SRSS Local Currency and Capital Markets Initiative TC Framework - Latvia - Design of an EU Structural Fund based SME Equity Listing Support Instrument

Country:Latvia

Business sector:Financial institutions

Project number:71612

Funding source:Not Yet Determined

Contract type:Consultancy Services

Notice type:Invitation for expressions of interest (CSU)

Issue date:21 Nov 2017

Closing date:05 Dec 2017   at  23:59   London

Project Description:

The Ministry of Finance of the Republic of Latvia (MoF) (the Client) has requested the European Bank for Reconstruction and Development (the EBRD or the Bank) to provide technical assistance to design of an EU Structural Fund based SME Equity Listing Support Instrument project (the Project).

In the European Union countries, nearly 99% of all enterprises are SMEs[1]. Especially in emerging economies, SMEs are the driving force behind economic growth, employment, poverty alleviation and wealth creation. SMEs face more severe credit conditions than larger companies, including higher interest rates, shorter maturities and increased collateral[2]. SMEs’ access to capital market, especially equity financing, is limited as an initial public offering (IPO) with a subsequent listing is either not considered by SMEs due to the lack of information/knowledge or seen as being too complex.

In this context, Latvia has requested support from the European Commission under Regulation (EU) 2017/825 on the establishment of the Structural Reform Support Programme ("SRSP Regulation"). The request has been analysed by the European Commission in accordance with the criteria and principles referred to in Article 7(2) of the SRSP Regulation, following which the European Commission has agreed to provide technical support to Latvia, together with the EBRD.

In this context, the MoF would like to closely cooperate with the European Commission and EBRD to develop the Project.

The aim of the project is to increase the access of Latvian companies, especially SMEs, to equity financing via the local stock exchange or alternative financing platforms. This project aims to design an EU Structural Fund based SME Equity Listing Support Instrument (“SME Equity Support Instrument”) which will be included in the Latvian Government regulations on the EU Structural Funds activities at the end of 2017. The instrument design will include measures to promote the use of equity market financing and to increase the public awareness for capital market financing of SMEs. Moreover it will also cover part of the one-off initial costs for preparation of documentation for a number of SMEs considering an IPO with subsequent listing on the stock exchange and other support measures identified as important to achieve increased access to finance for Latvian SMEs and improved market liquidity.

Assignment Description

The specific objective of this assignment is to design a support instrument for SMEs’ access to equity funding via the local stock exchange, and its key parameters (criteria of support, SMEs target group, eligible beneficiaries, and eligible project costs). The project design and parameters will be used when drafting the Government regulation on the EU Structural Funds activity in end-2017.

The Bank now intends to engage a consulting company (the Consultant) to assist and support the MoF with the implementation of the following services/activities:

• Service/Activity 1: Design of the SME Equity Support Instrument

• Service/Activity 2: Legal drafting support

It is expected that the Consultant will closely liaise with the MoF, the Ministry of Economy (MoE), and the EBRD in carrying out the activities/services.

The aim of the service/activity 1 is to design a SME Equity Support Instrument which is (a) eligible for funding out of the EU Structural Funds, (b) increases SMEs access capital market financing through the provision of tailored support, and (c) fully supported by the key stakeholders.

The aim of the service/activity 2 will be based on the designed and agreed structure of the SME Equity Support Instrument from the service/activity 1, where the Consultant will support the authorities in drafting the respective regulations to facilitate the use of structural funds.

The expected outcome of the Assignment is (i) design of the SME Equity Support Instrument, with the kick-off meeting and the stakeholder workshop; and (ii) set of regulation/legal amendments as required to facilitate the use of structural funds and the setup of the SME Equity Support Instrument

The selected Consultant is expected to provide the following services:

1. 1. Design of the SME Equity Support Instrument:

• Organisation of a project kick-off workshop in Riga to discuss the project goals and implementation steps with the MoF, the MoE, SRSS and EBRD
• Identification and analysis of current models used in other, preferably similar, markets (i.e. 4stock.pl in Poland, capital market development fund in Hungary…)
• Organisation of a study visit
• Definition of eligibility criteria and rules for SMEs to benefit from the support instrument

• Definition of eligibility criteria and rules
• Definition of application and approval procedures
• Benchmark the defined eligibility criteria against the criteria provided in the local legal framework and especially the Latvian “Law on Aid for Start-up Companies”[3], which came into force on 1 January 2017.
  • Definition of services provided under the planned framework
  • Calculate the indicative costs for the proposed SME Equity Support Instrument
  • Prepare the “Design Report: Structural Fund based SME Equity Support Instrument” including an implementation plan
  • Organise a stakeholder workshop in Riga chaired by the MoF and MoE to present the details of the proposed SME Equity Support Instrument

2. Legal drafting support:

• Analysis of similar Latvian laws/regulation (Start-up law) and align concept with current rules
• Conduct stakeholder consultations to discuss required legal/regulatory framework
• Agree with MoF and MoE required legal and regulatory changes
• Support the Latvian authorities in drafting the respective regulations and rules to facilitate the use of structural funds as required to setup the SME Equity Support Instrument

Support the adoption of regulation by Latvian authorities. It is expected that The Consultant will have overall responsibility for delivering the assignment according to the agreed work plan and will manage the project implementation and actively monitor the progress achieved.

Status of Selection Process: Interested firms or groups of firms are hereby invited to submit expressions of interest.

Assignment Start Date and Duration: The Assignment is expected to start in Q4 2017 and has an estimated overall duration of 12 months.

Cost Estimate for the Assignment: EUR 143,250 (exclusive of VAT). Subject to availability of funding, the performance of the selected Consultant and the specific needs of the Bank the Assignment may be extended beyond the current scope.

The Consultant must determine whether any VAT would be chargeable on the services and the basis for that determination, without taking into consideration the special status of the Bank as an IFI and state this to the Bank in their response to the Invitation for Expressions of Interest. To the extent that a Consultant incurs input VAT on goods and services purchased in connection with the provision of services (e.g. VAT on airline ticket) which is not otherwise recoverable by the consultant from the local tax authority, the gross cost to the consultant of such expenses shall be treated as a reimbursable expense.

Funding Source: This assignment is expected to be funded by the European Commission via the Structural Reform Support Service. Please note selection and contracting will be subject to the availability of funding.

Eligibility: There are no eligibility restrictions

Consultant Profile: Corporate services are required. The Consultant will be a firm or a group of firms preferably with previous project experience related to:

1.Capital Markets development;

2.International standards and especially EU Directives related to/impacting the capital markets;

3.Legal and regulatory development

4.Corporate finance

The Consultant must have a proven record of accomplishment working with market participants and authorities on similar consulting assignments.

The Consultant’s expert team is expected to include key experts as follows:

1. Key Expert No 1 (Team Leader/Senior Expert):

• with preferably 8-10 years of previous professional experience in the field of capital markets development including understanding of the areas of expertise required for below key experts;
• preferably 3 years project management experience including acting as a team leader on similar assignments;
• Proficiency in written and spoken English language;
• excellent knowledge of international standards and EU Directives.

1. Key Expert No 2 (Legal and regulatory expert )

• with preferably 5 years of previous professional experience as a legal and regulatory expert with focus on capital markets development and/or legal reforms including, and not limited to, drafting legal texts, understanding the need for amendment of EU Structural Funds operational programmes, state aid procedures and business support tools available via programmes such as the European Regional Development Fund (ERDF);
• Minimum a Master degree or equivalent in legal studies;
• excellent knowledge of the EU acquis and EU regulation related to European Structural Funds;
• Proficiency in written and spoken English language;
• Knowledge of the Latvian legal and regulatory environment is a distinctive advantage.

1. Key Experts No 3 (Pool of Additional Experts- EU Structural Fund Specialist):

• Preferably 5 years’ consultancy experience related to EU-funding and the design of support measures;
• In-depth knowledge of European Structural Funds;
• Acted as an expert in preferably 2 projects related to the design/use of European Structural Funds;
• Proficiency in written and spoken English language.

1. Key Experts No 3 (Pool of Additional Experts- SMEs Corporate Finance and Securities Market Expert(s)),:

• Preferably 5 years’ consultancy experience related to corporate finance and securities markets with special focus on (i) access to capital market financing by SMEs, and (ii) Equity and debt market listing processes and costs, and/or;
• Preferably 3 years’ experience in designing support measures for and/or advising SMEs on equity or debt issuance;
• Understanding of current trends and developments in increasing SMEs access to capital market financing including: (i) IPO/listing process, procedures and documents; (ii) assess SME target group including companies that exit from venture capital funding; (iii) funding requirements for companies identified at prior point (ii); and (iv) alternative funding sources (i.e. private equity);
• Proficiency in written and spoken English language.

Submission Requirements: In order to determine the capability and experience of Consultants seeking to be selected for this Assignment, the information submitted should include the following:

1. Company/group of firms’ profile, organisation and staffing (max. 2-4 pages).
2. Details of previous project experience or similar assignments particularly undertaken in the previous five years, including information on contract value, contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided (if different from duration) , main activities, objectives.
3. CVs of key experts who could carry out the Assignment detailing qualifications, experience in similar assignments, particularly assignments undertaken in the previous five years, including information on contracting entity/client, project location/country, duration (mm/yy to mm/yy), expert months provided, assignment budget, main activities, objectives.
4. Completed Consultant Declaration Form and Contact Sheet, the template for which is available from the following web-link:

http://www.ebrd.com/pages/workingwithus/procurement/notices/csu/contact_sheet.doc.

The above information should not exceed 20 pages excluding CVs and contact sheet.

The complete expression of interest (including CVs, Consultant Declaration and Contact Sheet) should be submitted, in English electronically through e-Selection, to reach the Bank not later than the closing date. The expression of interest shall be one file (pdf). The EBRD reserves the right to reject applications of firms submitting more than one file. Only if the permissible file size is exceeded (4MB), the Consultant may split the expression of interest into further files.

Bank Contact Person:

Larissa Gosling

Technical Co-operation

European Bank for Reconstruction and Development

One Exchange Square

London EC2A 2JN

Tel: + 44 20 7338 6338

e-mail:goslingl@ebrd.com (submissions should be sent through eSelection and NOT to this email address)

Notes:

1. The selection will normally be made from responses to this notification only. Consultants will not be asked to submit a proposal. The highest-ranked Consultant will be selected from a shortlist and be invited to negotiate the contract, subject to availability of funding.
2. The shortlist criteria are:

(a) Firm’s previous project experience in both the international and local levels in the capital markets operation and development projects (50%)

(b) CV of Key Expert No (50%)

[1] SME Performance Review, http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/files/supporting-documents/2014/annual-report-smes-2014_en.pdf

[2] Source: Financing SMEs and Entrepreneurs 2012: An OECD Scoreboard

[3] Source : https://www.em.gov.lv/files/attachments/2017-01-04_16_58_28_startup_eng.docx