The project is over, and then what? Post-completion duties of beneficiaries in cofinanced ventures
For many businesses, completion of a project and payout of the funding mark the symbolic end of the cofinancing process. But in practice completion of the project does not mean an end to the relationship with the financing institution. Some obligations continue after completion of the project, over the entire durability period and also after the end of the durability period. The significance of these obligations is most often revealed during an inspection or audit, a reorganisation of the enterprise, or an M&A transaction, when it turns out the project, although formally completed, must still comply with the contract.
Particularly in M&A transactions carried out years after the award of cofinancing, businesses often no longer have in their possession the full project documentation, or aren’t aware that certain obligations are still in force. This may happen for example because the persons responsible for executing the project no longer work at the organisation, the documentation has been turned over to an external archive, or the knowledge of the cofinancing conditions has been dispersed. This makes it crucial to have an awareness that after project completion, the beneficiary must still comply with certain obligations for several years into the future.
What is the project durability period?
The project durability period arises under European Union regulations. It is the period in which the beneficiary must retain the results of the project and maintain the project in compliance with the conditions for the awarded cofinancing. As a rule the durability period runs for five years (for large enterprises) or three years (for micro enterprises and SMEs) following completion of execution of the project.
The following may infringe project durability:
- Cessation of productive activity, or transfer of productive activity outside the area covered by the support
- Change in the nature or objectives of the project
- Disposal of assets in a manner inconsistent with the cofinancing terms
- Changes resulting in the enterprise obtaining an undue advantage.
Thus, during this period the beneficiary has limited possibility for disposing of cofinanced assets, or making organisational changes in the beneficiary’s structure. Infringement of project durability may make it necessary to repay the cofinancing received by the beneficiary.
But this does not mean that when the project durability period ends, the enterprise can definitively “close the books” on the project.
End of the durability period and other obligations arising under the contract
Businesses often equate the end of the durability period with the possibility of definitively closing the project. This is one of the most common misunderstandings encountered during audits and inspections by financing institutions.
Cofinancing agreements provide for duties that must be performed also after completion of the durability period. This involves for example archiving of documentation, providing information to the institution, and ensuring the possibility of conducting inspections. The scope of these obligations depends on the programme in which the support was awarded, as well as the wording of the specific cofinancing agreement.
The duty to retain project documentation is particularly relevant. As a rule, this period runs for 10 years after completion of execution of the project or the date of award of state aid, and thus extends well beyond the project durability period.
Examples of beneficiary’s obligations after the end of the durability period
The scope of duties following the end of the project durability period depends primarily on the programme in which the support was awarded and the terms of the cofinancing agreement. They most often involving the following areas:
- Archiving of project documentation. The beneficiary must store the documentation for the period indicated in the cofinancing agreement or applicable regulations.
- Reporting obligations. These include filing the final project durability statement and information on the socio-economic impacts of project implementation, if required under the programme documentation (e.g. in the European Funds for a Modern Economy programme (FENG) and the Smart Growth Operational Programme (POIR)).
- Ensuring the possibility of conducting inspections. This is the duty to make documentation accessible for purposes of potential inspections or audits conducted by authorised institutions.
- Information obligations. There is an obligation to notify the financing institution of certain changes, particularly involving the location where documentation is stored, or legal succession involving the beneficiary.
- Release of security instruments. This usually occurs only at the request of the beneficiary, even if the durability period has already ended.
What should be done upon project completion?
When the durability period ends, it is worth conducting a kind of “project review” and answering a few fundamental questions:
- Have all existing obligations under the cofinancing agreement been performed?
- How long must the project documentation be stored?
- Where is the documentation located, and who within the organisation is responsible for archiving it?
- What duties remain with the beneficiary notwithstanding completion of the project?
Thus after the project is completed, it is worthwhile to make certain not just that the enterprise retains a complete set of documentation, but also that it knows what duties it still bears. Ongoing monitoring of the project and awareness of these obligations ensures the proper conduct of the project in its final stages.
Maria Rudzińska, adwokat, Marta Grodzki, Competition & Consumer Protection practice, State Aid & EU Internal Market practice, Wardyński & Partners
