesn’t make any payment on the main loan. The authorized credit institutions have to inform the Fund about the grace period determined for the entrepreneurship subjects.
6. Return of funds by the entrepreneurship subjects
6.1. Interests or principal payments of the entrepreneurship subjects paid ahead of time have to be transfered to the Fund’s account by authorized credit institutions not later than 3(three) banking days. If the authorized credit institutions are late to transfer this money to the Fund’s account more than 30(thirty) banking days, the Board ceases allocation of new funds to the authorized credit institutions or refuses their services as authorized credit institutions.
6.2. The Fund can conduct the confrontation of the period of interests or principal payments of entrepreneurship subjects to authorized credit institutions with the transfer by authorized credit institutions to the Fund or can apply to the Central Bank of the Republic of Azerbaijan for it. In the event of such request, the Central Bank of the Republic of Azerbaijan also studies this issue during the investigation and informs the Fund.
6.3. Not paying or making the funds late by entrepreneurship subjects does not avoid the authorized credit institutions from the responsibility in front of the Fund.
7. Grant financing
7.1. The Fund carries out grant financing of individuals and juridical people on transparent and competitive basis according to the priorities in the Charter.
7.2. Acceptance of applications for the competition, the initial analysis and coding, the selection of permanent and independent experts, creation and coding of a database about independent experts are implemented in the relevant section of the Fund.
7.3. Each individual and juridical person has to apply to the Fund in order to participate in the competition.
7.4. According to the Charter of the Fund, competition projects are selected appropriately to the results of the preliminary and comprehensive examinations.
7.5. The preliminary examination of the codified projects is carried out by the relevant section and permenant experts of the Fund within 15 (fifteen) working days, the results of the preliminary examinations are systemized and a decision is made. According to the results of the preliminary examinations one of the following decisions is made:
7.5.1. to abandon the project because of its incompletion and failure to comply with the Fund’s activities and priorities. In this case, the applicant is informed in an appropriate manner;
7.5.2. Make a decision about the next stage of the application and comprehensive examination.
7.6. A comprehensive examination is held on each project by the independent and permanent experts within 20(twenty) working days and a reference, information and recommendations reflecting examination results are submitted to the Fund.
7.7. A set of relevant documents for each project is prepared by the relevant section of the Fund and permanent experts for consideration on the Board. Discussions are held, a reference and recommendations are made, winners are determined on the basis of documents at the Board meetings.
7.8. Financing of the project is carried out on the basis of an agreement concluded between the Fund and the winner of the competition(project manager). Relevant documents involving the specific obligations about the project estimation, business plan, the use of its practical consequences are added to the agreement.
7.9. Grants for projects are given in small, medium and large partitions within 36 (thirty six) months.
7.10. Grant financing limit on a project must not be more than 300 000 manats.
7.10.1. The Fund provides grants to entrepreneurship subjects in the following limits:
188.8.131.52. From 10 000 manats to 100 000 manats – small grants;
184.108.40.206. From 100 001 manats to 200 000 manats – medium grants;
220.127.116.11. From 200 001 manats to 300 000 manats – large grants.
7.11. Selection of projects on a competitive basis is fulfilled in accordance with the results of the initial and final examinations conducted by independent expert commissions.
7.12. The funding of a project is carried out in three stages:
7.12.1. The initial funding is carried out in the first stage of 12 months. At this stage, 20 percent of the total amount of the grant is allocated for the organization of work according to the business plan.
7.12.2. The decision to continue funding is made according to the results of the initial phase in the second stage of 12-24 months. 30 percent of the total grant is allocated for the interim financing of the project, if the results of the initial phase of the project are considered satisfactory according to the predictions set in the business plan.
7.12.3. The remaining 50 percent of the total grant is allocated for the final financing of the project according to the relevant procedure in the final phase of 24-36 months. At this stage, attracting other investors’ funds for the commercialization of the project is considered the primary condition.
8. Monitoring of the Projects
8.1. Authorized credit institutions, in accordance with the rules established by the Fund, conduct a monitoring at least twice a year, about the use of the Fund’s assets on the investment projects by each entrepreneurship subjects and gives information to the Fund. The structure and format of the report is determined by the Fund. During the monitoring conducted by authorized credit institutions, if they find out that the concessional loans are not used for the intended purposes the authorized credit institution has to demand the payment of the credit and calculated interest from the entrepreneurship subject ahead of schedule. The authorized credit institution has to transfer the main credit and interest debt the Fund’s account within 10(ten) banking days regardless of the fulfillment of the obligations by the entrepreneurship subject.
8.2. The Fund may conduct independent monitorings of entrepreneurs in order to monitor the intended use of assets by the Fund.
8.3. The monitoring of the competition projects is carried out by the Fund’s relevant section or independent experts upon the Fund’s request.
8.4. The monitoring of the competition projects is carried out for following purposes:
8.4.1. the assessment of the fulfillment of the obligations by the project manager to the Fund according the signed contract;
8.4.2. take measures to reduce and eliminate the risks of the project;
8.4.3. to include the relevant information on the implementation of the projects to the database of the project monitoring.
8.5. The monitoring of the competition projects is performed by checking the relevant documents (including the legal, financial, economic, scientific-technical analysis of the submitted projects) submitted by the project manager.
8.6. The intended use of the Fund’s assets is checked during the monitoring of the competition projects, the factual and prognosis of the project implementation on the relevant documents are analyzed in comparataive manner, its financial status is checked on the basis of submitted documents (annual audits, quarterly and annual financial statements and other information).
8.7. If the Fund finds out that the concessional credits are not used for the intended purpose during its monitoring, according to the Fund’s written demand, the concessional loan and interest debt given to the entrepreneurship subject are transferred completely to the Fund’s account by the authorized credit institution within 10(ten) banking days, irrespective of the fulfillment of the obligations by the entrepreneurship subject. If the transfer of the required fund exceeds 30(thirty) calendar days, the Fund will take actions for the return of payment according to the legislation.
8.8. If the authorized credit institution breaks the rules of the monitoring 3(three) times or more, the Fund stops to allocate finance to the the authorized credit institution or removes it from the list of authorized credit institutions.