Financial Services and Markets - Act No 61/1997 on the New Business Venture Fund .

[Translation from Icelandic]

THE PRESIDENT OF ICELAND
Announces: Althingi has approved this Act and I confirmed it with my approval: The New Business Venture Fund is an independent entity owned by the state. Overall supervision of the Fund is in the hands of the Minister of Commerce.
The Treasury shall not be liable for the Fund's obligations cf., however, Chapter II.
The role of the New Business Venture Fund shall be to encourage development and growth in all sectors of the Icelandic economy through participation in innovation-oriented investment projects and support for development and marketing projects. For this purpose, the Fund may advance share capital or make loans, guarantees or grants. The Fund shall also operate an Export Credit Guarantee Department in accordance with Chapter II.
In its operations the Fund may cooperate with third parties in the field of venture capitalisation.
The New Business Venture Fund may make loans and guarantees without special securities other than those inherent in the projects themselves.
The Fund may exercise its voting strength in accordance with its shareholdings.
The board of directors of the New Business Venture Fund shall consist of five persons who are appointed by the Minister of Commerce for terms of two years at a time. The board shall be composed as follows: one member nominated by the Minister of Industry; one member nominated by the Minister of Industry in accordance with the recommendations of associations of enterprises in industry; one member nominated by the Minister of Fisheries; one member nominated by the Minister of Fisheries in accordance with the recommendations of associations of enterprises in fishing and fish processing and one member in accordance with the nomination of the Icelandic Federation of Labour. The members of the board shall divide their responsibilities among themselves.
The Minister shall determine fees to members of the board.
The board of the New Business Venture Fund shall supervise its functioning in accordance with this Act and regulations. The tasks of the board include:
1. Policy-making and the formulation of operational guidelines, which shall be confirmed by the Minister.
2. The engagement of a managing director.
3. The approval of an operational budget, which shall be prepared in advance for one year at a time.
4. Decisions regarding the taking of loans and other methods of financing the operations of the Fund.
5. Decisions on participation by the Fund in financing activities, such as the purchase of share capital, the granting of loans by the Fund, the making of grants and guarantees and decisions regarding securities and loan terms.
6. The investment of funds.
The managing director of the New Business Venture Fund shall be in charge of the day-to-day operation of the Fund in accordance with the mandate given by its board. The board of the Fund may authorise the managing director to take decisions on making loans, securities or grants within specific limits.
The board of the New Business Venture Fund may enter into agreements with other parties on the Fund's place of deposit or specific services to be provided for it, with the approval of the Minister.
The foundation capital of the New Business Venture Fund shall be ISK 4,000 million of the combined equity of the Fisheries Fund, the Industrial Loan Fund, the Export Credit Fund and the Industrial Development Fund. The above sum shall be presented to the Fund when it begins operations, on the one hand in the form of marketable share certificates owned by the funds, and on the other in the form of an indexed bond issued by the Icelandic Investment Bank Ltd for a term of 10 years with 20 instalment payments, which shall carry ordinary market interest.
In addition to the foundation capital under paragraph 1, the Treasury shall pay the New Business Venture Fund ISK 1,000 million of the proceeds from the sale of share capital owned by the Treasury in the Icelandic Investment Bank Ltd. The principal under this paragraph shall be kept separate from the books and accounts of the Fund and shall be used for the purchase of share capital in order to support innovation and business development with a special emphasis on the rural areas, especially in the fields of information and high technology. The board of the New Business Venture Fund shall tender the deposition and management of the amount in smaller units, with a view to maximise the profit of the sum in accordance with rules set by the Minister of Commerce at the suggestion of the board. The units tendered shall be deinvested after 7-10 years from the tender and the proceeds shall be paid to the Treasury. The provision of Article 9, paragraph 2 does not apply to the disposition of funds under this paragraph.
The disposable funds of the New Business Venture Fund shall consist of:

1. Yield on the Fund's own funds.
2. Repayments and interest on loans made by the Fund.
3. The Fund's shareholdings.
4. Other revenues.

The New Business Venture Fund shall maintain a reserve for loan losses in accordance with generally accepted accounting practice and risk assessment, so that its balance sheet at any given time presents the most realistic picture of its financial standing. Allocations to the reserve for loan losses shall be determined at the same time as decisions on loans, guarantees, grants and equity participation. The sums posted to the loan loss reserve shall in each instance correspond to the risk taken, and be in accordance with rules confirmed by the Minister.
The amount granted to the Fund's projects under Article 2 may not be so great that the loss provision exceeds the framework of the operational budget. The Fund's operational budget shall be based on the principle of not drawing upon its own funds.
The New Business Venture Fund may take short-term loans only to balance its cash flow. Loans may not be taken through the issue and sale of bonds and other redeemable debt instruments to the public.

In addition to the activities described in Chapter I, the New Business Venture Fund shall operate a department known as the Export Credit Guarantee Department.
The role of the Export Credit Guarantee Department shall be:

1. To undertake to insure loans which banks and other credit institutions grant to domestic manufacturers of goods or providers of services for financing export loans granted to, or made available to, foreign purchasers.
2. To underwrite claims held by Icelandic exporters against foreign purchasers, providing they have come into existence in connection with the export of Icelandic goods and services.
3. To sell insurance guarantees for services provided by Icelandic parties abroad. Also, to underwrite project guarantees made by domestic parties in connection with projects falling within the reference limits which require public projects to be tendered out in the European Economic Area.
4. To insure investments by domestic investors abroad against political risk.
5. To insure equipment which domestic parties send abroad in connection with projects carried out there against political risk.

The department shall be governed by a separate governing committee composed of five persons. Of these one person nominated by the board of the New Business Venture Fund shall hold a seat on the committee and the others shall be representatives of the Ministers of Finance, Industry, Fisheries and Foreign Affairs. The managing director of the New Business Venture Fund shall be in charge of the day-to-day operations of the department.
The Export Credit Guarantee Department shall take over the assets and liabilities of the Export Credit Guarantee Department which has been operated under Act No. 76/1987 on the Industrial Loan Fund, and the foundation capital of the new department shall not be part of the foundation capital of the Fund under Article 7, paragraph 1.
The governing committee of the Export Credit Guarantee Department shall determine premiums and the insurance ratios of the department, which shall be subject to the approval of the Minister of Finance. They shall be determined so as to meet the cost of running the department, paying compensation claims and forming a reserve fund equivalent to at least 10% of the guarantees granted by the department at any given time. The operations of the department shall be treated separately in the Fund's bookkeeping and accounts.
Revenues in excess of costs shall be placed in a special reserve fund, which shall be used for the payment of compensation claims. If the department's funds, including the reserve fund, are insufficient for the payment of compensation claims, the amount lacking shall be paid out of the State Guarantee Fund.
The Treasury is liable for other obligations of the department.
The payment terms of loans insured by the Export Credit Guarantee Department shall be in accordance with normal commercial practice in Iceland and abroad, taking into account the type of product, the nature of services, market conditions and other relevant factors.
At no time may the Export Credit Guarantee Department's total obligations in connection with the insurance of export credits and claims exceed the equivalent of SDR 100 million.
The governing committee of the Export Credit Guarantee Department shall lay down for it more detailed operational guidelines, which shall be subject to the approval of the Minister of Finance.

The board of the New Business Venture Fund shall compile annual accounts for each accounting year in accordance with Act No. 144/1994 on Annual Accounts.
The annual accounts of the New Business Venture Fund shall be audited by the National Audit Office.
The Bank Inspectorate of the Central Bank of Iceland shall supervise the activities of the New Business Venture Fund to ensure that they are in accordance with this Act and regulations issued under it. This supervision shall be subject to the Central Bank of Iceland Act.
Management and other employees of the New Business Venture Fund shall be bound to confidentiality concerning matters of which they become aware in the course of their work and which should be kept secret according to law, the instructions of their superiors or the circumstances. This obligation to confidentiality shall persist even after cessation of employment.
The New Business Venture Fund shall be exempt from income tax and property tax. Loans taken or granted by the Fund shall be exempt from stamp duties.
The Minister shall issue further provisions on the implementation of this Act in the form of a regulation.
Violations of this Act shall be punished by fines or custody except where more severe punishments are prescribed in other statutes.
This Act shall enter into force at once. The New Business Venture Fund shall begin operations on 1 January 1998. At the same time, Act No. 60/1970 on the Export Loan Insurance Department of the State Guarantee Fund shall be repealed.
All expenses deriving from the establishment of the New Business Venture Fund shall be paid by the Fund itself.
A board in accordance with Article 4 shall be appointed not later than 1 July 1997 for a term of two years. Until the New Business Venture Fund has commenced operations in accordance with the first sentence of this Article, the board shall have the task of preparing the Fund's operations. It shall confer with the Icelandic Investment Bank Ltd. regarding contracts with the employees of the Fisheries Investment Fund, the Industrial Loan Fund and the Industrial Development Fund. During this period, the board shall have full access to the records of these funds, notwithstanding statutory provisions regarding confidentiality, and the directors and employees of the funds shall provide the board with such assistance as is necessary. Furthermore, the directors and employees of the Fund shall be bound by a confidentiality obligation in the same way as are the directors and employees of the said funds.
All employees of the Fisheries Investment Fund, the Industrial Loan Fund and the Industrial Development Fund who receive wages according to the collective agreements of the Union of Icelandic Bank Employees or the collective agreements of other trade unions and who are not offered employment with the Icelandic Investment Bank Ltd shall be offered employment with the New Business Venture Fund.
Persons previously employed at the Fisheries Investment Fund, the Industrial Loan Fund or the Industrial Development Fund who accept positions at the New Business Venture Fund shall enjoy the same rights as they had under their collective agreements or employment agreements. Their right to receive wages from the Fisheries Investment Fund, the Industrial Loan Fund or the Industrial Development Fund shall lapse when they enter their new positions.
The New Business Venture Fund shall take over pension obligations towards those employees of the Fisheries Investment Fund, the Industrial Loan Fund or the Industrial Development Fund who accept positions with it.
The equity of the Product Development and Marketing Department of the Industrial Loan fund, cf. Act No. 76/1987, shall be transferred to the New Business Venture Fund and be kept there in a special department which shall be treated separately in the Fund's bookkeeping and accounts. The principal under this paragraph shall not be regarded as part of the foundation capital of the New Business Venture Fund in accordance with Article 7. During the first three years of the New Business Venture Fund's operations, its board shall dispose of the department's assets in the form of contributions to product development and marketing action in accordance with rules set by the board and confirmed by the Minister. At the end of that period, the department shall be abolished. If at that time any of the department's assets have not been disposed of, the amounts remaining shall be devoted to the general activities of the New Business Venture Fund. In other respects, the department's operations shall be subject to the provisions of this Act.