Working document

Working document Working document GOVERNMENT OF THE REPUBLIC OF LITHUANIA RESOLUTION No 912 ON THE AGRICULTURAL LOAN GUARANTEE FUND 22 August 1997 Vilnius As amended by Resolution No 734 of 16 June 1998 of the Government of the Republic of Lithuania (effective from 25 June 1998) (Official Gazette No 57-1600, 1998) The Government of the Republic of Lithuania h a s r e s o l v e d:

1. to found a guarantee institution - the Close Stock Company the Agricultural Loan Guarantee Fund (hereinafter referred to as the Fund), which shall operate in accordance with the Company Law of the Republic of Lithuania, the Law of the National Debt of the Republic of Lithuania, its Statute and other legal act as well as this resolution.
2. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) to approve the rules of procedure of the Close Stock Company Agricultural Loan Guarantee Fund (attached).
3. to establish that: 3.
4. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the Fund shall provide guarantees (whose amount at a time shall not exceed the guarantees provided that year for the obligations of the Fund by the Government of the Republic of Lithuania) to banks on behalf of farmers, farming co-operatives and farming partnerships for long-term loans given thereof, as well as to the Agency for Agricultural and Foodstuffs Market Regulation of Lithuania (hereinafter referred to as the Agency) and enterprises processing (storing) agricultural production, which enjoy the mediation of the Agency, for short-term loans by concluding the contracts of guarantee with banks on the repayment of the loans; 3.
5. the Ministry of Agriculture shall perform the functions of the founder of the Fund; 3.
6. the portfolio of the Fund acquired in the name of the state in any case must be composed of no less that 51 percent of authorised capital. 3.
7. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the Fund shall provide guarantees to the banks: 3.4.
8. the repayment of the part (up to 70 per cent) of the outstanding loans, granted to farmers, farming co-operatives, farming partnerships and enterprises processing (storing) agricultural production whereas the remaining risks shall be undertaken by the bank that has granted the loan; 3.4.
9. the repayment of the part (100 per cent) of the outstanding loans granted to the Agency; 3.
10. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) after the receipt of the act of the bailiff service bureau sent on behalf of the bank that has granted a loan and certifying that the property of the farmer, farming co-operative, farming partnership and enterprise processing (storing) agricultural production is not found, the Fund shall take a decision in accordance with the established procedure by the rules of procedure of the Agricultural Loan Guarantee Fund approved by this regulation on the payment to the bank which has granted the loan the difference up to 70 per cent between the outstanding part of the loan and the revenues of the bank, received upon the sale of the property of the debtor. In the event the recipient of the loan is the Agency, the Fund shall repay to the bank that has granted the loan the total amount of the outstanding loan. 3.
11. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) on the grounds of Resolution No 213 On Founding the Rural Support Fund adopted on 12 March 1997 by the Government of the Republic of Lithuania (Official Gazette No 23-545, 1997, No 28-746, 1998) the money of the Rural Support Fund shall be used for the following: 5 million LTL to pay the shares of the Fund; 1 million LTL to cover the administrative costs during the period of founding (but no longer than until 1 July 1999). The money that has not been used by the specified date shall be transferred to the sub-account of the Fund for carrying out long-term guarantee obligations; 10 million LTL to the budgeting of the State Reserve which is required for carrying out the guarantee obligations (accounts shall be kept in a separate sub-account of the Fund and used upon a special decision of the Government of the Republic of Lithuania); 4 million LTL to pay a part of the guarantee payment and 50 per cent of the insurance payment for the mortgaged property to be paid by a farmer, farming co-operative, farming partnership or the Agency; 3.
12. the money of the Fund for carrying out guarantee obligations on behalf of farmers, farming co-operatives and farming partnerships for long-term loans, and the money of the Fund for carrying out guarantee obligations for the short-term loans on behalf of the Agency and enterprises processing (storing) agricultural production shall be accounted separately and kept in separate sub-accounts; 3.
13. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the guarantee payment for providing guarantees to banks for the loans granted to farmers, co-operative companies of farmers, farming co-operatives, farming partnerships, enterprises processing (storing) agricultural production and Agency shall be made once (at the time of concluding the contract of guarantee): no less than 5 per cent for long-term loans and no less than 2 per cent for short-term loans of the guaranteed amount. 80 per cent of the guarantee payment shall be made on behalf of farmers, farming co-operatives and farming partnerships out of the money of the Rural Support Fund, whereas the remaining amount (20 per cent) shall be paid by the recipient of the loan. The total guarantee payment shall be paid on behalf of the Agency out of the money of the Rural Support Fund. 90 per cent of this guarantee payment must be accounted in the adequate sub-account of the Fund for carrying out long-term or short-term guarantee obligations, the remaining 10 per cent shall be allocated for administration of the Fund; 3.8-
14. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) 50 per cent of the insurance payment for the property acquired from the money of the loan and mortgaged to the bank shall be to reimbursed to farmers, farming co-operatives and farming partnerships from the money of the Rural Support Fund according to the documents provided. 50 percent of the part of the insurance payments shall be reimbursed in proportion to the amount of the loan in the event other property has been mortgaged by the bank instead that acquired from the money of the loan. 3.
15. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the money allocated by the decision of the Government of the Republic of Lithuania for the guarantee payment and insurance payment or carrying out guarantee obligations can also be used to increase the authorised capital; 3.
16. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) farmers, co-operative companies of farmers, farming co-operatives, farming partnerships, and enterprises processing (storing) agricultural production must conclude contracts with the bank (or with the Fund in the event specified in Item 3.10-1) on the mortgage of property whose purchase or construction is financed by the loan; 3.10-
17. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the Fund shall have the right to demand that the recipient of the loan (or the third party on its behalf) mortgages its property by ensuring the retroactive payment of the outstanding amounts of the loan; 3.
18. the activity of the Fund shall be monitored and the accountability thereof shall be established by the Ministry of Agriculture; 3.
19. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the Fund shall inspect the repayment of the loans by the bank on the grounds of the contracts of guarantee that have been concluded and until the 20th day of the following month shall submit to on a quarterly basis to the Ministry of Finance the statement on the carrying out of the repayment of the loans and the implementation of the terms or other guarantee obligations whose implementation has been guaranteed by the Fund; 3.
20. the losses incurred to the Fund shall firstly be covered from the obligatory reserve. In case the obligatory reserve has already been used to cover the losses, upon the loss reaching 25 per cent of the authorised capital, the Board of the Fund shall suspend the reimbursement of the guarantee payment, the holder of the shares which belong to the State by the right of ownership shall initiate and call the general shareholders’ meeting which shall vote on the suspension of concluding the new guarantee contracts, and the banks shall be informed thereof, the reasons of the loss shall be discussed and within 20 days conclusions and proposals shall be issued to the Government of the Republic of Lithuania and, in case of necessity, the draft decision on the use of the money of the State Reserve for carrying out guarantee obligations to cover losses shall be prepared; 3.
21. the Board of the Fund shall be formed and its chairman shall account for the activity of the Fund on a quarterly basis (until 25 of the following month) to the Ministry of Agriculture; 3.
22. Repealed by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) 3.
23. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) upon the decision by the Tendering Commission of the District Agriculture Division of the Rural Affairs Department of the County Governor’s Administration (hereinafter referred to as the Tendering Commission) a part of the interest shall be paid on behalf of farmers, farming co-operatives, farming partnerships out of the money of the Rural Support Fund or the Small and Medium-sized Business Support Fund according to the procedure established by the joint decree of the Minister of Agriculture and the Minister of Economy, published in the Official Gazette; 3.
24. Repealed by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) 3.
25. in the event the Fund fails to carry out the obligations provided in the obligation documents of the contracts of guarantee (whose implementation has been guaranteed by the Government of the Republic of Lithuania) or partial fulfilment of the obligations, they shall be carried out by the Government of the Republic of Lithuania according to the contracts of guarantee signed between the Fund with the bank. 3.
26. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) the farming partnership is a partnership where the share of its registered farmers constitutes no less than half of the total value of the shares of the farming partnership. The farming co-operative is a company where the shares of its registered farmers make up no less than half of the value of all the shares of the company. Annual revenues from commodity agricultural production and production services for agriculture must comprise more than 50 per cent of all the revenue received in a farming partnership and farming co-operative (throughout the whole period of operation of a farming partnership and farming co-operative which is in operation for no less than a year). The Fund shall provide guarantees to the banks only on the loans for farming partnerships and farming co-operatives as specified in this Item.
27. the Ministry of Agriculture has: 4.
28. to draft and approve the Statute of the Fund in compliance with the rules of procedure of the Fund approved by this Regulation and providing that the Observers’ Council of the Fund shall not be formed, and 5 personas shall be delegated to the Board of the Fund: one from the Ministry of Agriculture, the Ministry of Finance and the Ministry of Justice each, the head of the administration of the Fund and the state consultant on rural affairs; 4.
29. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) to provide money for the guarantee payment and insurance payment for the mortgaged property and for partial reimbursement of the interest each year, upon taking the decision on budgeting and use of the Rural Support Fund.
30. to authorise the Minister of Agriculture to sign the documents on founding the Fund.
31. to oblige the Ministry of Agriculture and the Ministry of Economy to establish the procedure for payment of the interest from the Rural Support Fund or the Small and Medium-sized Business Support Fund, respectively, in cases specified in Item 3.
33. As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) to authorise the Minister of Agriculture to approve the maximum amount in per cents of the guarantee payment by 1 December every year.
34. to authorise the Ministry of Agriculture to draft the procedure for satisfying the claims of the bank and the procedure for selling the property transferred to the Fund and approve thereof after the agreement with the Ministry of Justice has been reached. Prime Minister Gediminas Vagnorius Acting Minister of Agriculture, Minister of Transport Algis Þvaliauskas Approved by Resolution No 912 of 22 August 1997 of the Government of the Republic of Lithuania As amended by Resolution No 1026 of 20 September 1999 of the Government of the Republic of Lithuania (effective from 25 September 1999) (Official Gazette No 80-2361, 1999) RULES OF PROCEDURE OF THE CLOSE STOCK COMPANY AGRICULTURAL LOAN GUARANTEE FUND I. General Provisions
35. Close Stock Company Agricultural Loan Guarantee fund (hereinafter referred to as the Fund) shall provide guarantees to banks for long-term loans on behalf to farmers, farming co-operatives and farming partnerships, as well as for short-term loan on behalf of the Agency for Agricultural and Foodstuffs Market Regulation of Lithuania (hereinafter referred to as the Agency) and enterprises processing (storing) agricultural production, which enjoy the mediation of the Agency, by concluding the contracts of guarantee with banks on the repayment of the loans. The fulfilment of the guarantees of the Fund shall be ensured by the State.
36. The guarantee provided by the Fund for the loan on behalf of the farmer must not exceed 400 thousand LTL, and the total amount of guarantees on behalf of one farmer cannot exceed 600 thousand LTL. The guarantee for the loan on behalf of farming co-operatives or farming partnerships cannot exceed 900 thousand LTL, and the general amount of guarantees for the loans on behalf of one farming co-operative or farming partnership cannot exceed 1,200 thousand LTL.
37. Upon the receipt of the bank’s submission on the guarantee on behalf of farmers, farming co-operatives or farming partnerships upon granting the loan and necessary documents thereof, The Board of the Fund shall examine them and in cases where submitted documents comply with the requirements of Items 5, 6 and 9 decide on providing guarantee within 14 days. The decision on providing guarantee shall be made only after all the documents specified in Item 10 have been received, the business plan has been examined in detail and positive conclusions have been drawn by the bank which has examined the said documents. If the guarantee cannot be provided according to the requirements of Items 5, 6 and 9, the Board shall inform the farmer, farming co-operative or farming partnership and the bank on the reasons why it has been rejected within 7 working days from the day of making the decision.
38. Upon the receipt of the application of the Agency for allowing the guarantee of the loan intended to buy up agricultural production and foodstuffs and pay the value added tax for the production thereof, or that of the enterprise processing (storing) agricultural production which enjoys the mediation of the Agency, the Board of the Fund shall examine the application for the guarantee of the loan intended for buying up agricultural production, and the documents specified in Item 11 within 14 days on whether the loan corresponds to the provisions of the Programme for Agriculture and Foodstuffs Market Regulations and Export Promotion approved by the Government of the Republic of Lithuania, and shall submit to the applicant in writing the conclusions on providing the guarantee or the refusal to provide thereof. II. Conditions for Providing Guarantees
39. the guarantees shall be provided only for the project which is commercially feasible in financial term and is subject to crediting.
40. the guarantees shall be provided to farmers, farming co-operatives or farming partnerships in the event they: 6.
41. are registered according to the established procedure; 6.
42. submit a business plan (business project); 6.
43. invest in the business project the loans is intended for no less than 10 per cent of its own funds; 6.
44. mortgage to the bank for the insured property acquired with the loan and register the mortgage in accordance with the established procedure. If the bank is not willing that the purchased property for the loan should be mortgaged or such property is not enough for ensuring the implementation of the obligation, the recipient of the loan shall mortgage to the bank other property which is allowed for mortgaging in accordance with the procedure established by laws. In each case the total value of the mortgaged property in market prices must not be lower than 100 per cent of the received amount of the loan; 6.
45. the loan contract with the bank shall provide the following that: 6.5.
46. the loan to be granted shall be used only for the investment expenditure of the business project; 6.5.
47. the loan shall not be used as operating capital, for the payment of wages and payment for taxes as provided by laws, excluding the value added tax; 6.5.
48. the bank shall be presented the documents for direct payment for the purchased material values and provided services; 6.5.
49. the property acquired for the specified loans shall not be sold, transferred, leased, mortgaged to other persons or used otherwise than prescribed in the loan contract without the permission of the Fund; 6.
50. current and loan accounts shall be opened in the bank that grants the loan upon the request of the bank or the Fund.
51. The Agency or the enterprise processing (storing) agricultural production shall be provided the guarantee if: 7.
52. it is registered in accordance with the established procedure; 7.
53. according to the established procedure, mortgage to the bank the property (of the enterprise processing (storing) agricultural production) which is registered in the real estate registration office and is allowed to be mortgaged, the movable items which are listed according to their individual or type characteristics, securities, funds which are in their account, material rights, and obligations which have derived from written contracts. The value of the mortgaged property of the enterprise for processing (storing) agricultural production in market prices must be no less than 100 per cent of the acquired amount of the loan. The property which is mortgaged to the bank has to be insured. 7.
54. the loan contract with the bank shall provide that: 7.3.
55. the loan to be granted to the Agency shall be used only for buying up agricultural production and foodstuffs and the payment of the value added tax for the production thereof and shall not be used for the payment of wages and other taxes established by laws, and the loan granted to the enterprise processing (storing) agricultural production shall be used only for buying up agricultural production and shall not be used for the payment of wages and other taxes established by laws; 7.3.
56. the bank shall be presented the document for the direct payment of purchased agricultural production and foodstuffs; 7.3.
57. the property acquired for the specified loans shall not be used otherwise than provided in the plan for purchase and sales of production and the Programme for Agriculture and Foodstuffs Market Regulations and Export Promotion approved by the Government of the Republic of Lithuania; 7.
58. the current and loan accounts shall be opened in the bank that grants the loan upon the request of the bank or the Fund.
59. The Statute of the Fund and the documents regulating its procedures can also specify additional conditions for providing guarantees.
60. The guarantee contract must specify that: 9.
61. the recipient of the guarantee is the bank that granted the loan; 9.
62. the maturity of guaranteed loans, which have been granted to farmers, farming co-operatives or farming partnerships must be no longer than 7 years, and the maturity of the World Bank loans shall be no longer than 12 years; 9.
63. the maturity of the guaranteed loan, which has been granted to the Agency and enterprise processing (storing) agricultural production, must be no longer than 12 months. Upon the permission of the Government of the Republic of Lithuania, the maturity of Fund-guaranteed loan may be extended no longer that up to 16 months. III. Concluding of a Guarantee Contract
64. The bank which intends to finance the business plan of a farmer, farming co-operative or farming partnership shall apply to the Fund for the guarantee by submitting the following documents prepared by the bank and sent by the recipient of the loan: 10.
65. the application for obtaining the loan guarantee. The application shall specify the purpose of the loan, the scope of the guarantee, the maturity of the loan; 10.
66. the business plan (business project); 10.
67. the conclusions of the bank on the conditions of granting the loan; 10.
68. the certificates which prove the value of the property intended for mortgage; 10.
69. the copies of the registration documents of farmers, farming co-operatives or farming partnerships; 10.
70. other documents established by the Fund; 10.
71. the recommendation to obtain guarantees from the Tendering Commission of the District Agriculture Division of the Rural Affairs Department of the County Governor’s Administration (hereinafter referred to as the Tendering Commission).
72. The Agency and the enterprise processing (storing) agricultural production which want to obtain the guarantee for the loan shall apply to the Fund for providing the loan guarantee by presenting the following documents: 11.
73. the application for obtaining the loan guarantee. The application shall specify the purpose of the loan: for buying up agricultural production or foodstuffs, as well as the scope of the guarantee and the maturity of the loan; 11.
74. the plan for purchase and sales of agricultural production and explanatory note on its compliance with the provisions of the Programme for Agriculture and Foodstuffs Market Regulations and Export Promotion approved by the Government of the Republic of Lithuania; 11.
75. the conclusions of the bank on the conditions of granting the loan; 11.
76. the certificates which prove the value of the property which is intended for mortgage (for the enterprise processing (storing) agricultural production only); 11.
77. the mediation document of the Agency (for the enterprise processing (storing) agricultural production only). The Agency shall mediate only for the enterprises processing (storing) agricultural production, selected according to the set criteria that have been agreed with the Fund; 11.
78. the copies of the registration documents of the Agency and the enterprise processing (storing) agricultural production; 11.
79. other documents established by the Fund.
80. After the documents specified in Item 10 or 11 have been received, the Board of the Fund shall make the decision within 14 days on providing the guarantee or the refusal thereof, as well as on the part of the guarantee payment and 50 per cent of the insurance payment of the mortgaged property on behalf of the farmer, farming co-operative, farming partnership or Agency. The Fund shall inform the bank that finances the project and the applicant in writing no later than within 7 days.
81. Upon the decision of the Board of the Fund to provide the guarantee, the head of the administration of the Fund or the person who has been authorised thereof shall sign the guarantee contract with the bank within 20 working days. IV. Distribution of Risks and Losses Between the Bank that Granted the Loan and the Fund
82. The Fund shall ensure: 14.
83. the repayment of the part (up to 70 per cent) of the outstanding loan that has been granted to farmers, farming co-operatives and farming partnerships as well as the enterprises processing (storing) agricultural production, which enjoy the mediation of the Agency, whereas the remaining risks shall be undertaken by the bank that granted the loan. 14.
84. the repayment of the outstanding part of the loan (100 per cent) granted to the Agency.
85. The bank can apply to the Fund on the fulfilment of the guarantee obligation only after the mortgaged property has been sold according to the procedure established by laws and other property to satisfy the claim has not been found. Upon the receipt of the act of the bailiff service bureau, which proves that the property of the loan recipient has not been found, the Board of the Fund shall make a decision on the difference (up to 70 per cent) between the outstanding part of the loan and the revenues of the bank received after the sales of the property mortgaged to the bank that granted the loan.
86. In case the Agency has failed to satisfy the demand of the bank or partial fulfilment of the obligation and the violations of the loan contract have not been eliminated on the request of the bank, the Fund shall repay to the bank the part of the outstanding loan upon the decision of the Board.
87. In the event the Fund carries out its obligation according to the provided guarantee, it shall be entitled to claim the pecuniary amount of the recipient of the loan for which the Funds has paid. V. Inspection of the Loans Guaranteed by the Fund
88. the Fund shall collect the information on the following: 18.
89. the amount and scope of all the loans (and those to be repaid at the time information is provided) received with the guarantee of the Fund, as well as the amount and scope of the loans granted for the farmers, farming co-operatives, farming partnerships, Agency and enterprise processing (storing) agricultural production; 18.
90. the amount and scope of the loans which have been guaranteed by the Fund and have not been repaid on time by the farmers, farming co-operatives, farming partnerships, Agency and enterprise processing (storing) agricultural production; 18.
91. the realisation of the property which has been guaranteed by and which has been taken to cover outstanding loans from each farmer, farming co-operative, farming partnership, Agency and enterprise processing (storing) agricultural production;
92. Having provided the guarantee on behalf of farmers, farming co-operatives, farming partnerships, Agency and enterprise processing (storing) agricultural production, the Fund shall start managing their files where all the submitted documents and the decisions on providing the guarantee, the guarantee payment and insurance payment have been registered. The files shall be managed until the loan is repaid to the bank or the Fund repays it on behalf of the loan recipient and implements the right specified in Item 17, and the files shall be kept for five years.
93. During each meeting of the Board of the Fund, the head of the administration of the Fund shall inform the Board of the Fund about the status of the loans for which the guarantees have been provided and submit corresponding proposals.
94. If the obligatory reserve is used to cover the losses upon the loss reaching 25 per cent of the authorised capital, the Board of the Fund shall suspend the reimbursement for the guarantee payment, the holder of the shares which belong to the State by the right of ownership shall initiate and call the general shareholders’ meeting where they vote for suspension of the new guarantee contracts, and the banks shall be informed thereof, the causes for the losses shall be examined, and within 20 days conclusions and proposals shall be submitted to the Government of the Republic of Lithuania, and, in case of necessity, the draft decision on the use of the money of the State reserve for carrying out guarantee obligations to cover losses shall be prepared.
95. Each case of the usage of the money for the Fund guarantees must be discussed by the Board of the Fund, and this information shall be provided to the Ministry of Finance and the Ministry of Agriculture on a quarterly basis.
96. 10 per cent of each guarantee payment shall be allocated for the administration of the Fund.
97. The Minister of Agriculture and the Chairman of the Board of the Fund shall account to the Government of the Republic of Lithuania for the activity of the Fund every six months. Accounting for the annual activities shall take place no later than within 3 months after the end of financial year by providing annual financial statement with the conclusion of the auditor.