THE Minister for Finance has outlined the new certification process for companies seeking more than £250,000 in Business Expansion Scheme funding. Any project over the threshold will have to prove that it has the potential to create a "reasonable level of additional sustainable employment" or is necessary to secure the survival of the company".

Industrial and manufacturing projects will have to be certified by Forbairt, while Bord Failte will certify tourism related projects. BES funding has been extended to certain aspects of the music industry in this year's Budget, but is not yet clear which body will certify music projects.

The new criteria, combined with the historically low cost of bank borrowings, may discourage companies from seeking BES funding, according to Mr Brian Farrell, a BES fund executive with Riada Stockbrokers.

Certification will be on the basis of a business plan submitted to the relevant authority. The plan will normally cover a three year period and qualifying companies will have to submit annual progress reports. The plans will include details of how the BES funds will be spent and also of any planned transfer of employees or assets.

The transfer of employees from a company to an associated company will not constitute the creation of employment for the purpose of obtaining certification, according to the Minister. Money raised through a BES cannot be used to fund the transfer or lease of assets from a company to an associate company.

These measures are intended to prevent the splitting, or reorganisation of a company merely to get around the £1 million limit to the amount of BES funding that a company can receive.

If BES funding is sought on the basis that it is needed to secure the future of a company, the certifying body will have to "satisfy itself that such employment would not be maintained without BES assistance", according to the criteria published yesterday.

The introduction of certification was announced by the Minister for Finance in his Budget last month. At the same time it was announced that the BES legislation would be extended for another three years. Under the legislation, investors in BES schemes can claim income tax relief, at their marginal rate, on the sum invested subject to a maximum investment of £25,000.

If a company does not apply the funds raised through a BES according to the plan submitted, the tax relief available to investors will be revoked. This provision will apply until six months after the last progress report is filed, but will be waived in certain circumstances. These include genuine commercial reasons or adverse economic circumstances as well as if the company enters liquidation or receivership for bona fide commercial reasons and not for tax avoidance purposes".

The Department of Finance has pointed but that certification of a scheme is not an endorsement and cannot be used to promote the scheme. Similarly, it does not mean that the scheme will be approved automatically by the Revenue Commissioners.